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Some hope election changes mortgage system

If Donald Trump wins the presidential election, Republicans hope he will fulfill a longstanding GOP goal of privatizing the mortgage giants Fannie Mae and Freddie Mac, which have been under government control since the Great Recession.

But Democrats and some economists warn that, especially in this time of high mortgage rates, doing so will make buying a home even more expensive.

Republicans contend the Federal Housing Finance Agency has been overseeing the two firms far too long, stymying competition in the housing finance market while putting taxpayers at risk should another bailout be necessary, like in 2008. President Donald Trump sought to free the two companies from government control when he was in office, but Joe Biden’s victory in 2020 prevented that from happening.

Democrats fear ending the conservatorship would cause mortgage prices to jump since Fannie Mae and Freddie Mac would need to raise fees to make up for the increased risks they would face without government support. The two firms guarantee roughly half of the $12 trillion U.S. home loan market and are a bedrock of the U.S. economy.

Project 2025, a handbook for the next Republican administration, includes a key call for the conservatorship to end, though Trump has sought to distance himself from the 920-page document, which was drafted by longtime allies and former officials of his administration.

“If his (Donald Trump’s) Project 2025 agenda is put into effect, it will add around $1,200 a year to the typical American mortgage,” Democratic presidential nominee Kamala Harris said during an August rally in North Carolina, building off of a 2015 analysis by economists Jim Parrott and Mark Zandi.

Parrott, a fellow at the Urban Institute, and Zandi, chief economist for Moody’s Analytics, concluded that a privatized Fannie Mae and Freddie Mac “would need to hold more capital against riskier loans … forcing them to either increase mortgage rates for these borrowers or lend less to them.” Ultimately, they found that privatization would cause rates for 30-year mortgages to rise between 0.43% and 0.97%. Applying that to the average homeowner’s mortgage balance of $244,500 in 2023, that would be about $730 to $1,670 more per year.

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