Fannie Mae Shocks Housing Market: New 2025 Forecast Signals Lower Mortgage Rates Ahead

The push to return Fannie Mae and its sibling Freddie Mac to private hands is back in the headlines after former President Donald Trump told advisers he wants both government-sponsored enterprises (GSEs) to launch initial public offerings before year-end, according to the Wall Street Journal and confirmed by Reuters this morning. If the plan moves forward, it would mark the biggest change to U.S. housing finance since the companies were placed in federal conservatorship during the 2008 crisis. Why the talk of an IPO now? Analysts say three forces have converged: • Rising equity valuations. Shares of the thinly traded Fannie Mae (OTCQB: FNMA) have already surged more than 30 percent this month on privatization chatter, signaling pent-up investor demand for a true public float. • Budget politics. Selling a portion of Washington’s 79 percent stake could deliver tens of billions of dollars in proceeds, helping offset federal deficits without new taxes. • Policy momentum. The Federal Housing Finance Agency (FHFA) has spent the past two years tightening underwriting standards and boosting capital buffers, steps designed to make the GSEs IPO-ready. Still, major hurdles remain. The FHFA would have to certify that Fannie Mae meets minimum capital thresholds, while Congress—deeply divided over the role of the federal backstop—could intervene at any point. “No road map exists for extracting two $5 trillion balance-sheet giants from conservatorship,” warns housing economist Douglas Holtz-Eakin. Impact on borrowers and lenders Fannie Mae finances roughly one in four new U.S. mortgages, so any change in its structure reverberates across Main Street. For now, homebuyers face little immediate disruption: average 30-year fixed rates hover near 6.70 percent, and Fannie’s latest forecast still sees rates ending 2025 around 6.4 percent. But if the market perceives added credit risk once the Treasury’s backstop shrinks, mortgage rates could drift higher. Consumer sentiment is already fragile. In its July National Housing Survey, only 17 percent of respondents said now is a good time to buy a home, the lowest reading since the series began in 2010. Affordability strains would intensify if Fannie’s funding costs rise post-IPO. What’s next Investors will watch for three catalysts: 1. An FHFA capital adequacy ruling, expected as early as September. 2. Draft offering documents, which could reveal fresh details about credit-risk transfer programs and loan-buying caps. 3. Statements from President Biden, whose administration retains veto power over any transaction. Bottom line Whether or not an IPO materializes this year, the renewed spotlight on Fannie Mae underscores a pivotal moment for the U.S. housing market. Homebuyers, lenders, and shareholders alike should brace for elevated volatility—and the possibility that the nation’s mortgage superstructure could soon look very different from the one that has dominated lending for nearly nine decades.