By Rocky Swift
(Reuters) -Over-the-counter (OTC) shares in Fannie Mae and Freddie Mac rose sharply on Thursday after U.S. President Donald Trump said he was considering taking the U.S. mortgage finance firms public.
The United States Treasury owns preferred shares in the firms and warrants to purchase about 80% of their common stock, a holdover from a rescue during the 2008 housing loan crisis.
The spinoffs would be a win for conservatives who have long advocated for privatising government-affiliated firms, such as the U.S. Postal Service and passenger rail operator Amtrak. But moving housing loans outside the government umbrella could raise mortgage costs for home buyers.
In a post on Truth Social, Trump said he was “giving very serious consideration” to the spin-off and would decide in the near future. He added he would speak on the matter with Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Federal Housing Finance Director William Pulte and others.
In premarket trades, Fannie shares were up 40.9% at $10.50 while Freddie shares were up 52.6% at $8.58.
The U.S. government could get a windfall of more than $250 billion from a listing of the housing lenders, James E. Thorne, chief market strategist of Wellington-Atlus Private Wealth, said on X.
It may also be a boon to Trump ally Bill Ackman, whose Pershing Square Capital Management is the biggest holder of Fannie’s public OTC shares with about 10%, according to LSEG data.
Capital Research Global Investors, a unit of the Capital Group, holds about 7.7% of Freddie, the biggest single stake, and 8.8% of Fannie.
The two companies have a combined market value of about $12.3 billion. Their shares, which don’t trade on major exchanges, have surged more than 260% in the past year, with most of those gains following the November election of Trump, who unsuccessfully pushed to sell off the companies during his first term.
Fannie, formally known as the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., operate as for-profit firms with private shareholders.
They were created by Congress to expand the national home lending market by buying home loans from private lenders and repackaging them as mortgage-backed securities.
Fannie and Freddie suffered overwhelming losses when the U.S. housing market collapsed during the sub-prime mortgage crisis in 2007-2008. Fearing an economic catastrophe, U.S. authorities placed them in conservatorship under the newly created Federal Housing Finance Agency.
The companies returned to profitability in 2012 and by 2017 had repaid all the loans they received from the federal government.
“Fannie Mae and Freddie Mac are doing very well, throwing off a lot of CASH, and the time would seem to be right,” Trump said in his social media post.
In February, Bessent said the release of Fannie and Freddie from their conservatorship would depend on mortgage rate implications.
Effectively reprivatising the firms may also put them in line for a credit downgrade, as they would “no longer be quasi-sovereign paper,” Tolou Capital Management founder Spencer Hakimian said on X.
That could in turn lead to an increase in mortgage rates for homebuyers, he added.
(Reporting by Rocky Swift in Tokyo; Editing by Edmund Klamann)
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