Fannie Mae and Freddie Mac under Trump: Restructuring or further delay?
Recent signals from former President Donald Trump's campaign are sparking a new wave of discussion surrounding the fate of Fannie Mae and Freddie Mac - the two most important GSEs (Government-backed financial enterprises) in the US housing market.
Speaking on the Truth Social platform, Mr. Trump revealed his policy direction if he returns to the White House, hinting at the possibility of maintaining government control over Fannie and Freddie - a strategy called "retain rather than float", which is completely opposite to the reform effort after the 2008 financial crisis to privatize these two organizations.
Capital and political issues
According to analysts from Bank of America (BofA), both GSEs are currently seriously short of the capital requirements under the current legal framework, with a total shortfall of up to 135 billion USD. Meanwhile, the Preferred Stock Purchase Agreement (PSPA) standards are considered by many experts to be “outdated and overly rigid,” especially in the context of a post-pandemic economy experiencing unprecedented interest rate volatility.
Although the current capital ratio of these two organizations has been raised to about 2.15%, a significant improvement from just 0.45% before the 2008 crisis, qualifying for withdrawal from government supervision is still far away.
New administration new policy?
In this context, the name of Bill Pulte the new director of the Federal Housing Finance Agency (FHFA) is attracting attention. With a “private enterprise style” approach, Mr. Pulte is expected to reduce bureaucracy, increase operational efficiency and put the two GSEs on a profitable trajectory.
But some experts at the Housing Policy 2025 conference were cautious, saying that Pulte’s lack of public policy experience could limit his ability to implement major reforms, especially when faced with pressure from the mortgage bond market and interest groups.
Expanding the scope of operations the risk of “mandate sprawl”?
Another notable topic at the conference was the possibility of Fannie and Freddie expanding their operations into previously restricted segments, such as vacation home mortgages, second loans or “high-yield, low-stringency” financial products. This was a “sensitive” area because it risked detracting from the GSEs’ original social purpose – helping people buy their first homes.
These comments represent a shift in thinking from a “subsidy for duty” model to a “growth for efficiency” modelthat could open the door to a full-blown restructuring if Trump returns to power.
Technology and alternative credit scoring still face hurdles
While the use of AI and alternative credit scoring models like VantageScore is gaining traction, experts remain skeptical about their practical application. Bank of America points out that the lack of long-term historical data and low reliability mean that FICO will remain the default underwriting standard for the foreseeable future.
Is FMCC undervalued?
Amid the policy debate, Freddie Mac (FMCC) stock is attracting the attention of both retail and institutional investors. While it hasn’t made it onto InvestingPro’s algorithm’s list of “forgotten gems,” FMCC is still a name to watch as policy changes could alter the entire valuation of the company in the coming quarters.
Conclusion
Fannie Mae and Freddie Mac – the “two silent pillars” of the US financial system are at a crossroads. The return of Trump and the new team at FHFA may not bring immediate reform, but it has raised expectations for a GSE model that is flexible, efficient, and less constrained by historical bias.
However, when housing policy touches interest rates, public finances, and elections, the question is not “should we reform?” but “can we reform – and when?”