Federal Home Loan Mortgage Corp: A New Era of Public Ownership?

In a bold move that has sent ripples through the financial markets, U.S. President Donald Trump has announced plans to take the housing giants Fannie Mae and Freddie Mac public. This announcement has already sparked a surge in their over-the-counter (OTC) shares, with Freddie Mac’s shares climbing significantly in premarket trading. The President’s declaration, made via a post on Truth Social, emphasized that while these companies are set to transition to public ownership, the U.S. Government will maintain its implicit guarantees and oversight.

The Implications of Public Ownership

Fannie Mae and Freddie Mac, both operating as for-profit corporations with private shareholders, were established by the U.S. Congress to bolster the national home-lending market. By purchasing home loans from private lenders and repackaging them as mortgage-backed securities, they play a crucial role in the secondary mortgage market. The move to public ownership could potentially enhance their operational transparency and market efficiency. However, it also raises questions about the balance of power between private shareholders and government oversight.

Government’s Role and Guarantees

Despite the shift towards public ownership, the U.S. Treasury’s significant stake in these firms remains unchanged. The Treasury currently holds preferred shares and warrants to purchase about 80% of their common stock, a legacy of the 2008 housing loan crisis bailout. President Trump’s assurance that the government will retain its mortgage guarantees and oversight role is crucial. It underscores the government’s commitment to maintaining stability in the housing finance system while allowing these companies to benefit from the efficiencies and innovations that often accompany public ownership.

Market Reaction and Future Prospects

The market’s positive reaction to the news, with Freddie Mac’s shares reaching a close price of $7.76 on May 22, 2025, reflects investor confidence in the potential benefits of this transition. However, the journey to public ownership is fraught with challenges, including regulatory hurdles and the need to balance shareholder interests with public policy objectives.

Conclusion

As Fannie Mae and Freddie Mac stand on the brink of a new era, the financial world watches with bated breath. The transition to public ownership promises to bring about significant changes in the secondary mortgage market. Yet, the enduring role of government oversight and guarantees will be pivotal in ensuring that these changes benefit not just the companies and their shareholders, but the broader housing market and the American public. The coming months will be critical in shaping the future of these housing finance titans.