Is a Fannie-Freddie merger on the way?
Of course, launching an IPO alone doesn’t indicate an immediate end to conservatorship, with “huge policy questions” to be answered after the public offering on what the government intends the GSEs to look like, Tabit said.
Another Trump social media post last month featured the president standing in front of a “Great American Mortgage Corporation” sign, fueling speculation that his administration could merge Fannie and Freddie into one entity for the IPO.
That’s an approach that would have both upsides and downsides, according to Tabit. “The reason why Freddie Mac was created in the first place was to create some competition, and there are concerns that if you merge them then you sort of remove that element,” he said. “And you’ve seen some mortgage lenders come out and oppose the idea of a merger for that exact reason – particularly smaller lenders.
“But on the other hand, you have benefits of scale and organizationally maybe that’s a little bit better. And if you have two competitors, there’s a race to the bottom in terms of G fees [guarantee fees]. That’s another major concern. So obviously, there are trade-offs there – but we don’t even know if that’s actually the plan the administration would like to pursue.”
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