Fannie Mae, Freddie Mac Are Likely to Remain in Conservatorship, Pulte Says

Fannie Mae and Freddie Mac entered government conservatorship during the 2008 housing and mortgage-led financial crisis. (Kevin Dietsch/Getty Images)

Markets are acting like Fannie Mae and Freddie Mac’s exit from conservatorship is a sure bet, but the mortgage finance giants’ future status is still uncertain**.**

Their common shares, which trade on OTC Markets, rose in the run-up to, and in the days after, the November 2024 presidential election on expectations that Donald Trump, if elected, would act to remove them from government conservatorship, which was on his agenda in his first term. But the administration’s plan for the companies remains hazy in the second term.

In a recent interview with Barron’s, Bill Pulte, the director of the Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae, reiterated prior comments that the two entities would “likely” remain in conservatorship, with the Trump administration exploring ways to “take pieces, or some of, the companies public.”

Fannie Mae is down 6% in late morning trading on Friday, while Freddie Mac is off 7.8%.

Friday’s selloff comes amid the stocks’ best run in years. As of Thursday’s close, Freddie Mac and Fannie Mae common shares were up 107% and 162%, respectively, according to Dow Jones Market Data. It’s Freddie Mac’s best year to date performance since 2019, and Fannie Mae’s best run in the same period since 2013.

The companies entered government conservatorship in the midst of the 2008 housing and mortgage-led financial crisis. It was meant to help stabilize the mortgage giants, and, by extension, the housing market. Exiting requires resolving questions with wide-ranging implications for the U.S. mortgage finance system, taxpayers, and investors.

One obstacle is finding a way to preserve the companies’ implicit guarantee, or the understanding that the mortgages are tacitly backed by the government. The president has said he wants the companies to retain that backing, without which mortgage rates could rise.

“The Trump administration is looking for ways to recapitalize [Fannie Mae and Freddie Mac] in a manner that preserves the implicit guarantee, that does not alarm the financial community, and that does not push mortgage rates up,” says Wedbush analyst Jay McCanless. “Any hint of trouble is going to freak people out.”

Pulte said in a May CNBC interview that the administration was “studying actually potentially keeping it in conservatorship and taking it public.” The White House had no comment on Pulte’s latest comments.

He repeated those comments to Barron’s last week: “I think it’s likely that the companies will stay in conservatorship, but the president is actively looking at simultaneously potentially taking them public,” he said, adding that “that could mean, you know, a small amount, or pieces, or just ways to get additional liquidity.”

Pulte didn’t elaborate to Barron’s on what bringing “pieces” of the companies public would entail. But his comments suggest that the administration’s presumed intent to release the companies isn’t as certain as some investors may have thought. His reiteration that both might remain under conservatorship while exploring ways to offer pieces publicly means “we need to think about how they’re going to do it with this approach,” says KBW analyst Bose George, who covers Fannie Mae and Freddie Mac.

Any potential step further into public markets *“*will be entirely up to the president,” Pulte said to Barron’s.

Pulte is a grandchild of William J. Pulte, founder of home builder PulteGroup. The younger Pulte previously served on the company’s board.

Fannie Mae and Freddie Mac didn’t respond to a request for comment.

The companies’ conservatorship is tied to the Treasury, which holds warrants for just under 80% of the companies’ common stock, Barron’s previously reported.

The Treasury didn’t respond to Barron’s request for comment. Treasury Secretary Scott Bessent indicated in May that addressing the companies’ conservatorship wasn’t a priority.

The stocks can move significantly from day to day, but investors will likely have to wait for clarity from Trump or the Treasury on the companies’ future status. They should buckle up for a bumpy ride.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com