Fannie Mae, Freddie Mac Faces Shake-Up as Trump Administration Pushes Privatization

Source: YouTube

The future of Freddie Mac has been thrown into uncertainty after a dramatic leadership overhaul at the Federal Housing Finance Agency (FHFA), mass layoffs, and reports that the Trump administration is exploring privatization. In recent weeks, the housing finance world has watched as Freddie Mac’s CEO was fired, employees were escorted out, and top federal officials hinted that a sweeping executive order may soon be issued.

FHFA Director Bill Pulte, recently confirmed under President Trump, wasted no time making his presence felt. He fired Freddie Mac CEO Diana Reid, placed key executives on leave, and installed himself as chairman of both Freddie Mac and Fannie Mae’s boards. His appearance on Fox News, where he criticized remote work at the housing agencies, was seen as a signal that he planned to remake the institutions from the ground up.

At the same time, Treasury Secretary Scott Bessent said that the government’s stake in Freddie Mac may eventually be rolled into a new U.S. sovereign wealth fund. This proposed move, along with statements supporting privatization, reflects a broader goal: cutting federal involvement in housing finance while unleashing private capital.

From Conservatorship to Uncharted Waters

Freddie Mac and Fannie Mae have operated under FHFA conservatorship since 2008, following the financial crisis that brought both mortgage giants to the brink of collapse. While they've returned to profitability—with Freddie Mac posting $11.9 billion in net income last year—they remain under federal control.

Now, Trump officials are signaling they want to change that. Bessent suggested that releasing Freddie Mac from conservatorship could be viable if it doesn’t raise mortgage rates. That’s a critical concern, as privatization could reduce investor confidence and drive up borrowing costs. The administration appears cautious, but determined to push forward.

Moody’s economist Mark Zandi recently laid out several scenarios for what privatization might mean. He argued that releasing Freddie Mac without a government guarantee could raise mortgage rates by 60–90 basis points. That would price many Americans out of the housing market. A more moderate approach—with an “explicit guarantee”—could slightly lower rates but would require legislation that’s unlikely to pass.

For now, the most probable path is the status quo, with Freddie Mac remaining under conservatorship. But with FHFA already cutting divisions, staff, and oversight offices, the groundwork for change is being laid.

Layoffs and Consolidation Signal Structural Change

Over the last week, FHFA has shut down two major divisions and placed dozens of employees on administrative leave. The agency cited a goal of “streamlining” and said it would follow all legal requirements. Yet housing policy experts note that the dismantling of oversight offices—like the Division of Public Interest Examination—removes key safeguards on affordable housing and consumer protections.

Freddie Mac’s internal staff now face tighter control and a return-to-office mandate set for May 1. The agency is also preparing for broader layoffs, potentially affecting thousands. These actions follow a pattern seen across federal agencies under Trump’s Department of Government Efficiency, led by Elon Musk allies tasked with shrinking the federal workforce.

Scott Olson of the Community Home Lenders of America warned that cutting staff at Freddie Mac could hurt smaller lenders. He emphasized that the company’s “cash window” is vital for community lenders who rely on access to the secondary mortgage market. Losing that flexibility, he argued, could reduce competition and harm the housing market overall.

A Volatile Path Ahead for Mortgage Giants

The Trump administration’s direction is clear. Freddie Mac is no longer just a government-sponsored enterprise—it’s a symbol of what some view as bureaucratic excess, and others see as essential infrastructure. With layoffs already underway and senior leadership purged, the administration seems eager to bring Freddie Mac closer to the private market.

Still, political risks remain. Pushing too hard on privatization could spook markets, raise mortgage rates, and alienate voters. Yet doing nothing would frustrate Trump loyalists eager to dismantle government influence.

Whether Freddie Mac survives as a public-private hybrid or is fully privatized will depend on decisions made in the months ahead. What’s certain is that the next chapter will be the most unpredictable in its history.

Should Fannie Mae and Freddie Mac remain under government control or be privatized as the Trump administration proposes? Tell us what you think!

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