Amid a wave of mass firings at the GSE last week, will the Trump administration steer Fannie and Freddie toward the private sector?
A dramatic year at Fannie Mae continued last week with the announcement of a cull of over 100 employees for what it described as unethical conduct, including the facilitation of fraud, as the Trump administration continues to put its stamp on the government-sponsored enterprise (GSE).
Federal Housing Finance Agency (FHFA) director Bill Pulte, who oversees Fannie and Freddie Mac, said in a news release that the agency was clamping down on “fraud, mortgage fraud, or any other deceitful act that can jeopardize the safety and soundness of the housing industry” and claimed the FHFA had slashed over 25% of its active workforce since Trump’s inauguration.
It remains unclear whether additional cuts are ahead at Fannie, with the GSE having no further comment to last week’s release announcing the firings.
But speculation has gathered pace this year that Fannie and Freddie’s days under government conservatorship are numbered – and mortgage lawyer Marty Green (pictured), principal at Polunsky Beitel Green, told MPA he viewed developments at Fannie this year as a step towards nudging the GSE back into the private space.
Future terminations, he suggested, “will likely be the result of the elimination of programs deemed to be too woke or DEI-related to be continued. Some staff will leave of their own accord and won’t be replaced, and others will be released for a failure to embrace sufficiently the administration’s future vision of the GSEs.
“I would anticipate that, with the reduced staff at whatever level that turns out to be, the GSEs will likely be less focused on expanding credit to borrowers at the lower end of the credit spectrum and more focused on its core mission of ensuring liquidity in the mortgage market. I think the administration views this refocus by the GSEs as an important step toward exiting conservatorship because it will be better aligned with privatization.”
Selma Hepp of Cotality, warned that US mortgage rates could rise if China decides to offload US Treasuries. The Trump administration's temporary tariff pause fails to ease the uncertainty surrounding the mortgage market amidst ongoing trade tensions.https://t.co/ZiujoutWP8
— Mortgage Professional America Magazine (@MPAMagazineUS) April 11, 2025
Will the Trump administration push ahead with ending conservatorship?
The first Trump administration set the scene for a possible end to Fannie and Freddie’s conservatorship, which began in 2008 as a global financial meltdown unfolded.
Mark Calabria, who served as FHFA director between 2019 and 2021, took steps to end that government control of the GSEs by introducing rules to bolster their capital requirements and allow them to retain earnings instead of sweeping profits to the US Treasury.
Pulte is expected to kickstart those efforts, which faded under the Biden administration, in the years ahead – but it’s often emphasized that ending government conservatorship of Fannie and Freddie is a long-term project that won’t be achieved overnight.
Still, Green said decisionmakers will also have their eye on the ticking clock towards midterm elections and the passing of the torch on to a new administration – either Republican or Democratic – in just under four years.
“I believe that the administration very much wants the pathway for an exit of conservatorship to be substantially commenced before the end of the administration in 2028,” he said. “If that is indeed the goal, the path probably needs to be agreed upon before the mid-terms.
“While many constituents have expressed concern about a too-hasty and not sufficiently thought out exit from conservatorship, I think the administration views speed as a virtue with the idea that the post-conservatorship structure could be adjusted, if necessary, in the future.”
Loan-level price adjustments could be in administration’s crosshairs
Also one to watch from the Trump administration in its approach to Fannie and Freddie this year, according to Green: whether it seems to reexamine the loan-level price adjustments of the GSEs to address home affordability concerns.
In 2023, Fannie and Freddie were directed by the FHFA to implement a new Loan-Level Price Adjustment (LLPA) framework, effective for all whole loans purchased on or after May 1, 2023, including the introduction of new credit score tiers and debt-to-income ratio changes.
But changing those regulations again could prove easier said than done, according to Green. “It’s a balancing act for the administration,” he said. “Eliminating or reducing these charges will impact the GSEs’ bottom lines, making the exiting of conservatorship more complicated.”
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