The Trump administration is looking to sell its stock holdings in mortgage giants Fannie Mae and Freddie Mac through a public offering that it believes could raise $30 billion and begin later this year.
The plans being discussed within the administration, first reported by the Wall Street Journal, could value these firms at a combined $500 billion or more and involve a 5% to 15% sale of Fannie and Freddie shares.
Still being debated is whether the mortgage giants would go public as two separate entities or one combined company. The president is still weighing all of his options.
The over-the-counter shares of Fannie Mae (FNMA) and Freddie Mac (FMCC) both jumped 21% on Friday following the report. They are up over 190% and 130%, respectively, year to date.
Chiefs of the country’s biggest Wall Street banks, JPMorgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC), Citigroup (C), Morgan Stanley (MS), and Wells Fargo (WFC), have visited Washington, D.C., in recent weeks to meet with President Trump one by one to discuss plans for Fannie and Freddie, according to the Wall Street Journal.
Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Bill Pulte, director of the Federal Housing Finance Agency, which oversees Freddie and Fannie, attended some of these meetings, according to the report.
These giants play integral roles in the US housing market by purchasing mortgages and repackaging them as securities. Both fell under government conservatorship during the 2008 financial crisis when mortgage defaults soared.
Investors in the mortgage-backed securities offered by Fannie and Freddie rate them as lower risk compared to their private-sector equivalents, given the implicit guarantee that they have the government’s backing.
Read more: Where and how to find the lowest mortgage rates right now
It remains unclear whether the Trump administration plans to fully relinquish its stakes in these major institutions.
“I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President,” Trump said in a post on Truth Social in late May.
Many housing experts and critics alike worry that fully privatizing these firms will cause investors to view their mortgage obligations as more risky, creating a ripple effect across the US housing market that would raise mortgage rates for homebuyers.
Making such a guarantee explicit without the government’s ownership would require an act of Congress. That kind of federal guarantee could even prompt mortgage rates to fall, benefiting borrowers, but “political gridlock makes this unlikely,” Moody’s Analytics chief economist Mark Zandi noted in June.
Proponents argue that the government’s ownership of Fannie and Freddie during the financial crisis was never intended to be permanent and that funds made from the sale of the government’s ownership could generate billions of dollars.
Some prominent Wall Street hedge funds have a lot to gain from the government relinquishing control of Fannie and Freddie. These investors hoped the first Trump administration would pull it off, but the effort, far from simple, was never fully executed.
“Whether the president decides to sell a small piece or what have you, that’s entirely up to the President. But I think the opportunities are endless,” the FHFA’s Pulte said in a CNBC interview in late May.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
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