Trump administration’s plan to spin off mortgage giants Fannie and Freddie faces new uncertainty

By Samantha Delouya, CNN

(CNN) — President Donald Trump tried – and failed – to end government control of mortgage giants Fannie Mae and Freddie Mac during his first term.

Now, his decision to give Bill Pulte, the official charged with making that happen, a second, unrelated job as acting director of national intelligence is fueling new doubts about whether the effort will succeed this time.

Pulte, whose grandfather founded one of the country’s largest homebuilders, would retain his position as director of the Federal Housing Finance Agency, which oversees Fannie and Freddie, even as the DNI post would put him in charge of national intelligence agencies like the CIA and the NSA.

While Trump has teased an IPO of Fannie Mae and Freddie Mac as recently as last month, Pulte’s expanded portfolio may suggest the administration is in no rush to make any moves. When CNN sought an updated timeline this week from the White House, the FHFA, Fannie Mae and Freddie Mac, none responded.

“I did see steps moving forward (to spin off Fannie and Freddie), but it appears to me that those efforts have stalled,” Susan Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania, told CNN after Pulte’s new role was announced this week.

If handled poorly, experts warn, an exit from conservatorship could disrupt the market for mortgage-backed securities (MBS) that underpins the US housing finance system. That could push borrowing costs even higher for homebuyers – right when home prices are near record highs and mortgage rates are elevated amid heightened Iran war-fueled inflation concerns.

“I think it’s a 24/7 operation to bring it private,” Wachter added.

Wachter isn’t the only one who believes Pulte’s new responsibilities may sideline the push to spin off.

“It already was going to be operationally and politically difficult to end the conservatorships. We do not see how one could surmount those obstacles if the FHFA director is devoting most of his time to national security issues,” TD Cowen financial services and housing policy analyst Jaret Seiberg wrote in a note to clients this week after Pulte’s new role was announced.

On Thursday, Trump said that Pulte “has done a phenomenal job at Fannie Mae-Freddie Mac,” adding that his role at DNI is “not a permanent position.”

How did we get here?

Untangling Fannie and Freddie from their government conservatorships is no simple feat.

The two entities don’t directly issue mortgages to buyers. Rather, they buy up mortgages from lenders and repackage them for investors. This enables a reliable flow of money to mortgage lenders, allowing them to offer more affordable borrowing rates to would-be homebuyers.

During the housing meltdown of 2008, Fannie and Freddie were brought under government control to prevent further damage to the housing market – but the arrangement was intended to be temporary.

“I doubt very much that anyone contemplated that 18 years later, they would still be in conservatorship,” Watcher said.

Proponents of ending the conservatorship, including many of Trump’s Republican allies, say the companies are viable on their own and that an IPO could help raise billions of dollars for a government flooded with debt.

In August of last year, CNN reported that Trump had met with various Wall Street bank CEOs, including JPMorgan’s Jamie Dimon, Goldman Sachs’ David Solomon and Bank of America’s Brian Moynihan, to discuss a potential IPO of the two mortgage giants.

But Wachter and many other experts warn that without an explicit government bailout guarantee during a future crisis, MBS investors would demand higher returns to compensate for added risk. Those higher costs would likely be passed on to borrowers as higher mortgage rates.

Policymakers could preserve a government backstop by charging Fannie and Freddie a fee for the guarantee. But that cost, too, could ultimately flow through to consumers, putting upward pressure on mortgage rates, Wachter warned.

Dashed hopes

Fannie and Freddie have long attracted investors betting that privatization would unlock enormous gains. Many of them saw Trump’s return to the White House as an opportunity for a breakthrough.

Few investors have been more bullish than billionaire hedge fund manager Bill Ackman of Pershing Square. In December, Ackman wrote on X that Fannie and Freddie common stock, traded on the over-the-counter market, rather than on a formal exchange like the New York Stock Exchange, “remains our best idea for 2026.”

Ackman declined to comment on whether Pulte’s new role changes his bullish thesis on Fannie and Freddie.

But so far this year, both stocks have fallen around 40% and dipped further this week on the news of Pulte’s new assignment.

On a Reddit forum for investors in Fannie and Freddie, some seem dejected.

“Hate to say it, but Trump has moved on from F2,” read one post this week after Pulte’s new appointment.

“I regret not selling about a year ago when the stock was pumping just to make a quick return,” another said.

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