Latest news with #FreddieMac
Wall Street Journal
2 hours ago
- Business
- Wall Street Journal
Fannie and Freddie Changes Would Reshape the Mortgage Market. It Hinges on These Questions.
The Trump administration wants to sell shares in two government-controlled companies that are crucial for getting a mortgage. First it needs to figure out what it wants the mortgage market to look like. A public offering for Fannie Mae FNMA -1.03%decrease; red down pointing triangle and Freddie Mac FMCC 1.40%increase; green up pointing triangle could raise money to help reduce the government deficit. President Trump has twice mentioned selling shares in recent days.
Forbes
17 hours ago
- Business
- Forbes
Privatizing Fannie And Freddie: Rationales And Credit Impacts
An American flag at a residential home in Discovery Bay, California, US, on Thursday, Nov. 7, 2024. ... More Mortgage rates in the US increased to the highest level since July. Photographer: David Paul Morris/Bloomberg All week, markets and politicians been dissecting the President Trump's proposal to privatize Fannie and Freddie. As they support 70% of the U.S. mortgage market, it is important to consider the credit markets impacts and risks for the U.S. These are still hard to work out until the rationale becomes clear, beyond removing the FHFA as conservator. Since their creation, the two main GSEs have been quintessential mixed-ownership corporations. In 1938, FNMA was established as a standalone company in the New Deal. It was acquired in 1950 by the entity that became the U.S. Department of Housing and Urban Development with two classes of shares: preferred, held by the U.S. Treasury, and common, non-voting, held by a network of mortgage lenders. In 1968, Fannie was reorganized and split into a successor FNMA and Ginnie Mae. The successor FNMA was listed on the New York Stock Exchange and chartered to purchase, bundle and sell residential mortgages as securities (RMBS). GNMA became part of HUD. Its function: to guarantee payments on securitizations backed by mortgages issued under programs by U.S. government departments like HUD, Veterans Affairs and Agriculture. FHLMC was created in 1970 along lines similar to FNMA—publicly traded, earning guarantee fees on loan portfolios, with HUD oversight—but its client network is smaller banks and credit unions rather than large banks. Originally, FHLMC was owned by the Federal Home Loan Banks, but under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 it became independent. In 1995, FHLMC diversified into making markets in subprime mortgage collateral. In 2008, Fannie and Freddie suffered material losses on their combined mortgage portfolio of USD 1.5 TN. They were bailed out, delisted from the NYSE on July 7, 2010, placed under FHFA's conservatorship, and began trading on OTC markets the next day. The stock of both institutions remains publicly investible alongside their residential mortgage-backed securities and corporate bonds. So there must be more to the current proposal than giving American investors access. The Big Beautiful Bill will shrink the U.S. tax base if it passes the Senate. Could privatizing these mortgage giants fill the gap with new, incremental tax revenues? It is hard to say without a concrete deal structure in place. However, the mortgage giants already pay taxes on operating income, as well as paying federal, state and local taxes on securities' earned interest. So the motivation to privatize is not obviously tax-related. It may have more to do with the U.S. Treasury currently owning the GSE preferreds as well as warrants on 80% of common stock. If pricing on a future IPO were to hit or exceed the target, the U.S. government could reap a one-time, massive windfall. Arranging banks would profit handsomely as well. A USD Trillion IPO (Chairman Pulte's estimate) could generate fees in the range of USD 40 to 70 Billion. That's plenty of incentive for a successful initial offering. But for most Americans, what matters more is what happens in the aftermarket. First, what would be the go-forward impact on rates for homebuyers? The more common theory is that the replacement entities, being purely profit-driven and maybe facing higher funding costs, would drive up rates—and up again as supply shrinks. A minority viewpoint says rates will go down as privatization drives innovation. The reality is—we can predict given a concrete exit plan, but without one, we just can't know. Second, and intimately linked, is the status of the U.S. guarantee. This decision would impact the entire credit market ecosystem starting with borrowers, whose numbers would shrink as government support goes away. If the new entities were to retain U.S. support in some form, the impacts on bank market microstructure and the competitive playing field are less clear; but don't expect the status quo to continue. Would a distributed ecosystem form anew, or would intense, uneven competition transform the U.S. bank market where only giants survive? Related to the status of the guarantee is how potential backlash could impact the U.S. government rating, which Moody's just downgraded to Aa1. Would global bond investors view sudden withdrawal as a default, regardless of the legal definition? And in this same point, will GNMA and its guarantee continue? The answer directly impacts home affordability for veterans, rural homeowners and disadvantaged groups. Third, are the potential changes to the GSE's current information disclosure regime. This question is not yet debated in the media but it should be. The go-forward disclosure package could have the greatest impact on aftermarket performance. Bonds are most active in the capital structure of GSEs today. Their required bond disclosures comply with the very best practices in the world that were created in the U.S. public securitization markets. Will the disclosures continue? Will the public have access to them after the IPO? Or will the financial position of the new players become more opaque as information disclosures lag changes in financial performance? We have seen this movie before in the GFC. It did not end well. Fourth, the operational impacts of privatization are unclear. Will the 30-year fixed rate model made in the 1930s continue or gradually be replaced by loan structures benefitting borrowers less and lenders more—floating rate indices, shorter and longer maturities, different funding formulas? Will a forward-settled market replace the To Be Announced market that FNMA and FHLMC currently use? The TBA market today allows sellers to fund their origination pipelines and buyers to lock in prices before transaction specifics are settled because the guarantee equalizes the potential risk between offerings. The cost benefits, which can be quite substantial, may disappear if the guarantee goes away. Fifth are what Donald Rumsfeld called unknown-unknowns. If the first four categories of unknowns are known (with the possible exception of #3), news unfolding daily shines a light on impacts we have not yet thought of. Was Moody's downgrade of FNMA a reflection of recent past performance, or does it also anticipate future shocks to the organization? Does the introduction of an anti-crime unit with AI fraud detection technology materially impact how ? WASHINGTON, DC - FEBRUARY 27: William Pulte, nominee for Director of the Federal Housing Finance ... More Agency testifies at a hearing of the Senate Banking Committee on February 27, 2025 at the Dirksen Senate Building in Washington, DC. When FHFA Director Bill Pulte says, 'what we're trying to do…is take cost out of the system and get homes so they can be affordable again,' is he referring to the current interest rate levels or foreshadowing a collapse in prices? These scenarios have drastically different economic consequences. Finally, when President Trump says, 'the U.S. will keep its implicit GUARANTEES,' the key word seems to me to be the one in small caps: implicit. Equities are story paper, but bonds are based on contracts; and it is hard to assign a financial value, positive or negative, to implicit support.
Yahoo
a day ago
- Business
- Yahoo
Mortgage rates rise for third straight week, hover near 7%
Mortgage rates increased for the third straight week and continue to hover near the 7% level, mortgage buyer Freddie Mac said Thursday. Freddie Mac's latest Primary Mortgage Market Survey, released Thursday, showed that the average rate on the benchmark 30-year fixed mortgage rose to 6.89% from last week's reading of 6.86%. It marked the highest level since Feb. 6, when the rate on a 30-year mortgage also averaged 6.89%. The average rate on a 30-year loan was 7.03% a year ago. "Aspiring buyers should remember to shop around for the best mortgage rate, as they can potentially save thousands of dollars by getting multiple quotes," said Sam Khater, Freddie Mac's chief economist. When Leaving The House To Your Heirs Backfires The average rate on the 15-year fixed mortgage climbed to 6.03% from last week's reading of 6.01%. One year ago, the rate on the 15-year fixed note averaged 6.36%. Read On The Fox Business App These States Were The Housing Market Mvps, According To Meanwhile, the National Association of Realtors on Thursday said that its Pending Home Sales Index, based on signed contracts, dropped by 6.3% to 71.3 last month. Economists polled by Reuters had forecast contracts, which become sales after a month or two, falling 1%. Pending home sales declined by 2.5% from a year earlier. "At this critical stage of the housing market, it is all about mortgage rates," said NAR chief economist Lawrence Yun. "Despite an increase in housing inventory, we are not seeing higher home sales. Lower mortgage rates are essential to bring home buyers back into the housing market." Reuters contributed to this article source: Mortgage rates rise for third straight week, hover near 7% Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
Billionaire Bill Ackman's big housing market bet pays off
Billionaire Bill Ackman's big housing market bet pays off originally appeared on TheStreet. Shares of Fannie Mae and Freddie Mac surged after U.S. President Donald Trump said he is working on taking the two government-controlled mortgage giants public, a move that many shareholders hailed. In a post on his Truth Social platform on May 27, Trump praised the two companies' "vital service" to the American dream of homeownership. The two entities help provide stability and affordability to the U.S. housing market by backing trillions of dollars in home loans. "I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President,' Trump wrote. 💵💰Don't miss the move: Subscribe to TheStreet's free daily newsletter💰💵 Fannie Mae and Freddie Mac are government-sponsored enterprises that have been under federal conservatorship since the 2008 financial crisis. The official names of the two enterprises are the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, respectively. Trump unsuccessfully attempted to remove Fannie and Freddie from U.S. government control in 2019 during his first administration. Despite being government-controlled, their shares are still traded on over-the-counter markets and have drawn strong interest from hedge funds and institutional this month, Trump said he was giving 'very serious consideration to bringing Fannie Mae and Freddie Mac public,' noting they are 'doing very well, throwing off a lot of CASH.' Following the statement, the shares just hit their highest since 2008. Fannie shares () rose 2.2% to $10.78, while Freddie () gained 5.3% to $8 at the market close on May 28. Among the investors cheering the announcement is billionaire fund manager Bill Ackman. In a recent X post, he responded to Trump with two thumbs up. Through his firm, Pershing Square Capital Management, Ackman has invested in both mortgage giants and has repeatedly pushed for their release from conservatorship. He called it the 'biggest deal in history' and estimated that the government could make $300 billion if the companies are restructured and released, according to Bloomberg. "Fannie and Freddie represent a royalty on first mortgages secured by the U.S. housing market, which is a low-risk, high risk-adjusted return investment that will generate large and growing dividends that can be invested in other sovereign fund assets," Ackman said in a March post on X."The long-term returns on F2 [Fannie Mae and Freddie Mac] will significantly exceed the cost of U.S. Treasurys enabling our country to deleverage over time," he added. Ackman's interest in real estate extends beyond the mortgage agencies. Earlier this month, Pershing Square announced a $900 million deal to acquire 9 million newly issued shares of Howard Hughes Holdings () , a real estate company focused on developing large-scale communities and commercial districts. Ackman plans to turn Howard Hughes into a "modern-day version of Berkshire." More Real Estate: SALT income tax deduction takes critical step forward Buffett's Berkshire predicts major housing market shift soon Homeownership trend surges among Gen Z and Millennials In 1965, legendary investor Warren Buffett bought control of Berkshire Hathaway, then a struggling textile manufacturer. He gradually sold off the textile businesses and invested heavily in insurance, utilities, retailing, and other businesses. "Fortunately, our starting base of assets won't be a dying textile company, but a very good business," Ackman said. "We will adopt similar, long-term, shareholder-oriented principles to Berkshire, and we intend to hold the stock forever."Billionaire Bill Ackman's big housing market bet pays off first appeared on TheStreet on May 29, 2025 This story was originally reported by TheStreet on May 29, 2025, where it first appeared. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Mortgage and refinance interest rates today, May 30, 2025: Rates are now highest since February
Mortgage rates edged higher this week. According to Freddie Mac, the 30-year fixed interest rate is up three basis points to 6.89%, and the 15-year fixed rate moved up two basis points to 6.03%. It's the highest 30-year home loan rates have been since February 6. 'Aspiring buyers should remember to shop around for the best mortgage rate, as they can potentially save thousands of dollars by getting multiple quotes," said Sam Khater, Freddie Mac's chief economist. A year ago, the 30-year mortgage rate was 7.03%. The 15-year fixed rate is 6.03%, a whisker above returning to the Magic Land of Fives. It went as low as 5.15% in September. If it moves in that direction again, it might be enough to win favor from would-be homeowners willing to opt for the shorter, wealth-building term. Dig deeper: 2025 housing market — Is it a good time to buy a house? Here are the current mortgage rates, according to the latest Zillow data: 30-year fixed: 6.87% 20-year fixed: 6.69% 15-year fixed: 6.05% 5/1 ARM: 7.14% 7/1 ARM: 7.18% 30-year VA: 6.37% 15-year VA: 5.85% 5/1 VA: 6.34% Remember, these are the national averages and rounded to the nearest hundredth. Learn more: Should you lock in a mortgage rate? These are today's mortgage refinance rates, according to the latest Zillow data: 30-year fixed: 6.89% 20-year fixed: 6.60% 15-year fixed: 6.10% 5/1 ARM: 7.22% 7/1 ARM: 7.26% 30-year VA: 6.34% 15-year VA: 5.85% 5/1 VA: 5.85% Again, the numbers provided are national averages rounded to the nearest hundredth. Mortgage refinance rates are often higher than rates when you buy a house, although that's not always the case. Learn more: Want to refinance your mortgage? Here are 7 home refinance options. Your mortgage rate plays a large role in how much your monthly payment will be. Use this mortgage calculator to see how your mortgage amount, rate, and term length will impact your monthly payments: To get an even more detailed look at your potential monthly payment, use our Yahoo Finance mortgage calculator. It also factors in your homeowners insurance, property taxes, mortgage insurance, and HOA fees. A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. You can choose from two types of rates: fixed or adjustable. A fixed-rate mortgage locks in your rate for the entire life of your loan. For example, if you get a 30-year mortgage with a 6% interest rate, your rate will stay at 6% for the entire 30 years unless you refinance or sell. An adjustable-rate mortgage locks in your rate for a predetermined amount of time and then changes it periodically. Let's say you get a 7/1 ARM with an introductory rate of 6%. Your rate would be 6% for the first seven years, then the rate would increase or decrease once per year for the last 23 years of your term. Whether your rate goes up or down depends on several factors, such as the economy and housing market. At the beginning of your mortgage term, most of your monthly payment goes toward interest. Your monthly payment toward mortgage principal and interest stays the same throughout the years — however, less and less of your payment goes toward interest, and more goes toward the mortgage principal or the amount you originally borrowed. Learn more: Adjustable-rate vs. fixed-rate mortgages A 30-year fixed-rate mortgage is a good choice if you want a lower mortgage payment and the predictability that comes with having a fixed rate. Just know that your rate will be higher than if you choose a shorter term and will result in paying significantly more in interest over the years. You might like a 15-year fixed-rate mortgage if you want to pay off your home loan quickly and save money on interest. These shorter terms come with lower interest rates, and since you're cutting your repayment time in half, you'll save a lot in interest in the long run. But you'll need to be sure you can comfortably afford the higher monthly payments that come with 15-year terms. Read more: How to decide between a 15-year and 30-year fixed-rate mortgage Typically, an adjustable-rate mortgage could be good if you plan to sell before the introductory rate period ends. Adjustable rates usually start lower than fixed rates, then your rate will change after a predetermined amount of time. However, 5/1 and 7/1 ARM rates have similar to (or even higher than) 30-year fixed rates recently. Before getting an ARM just for a lower rate, compare your rate options from term to term and lender to lender. Mortgage rates have been rising over the past few weeks. Still, they are slightly lower than this week in 2024. Even though mortgage rates have fallen over the last year, they probably won't plummet in the short term. So, when will mortgage rates go down enough to lower your monthly payment significantly? It could be months, if not well over a year. If you are ready to buy a house but holding out for lower rates, it might not be worth the wait. According to Freddie Mac, the national average 30-year mortgage rate is up three basis points to 6.89%, and the average 15-year mortgage rate has increased by two basis points to 6.03%. According to its May forecast, the Mortgage Bankers Association (MBA) expects the 30-year mortgage rate to be 6.7% in Q3 2025 and 6.6% by the end of the year. Fannie Mae's May forecast is a little more optimistic, predicting the 30-year loan rate to be 6.1% by the end of the year — and 5.8% by the end of 2026. Mortgage rates are likely to remain mostly unchanged through the second and third quarters of 2025, with a chance that they may slip slightly lower by the end of the year.
