As policymakers mull a potential stock offering that would distance Fannie Mae and Freddie Mac from conservatorship, speculation about the impact on various parts of the business’ ecosystem has run rife.
Wall Street and big financial institutions in general, which have been in consultation with the Trump administration in regard to an offering, stand to gain while smaller companies fear pricing that handed larger players a relative advantage pre-conservatorship could be considered again.
“Back before the Great Financial Crisis, Fannie and Freddie both had guarantee fees that were very different depending upon who you were,” noted Larry Goldstone, president of capital markets and lending at BSI Financial Services. “That’s an example of how they might bifurcate the market or seek different ideas or strategies.”
More on that and other developments that could impact different segments of mortgage stakeholders follow.
Why smaller lenders fear bigger ones may gain an advantage
The Community Home Lenders of America are concerned that “a conservatorship exit could create incentives to return to practices which unfairly favor mega-lenders,” according to a letter the group sent to the heads of Treasury and the GSEs’s oversight agency earlier this year.
(The latter official, Bill Pulte, at deadline was under a Government Accountability Office investigation related to politicized fraud claims he’s made, which also face court challenges. He has been quiet when it comes to a potential stock offering recently but another administration official involved, Commerce Secretary Howard Lutnick said this week that is progressing.)
Goldstone said pre-crisis disparities in g-fees between were considerable. So similar ones would be a real concern to more moderate-sized players if they came back along with a reversal of conservatorship.
“Smaller and midsize originators had a much larger guarantee fee, maybe as much as two to three times, so it put the smaller originators at a competitive disadvantage,” he said.
The first Trump administration also moved toward freeing the enterprises from conservatorship and left g-fee parity intact but the 2025 approach has differed, making it unclear whether or not that makes it likely the level playing field would remain protected.
The idea that large players could gain an advantage also extends in particular to those who have Wall Street arms and might want to be involved in a stock offering, or who might be able to absorb more in the way of capital requirements if leads to increased interest in risk management and additional requirements around this for lenders selling loans to Fannie and Freddie.
Goldstone also said there’s also a sense that the enterprises seem to be routing bigger players to the larger of the two GSEs, Fannie Mae, and smaller ones to the relatively less sizable Freddie Mac.
“That’s an interesting strategic choice that many of us as business operators have to think about,” he said.
Small property owners could get better rates for loans
If speculation that Fannie and Freddie could get more competitive in the market for single-family investor loans pans out, it would be to the advantage of borrowers in that market.
Owners who hold only one-to-five single-family properties account for 87% of single-family rental homes purchased as investments, according to BatchData’s latest report, which reflects numbers from the second quarter.
So financing in this market is more likely to support smaller, “mom-and-pop” owners looking to build wealth than large institutions that invest in the market, said Kimber White, president of the National Association of Mortgage Brokers.
Potential new partnerships with tech and crypto players
Some mortgage technology firms and companies comfortable with crypto could benefit if the GSEs follow through with their oversight chief’s plans to form partnerships with automation providers.
Also, cryptocurrency experts in the industry are cautiously optimistic about Pulte’s interest in allowing unconverted digital currencies to be counted as part of borrowers’ reserves as Republicans more broadly push for more business in this area and debate the degree of risk.
“I believe this is way the world is going in terms of some of the assets that today, some people have, and I think in the future, most people will have,” said Josip Rupena, CEO and founder and Milo Credit, a provider of crypto-backed mortgages and other loans.
