S♍ome leading congressional Democrats are pushing back on a big housing idea that President Donald Trump recently floated.

Led by Massachusetts Senator Elizabeth Warren, more than a dozen Senate Democrats sent a letter to the Trump administration arguing it should pause any efforts to release mortgage giants Fannie Mae and Freddie Mac from government control. They said the Trump administration needs to better explain its plans before moving forward.

“Hasty and poorly planned changes to [Fannie Mae and Freddie Mac] could dramatically increase costs for families seeking to purchase a home, rewarding President Trump’s billionaire campaign contributors while making the housing crisis even worse,” said the June 5 letter addressed to the Federal Housing Financing Administration, which oversees Fannie and Fredꦰdie.

Issues Over Relea🌄sing Fannie, Freddie from Government Control

Fannie Mae and Freddie Mac help the housing market by buying mortgages from banks and packaging them together as a special investment similar to a bond. They are private companies with government backing that would cover their potential losses. During the 澳洲幸运5官方开奖结果体彩网:2008 financial crisis, the federal government took control of these companies through a process called “澳洲幸运5官方开奖结果体彩网:conservatorship.”

While private investors can buy shares of Fannie and Freddie on the over-the-counter market, they are no longer listed on the New York Stock Exchange. 澳洲幸运5官方开奖结果体彩网:Trump’s proposal would have the government relinquish its control of the companies, even as it maintains a limited guarantee. He would have the companies relisted on a major stock exchange, making their stock easier for retail investors to buy, according to a post on Truth Social.

The proposal is controversial, especially since releasing the pair from government control could increase risks for its investment products, potentially leading to higher mortgage rates. Releasing Fannie Mae and Freddie Mac from conservatorship could also benefit shareholders like Pershing Square CEO Bill Ackman, who endorsed Trump in 2024, if they are relisted on a stock exchange. The Democrats raised these concerns in their letter.

How Changes to Fannie, Freddie Could Impꦿact Mortgage Rates

The letter comes as some analysts assess the impact of rel🦩easꦕing Fannie Mae and Freddie Mac from government control and relisting the stock. 

Mark Zandi, chief economist at Moody’s Analytics, laid out how he thinks the move could impact mortgage rates in a series of social media posts last week. He said much of the outcome would depend on what kind of guarantee the government would provide to Fannie and Freddie once it relinquishes control of the companies.

By strengthening the government's guarantee of Fannie and Freddie, mortgage rates could be lower by as much as a quarter of a percentage point, Zandi argued. However, if the government were to withdraw its guarantee of Fannie and Freddie, mortgage rates could be higher by as much as 0.6 to 0.9 percentage points.

However, whi♛le Trump is propﷺosing a change, Zandi said that there are 50% odds that the current system for Fannie and Freddie will remain unchanged. 

“Mortgage rates won’t change. The system works well as-is, with risks already shifted to private investors via credit risk transfers. No legislati🌞on is needed, and there’s little incentive to disrupt what’s already functioning smoothly,” Zandi wrote. 

Cato Institute economist Norbert Michel agreed that the way the government guarantees Fannie and Freddie can have an impact on mortgage rates, but he said the impacts would be minimal, arguing that eliminating the guarantee would equal about a quarter of a percentage point rise⭕ in mortgage rates. 

“It's not so clear that it's an enormous cost difference and we haven't even addressed whether that's worth it and whether the benefit is outweighing the cost,” said Michel, director of Cato’s Center for Monetary and Financial Alternatives.

Michel argued that the government should get out of the business of backing the mortgage giants and let other private-sector financial institutions fill the role that Fann𝕴ie and Freddie now serve

“Private profits should not be paired with the socialization of losses. Anything short of eliminating government sponsorship for these firms would leave in place the same system that led to the 2008 financial crisis,” Michel said.