Nearly half of MBS investors expect Fannie, Freddie privatized by 2028

Almost half of investors who buy agency mortgage-backed securities said in a survey by JPMorgan Chase & Co. they expect Fannie Mae and Freddie Mac will be privatized sometime in the next four years, according to a note released Friday.

Another quarter of respondents expect the two companies, known as government-sponsored enterprises, to be privatized sometime during the next presidential administration, or between 2029 and 2032, the survey found. And a slightly higher share — about 26% — don't think the two GSEs will ever be privatized. 

The results offer a window into a community of market watchers with a direct stake in what would be a major overhaul to the nation's mortgage finance system. The two GSEs have been in government conservatorship since their bailouts in 2008, and the debate over when and how to privatize them is notoriously complex. 

President Donald Trump has called for the release of Fannie and Freddie from government control, though hasn't brought it up recently and the issue was not part of his 2024 presidential campaign. The mechanics of how, when and if privatization will happen remain open questions. 

The survey was conducted over Jan. 16 to Jan. 23 and included 126 respondents. It was published in a note by strategists including Nicholas Maciunas, Alex Kraus, Sanjana Prasad and David Kaminsky. 

JPMorgan also asked investors how various privatization scenarios would impact the risk premiums on MBS that Fannie and Freddie financially guarantee, the pillar of their business models. Exactly how much those risk premiums move is a key question, since the costs are ultimately passed through to homeowners in the form of higher or lower mortgage rates.  

If the GSEs are privatized with only their current capital levels, respondents indicated risk premiums on MBS would widen by as much as 45 basis points or more. If they were privatized with greater capital requirements, including scenarios where the GSEs are still allowed to draw on a line of capital from the Treasury Department, risk premiums would still widen but not by as much, respondents indicated. And if privatization came with an explicit government guarantee, risk premiums would even tighten slightly, the survey found.  

READ MORE: What mortgage bankers want GSEs to keep post-conservatorship

Recently high-profile investors such as hedge fund chief Bill Ackman have brought attention to the debate by putting forward a plan to hold initial public offerings of Fannie Mae by 2026 and Freddie Mac by 2027. Shares of GSEs have risen sharply since President Trump's election, but the trade remains highly speculative. Fannie Mae common shares were down more than 15% as of 3:45 p.m. Friday compared to Thursday's close.