A cloud of uncertainty has hovered over the future of Fannie Mae and Freddie Mac during the first half of 2025.
The Trump administration has expressed interest in releasing the government-sponsored enterprises (GSEs) from the conservatorship they have been under for the past 17 years. While support for privatization is gaining traction, other experts believe the entities will remain in conservatorship for the foreseeable future.
“You want to keep the liquidity for single-family and multifamily mortgages, and you want a strong regulator,” says Dave Borsos, vice president of capital markets for the National Multifamily Housing Council (NMHC). “Don’t destroy a structure just to destroy a structure.”
Market observers also differ on whether the best path forward involves an implicit guarantee—the assumption the government will step in to prevent a collapse—or an explicit guarantee—a legally binding promise by the government to back the obligations of Fannie Mae and Freddie Mac.
“For us, more than anything else, our principles have always been to do no harm. Whether you decide to end conservatorship, lean into some form of conservatorship, or completely take them out, there is a proven business model on the multifamily side that is critically important to keep that going,” Borsos says. “To the degree that anything would change or undermine that, that would be a part that would create a lot of concern for us.”
“The one thing that anybody who is plugged into this will tell you [is] this is immensely complicated. It is not just a wave of a magic wand, get them out of conservatorship, and we’re done,” Borsos adds.
Exit From Conservatorship
The Federal Housing Finance Agency (FHFA) became the conservator of the GSEs in September 2008 as home prices plummeted and millions of homes were in foreclosure. As a result, many of the billions of dollars of loans the GSEs had purchased were in default or were collateralized by properties with rapidly declining values. Both organizations reported losses of more than $50 billion in 2008, prompting the government to step in to preserve their assets and property and return them to solvency.
As both entities have returned to profitability, many policymakers and housing organizations believe ending the conservatorship is the logical next step for Fannie Mae and Freddie Mac.
“Ending the conservatorship of Fannie Mae and Freddie Mac is the last major piece of unfinished business from the financial crisis,” says David Dworkin, president and CEO of the National Housing Conference (NHC). “After 16 years of limbo, the time has come to move beyond conservatorship with a transparent, thoughtful, and nonpartisan plan that addresses the remaining systemic flaw while preserving the vital mission of ensuring access to mortgage credit across the country.”
For organizations like the National Association of Home Builders (NAHB), a thoughtful exit must include assurances that Fannie Mae and Freddie Mac have adequate capital before leaving conservatorship. The total combined capital requirement is approximately $330 billion; Borsos notes Fannie Mae and Freddie Mac have built nearly half the required capital, and reaching minimum capitalization will take another one to two years.
In addition to sufficient capitalization, the NAHB also supports requiring an explicit federal government guarantee for mortgage-backed securities to ensure an exit from conservatorship does not disrupt the functioning of the primary and secondary mortgage markets.
The Mortgage Bankers Association (MBA) also supports an explicit government guarantee.
“We believe strongly that any release must include an explicit federal backstop—paid for by the GSEs—of their mortgage-backed securities to protect taxpayers, consumers, and our housing finance system,” says Bob Broeksmit, president and CEO of the MBA.
Jamie Woodwell, senior vice president of commercial and multifamily for the MBA, says an explicit backstop is critical to preserving the liquidity and stability of both single-family and multifamily mortgage markets.
“A thoughtful exit would also protect taxpayers by putting private capital at risk in front of the government and maintain the GSEs’ focus on affordability through their annual housing goals and other legislative, regulatory, and mission requirements,” Woodwell says. “A GSE exit would also put Fannie Mae and Freddie Mac back on a business-first posture, removing many of the policy swings that come to the enterprises with changes in an administration.”
However, implementing an explicit federal guarantee would require an act of Congress—an outcome that remains uncertain given the lack of consensus on how the exit would be structured.
“Given how difficult it was to get reconciliation done, I don’t think that there is any form of agreement or common thought around how you structure the exit from conservatorship of the enterprises,” Borsos says. “What does it look like to pass congressional statute to say we are going to allow [the GSEs] to issue securities and have the full faith backing of the government? There is no agreement on that either.”
The Path Forward
Woodwell says the greatest concern about a potential release of the GSEs from conservatorship is that it could happen without the “appropriate steps” to safeguard the stability and liquidity of the secondar mortgage market.
In a report published by the NHC, following consultation with policy experts and stakeholders, the organization emphasizes a key element for a successful exit from conservatorship is the return to an independent board governance with a fiduciary responsibility to the shareholders.
While any solution is likely to involve political considerations, Borsos notes the most viable path forward will be one that is broadly supported and bipartisan.
“If there is a path forward that is chosen, it needs to be durable. People have chosen explicit [because] changes in administrations and changes in political majorities can derail any path forward,” he says. “You need to get a path forward that is durable and has the most support across administrations and across majorities.”
