GOP plan to privatize mortgage firms could cost new borrowers $2,800 more annually

With majorities in both the U.S. Senate and House of Representatives and former President Donald Trump returning to the White House in 2025, Republicans are pushing for an end to the federal conservatorship of two massive mortgage financing companies. A top financial analyst says doing so would increase mortgage costs by $1,800 to $2,800 per year for new home buyers.

“If you’re a lower-quality borrower, you’re more risky and therefore will be charged more,” Moody’s Analytics chief economist Mark Zandi told CNN. “Today, you don’t have to pay that because you’re backstopped by the government.”

The Federal National Mortgage Association (commonly known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as Freddie Mac) are federally sponsored firms created by Congress to buy mortgage debt from banks and combine them into securities for investors to buy. In the midst of the 2008 financial crisis, the Treasury Department placed the two companies under federal conservatorship, under the control of the Federal Housing Finance Agency.

In September 2019, Trump’s administration sought to end the conservatorship and privatize the companies. A 2015 analysis by Zandi and Urban Institute senior fellow Jim Parrott estimated that such a move would increase annual mortgage costs by about $1,200 for homebuyers. Zandi has since updated that number based on current interest rates and home prices.

Trump was not able to implement the plan before leaving office in January 2021 and lamented in a November 2021 letter to Sen. Rand Paul (R-KY) that legal questions over his authority to fire the President Barack Obama-appointed head of the agency had left him with insufficient time to do so. “From the start, I would have fired former Democrat Congressman and political hack Mel Watt from his position as Director and would have ordered FHFA to release these companies from conservatorship,” Trump wrote, “My Administration would have also sold the government’s common stock in these companies at a huge profit and fully privatized the companies.”

Tennessee Republican Rep. Andy Ogles introduced a bill in September 2023 to end federal conservatorship of Fannie Mae and Freddie Mac and to require the Treasury Department to divest its investment in the companies.

The right-wing Heritage Foundation endorsed this idea in its Project 2025 blueprint for the Trump administration. “Treasury plays a role in funding the conservatorships of Fannie Mae and Freddie Mac,” the plan says. “It should work to end the conservatorships and move toward privatization of these massive housing finance agencies. This would restore a sustainable housing finance market with a robust private mortgage market that does not rely on explicit or implicit taxpayer guarantees.”

Throughout the 2024 presidential campaign, Trump repeatedly disavowed Project 2025. Since winning the election, he has named several of its authors and contributors to key administration posts.

According to a February 2024 report by GO Banking Rates, the average yearly mortgage cost for a Wisconsin home is $22,618 — $1,885 per month. A $2,800 yearly increase would represent about a 12% jump in costs.