As reported by Bloomberg, President Donald Trump said he’s considering taking mortgage giants Fannie Mae and Freddie Mac public. However, if they were to go public, he said the government would maintain oversight.
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Trump posted on Truth Social that the two companies are doing well and generating cash, CBS News reported. But not all housing experts agree this is the best move at the current time. Here’s what some of them told GOBankingRates about how this could impact homebuyers.
Mortgage Rates Could Climb
While Trump has indicated that the U.S. government will retain its guarantees to the two companies, CBS News reported it’s unclear what those could look like.
“If this change removes or weakens the government’s backing, mortgage rates could climb,” said Jon Wade from The Steamboat Group. “That backing helps keep borrowing costs low.”
Without it, Wade added, lenders and investors would want more protection, and that usually means higher rates. And higher rates could make it more difficult for homebuyers.
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Buyer Assistance Programs Could Expand
Wade said there is a possible upside as well.
“If privatization brings in a big chunk of money for the government, some of it could go toward housing support, new construction or buyer assistance programs,” Wade said. “That could help in the long run. But we’ve seen before that those kinds of benefits take time, and buyers need stability now.”
It Could Create a Two-Tier Market
“Based on my experience, I think this’ll create a two-tier market,” said Andrew Lokenauth, a financial expert who spent over a decade working closely with mortgage-backed securities. “The wealthy borrowers with perfect credit will be fine. But average folks with decent, but not perfect, credit scores might struggle.”
According to Lokenauth, from his time running credit analytics, he noticed private lenders typically want 20% down payments. He said that’s way different from the 3% to 5% down payments Fannie and Freddie sometimes accept now.
First-Time Buyers Could Have Difficulty
Lokenauth also explained that first-time homebuyers particularly could be impacted.
“So here’s the real deal from someone who’s been in the trenches: First-time homebuyers will probably get hit hardest,” Lokenauth said. “I’ve analyzed thousands of mortgage applications, and many first-timers simply can’t meet stricter private-market standards.”
Lokenauth said middle-class buyers in expensive markets might also struggle.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: Trump Wants These 2 Major Mortgage Companies To Go Public: 4 Ways That Could Impact Homebuyers
