The upcoming housing battle that could roil mortgage costs even more

https://www.washingtonpost.com/business/2024/11/19/trump-mortgages-housing-fannie-freddie/

The upcoming housing battle that could roil mortgage costs even more
The first Trump administration tried to remove two mortgage giants, Fannie Mae and Freddie Mac, from government control. The second one might finish the job.
By Rachel Siegel
November 19, 2024 at 6:00 a.m. EST

A big change to housing policy that many experts anticipate from the new Trump administration could roil the mortgage market and throw an already unsettled real estate industry into more turmoil.

The new administration is widely expected to resume a push to remove Fannie Mae and Freddie Mac, the two national mortgage behemoths that buy up huge quantities of loans, from government control. That initiative was a priority during President-elect Donald Trump’s first term, but the pandemic thwarted those plans. Now, though, economists and housing experts say the government has to be especially careful not to reshuffle the companies in a way that raises uncertainty or spooks investors, with mortgage rates already high and affordability at a crisis point.

“It’s really a question, not so much of ‘whether,’ but ‘how’” the change gets made, said Michael Fratantoni, chief economist at the Mortgage Bankers Association.

The mortgage market is already behaving in unexpected ways. After the 30-year fixed rate peaked around 8 percent last fall, it eased as the Federal Reserve began lowering interest rates. But now mortgage costs are again ticking up despite more Fed cuts, driven by a strong economy and the ongoing reality that there aren’t enough homes to go around.

The firms are deeply embedded in the workings of housing finance in America, and the popular 30-year fixed rate mortgage simply wouldn’t exist without them. Fannie and Freddie don’t make mortgage loans directly, but rather buy and package them into securities. Together, the companies guarantee about half of existing home loans.

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