Fannie Mae and Freddie Mac, two pillars of the U.S. mortgage market, are currently controlled by the federal government. Some in Washington, D.C. expect President Trump to push for the end of their conservatorship.
“We have a mortgage finance system that works really well on the upside, but is it prepared for a downturn?” said Mark Calabria, former director of the Federal Housing Finance Agency from 2019 to 2021. “While I am optimistic about the overall state of the economy, are we putting the taxpayer at risk?”
Fannie Mae and Freddie Mac create financial products that support the mortgage market and reduce risks for investors. These products can influence mortgage rates in the U.S.
The two firms were placed into government conservatorship in September 2008 as the global financial crisis mounted. In the aftermath, many borrowers defaulted on their mortgages and risked losing their homes. Between 2007 and 2010, approximately 3.8 million homes were lost to foreclosure according to an estimate from the Federal Reserve Bank of Chicago.
At the time, the Treasury Department extended $100 billion lines of credit to Fannie and Freddie each in an effort to keep them afloat. The Treasury also initiated sweeps of their profits in an effort to get taxpayers’ bail out money back.
“In my mind that was a good decision,” said Moody’s economist Mark Zandi.
In the intervening years, Fannie and Freddie paid $301 billion to the Treasury. As the process unfolded, the value of Fannie and Freddie’s stocks plunged to basically nothing.
Stock performance of Fannie Mae and Freddie Mac against the S&P 500 Index from 1980 to 2025. Share prices for the two mortgage market firms plunged dramatically when they entered government conservatorship in 2008.
In 2019, the government ended the sweep of Fannie’s and Freddie’s profits, laying the groundwork for the two mortgage giants’ return to private markets.
“The number one constraint on us was lack of capital. Fannie and Freddie were leveraged about 1,000-1, which meant they had almost no capital,” said Calabria.
Both firms are today known as government-sponsored enterprises, or GSEs. Fannie Mae was chartered as a government agency in 1938 and became a private entity in 1968. Freddie Mac was created as a private company by an act of Congress in 1970.
Mark Zandi estimates that without an explicit or implicit government backstop of the mortgage giants, mortgage rates could rise by by 60 to 90 basis points. Proponents of privatization like Calabria say it wouldn’t raise rates, and could even make them go down.
Watch the video above to learn how the end of Fannie’s and Freddie’s conservatorship could affect home buying in the U.S.
