From Conservatorship to IPO: How Fannie Mae & Freddie Mac, and the Mortgage Spread Could Reshape U.S. Housing in 2025 and Beyond

Adriana Perez
9 minutes ago
5 min read

By Adriana C. Perez, Texas REALTOR® | The Trochilidae Group at Surge Realty

License #829146 | Brokered by Surge Realty (Licensed in Texas)

The following material is for informational purposes only and does not constitute financial, tax or legal advice. Consult qualified professionals for your specific situation.

The Bigger Picture You Need to Know

While most attention goes to what the Federal Reserve Board is doing with interest rates, there’s another major story unfolding behind the scenes, one that could affect mortgage rates, home buying, investing, and development in substantial ways.

Fannie Mae and Freddie Mac, the two key GSEs shaping the mortgage market, are being talked about for an IPO (initial public offering). If the government ownership changes or their guarantee structure is altered, the ripple effects could touch affordability, credit access, and market dynamics.

Whether you’re a first-time homebuyer, an investor, a builder or a real estate pro, this shift matters. Let’s walk through the history, the mechanics, the data—and then what it means for you.

GSEs: Who They Are and Why They Exist

What is a GSE?

A government-sponsored enterprise (GSE) is a chartered private corporation created by Congress to enhance credit flow in specific sectors, like home financing. Wikipedia+2U.S. Department of the Treasury+2

Meet the Two Players

Fannie Mae (Federal National Mortgage Association): founded in 1938 to create a secondary market for mortgages. U.S. Department of the Treasury+1
Freddie Mac (Federal Home Loan Mortgage Corporation): established in 1970 to bring competition and stability to the mortgage financing ecosystem. Wikipedia+1

What They Do

They buy mortgages from lenders, bundle them into securities (MBS), and guarantee payment to investors, even if borrowers default. That guarantee is why they have been able to borrow money at favorable rates, and why their role is so critical to housing finance.

The Regulator: FHFA

The Federal Housing Finance Agency (FHFA) was created in 2008 to oversee Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Wikipedia

FHFA’s responsibilities include:

Setting capital and risk standards
Supervising the GSEs’ operations
Serving as conservator (since 2008) when the GSEs were placed under government control

The Pre-2008 Era: Growth, Risk, and Crash

A booming market

In the late 1990s and early 2000s:

Homeownership rose.
Mortgages were easy to get (zero down, interest only, “no-doc” loans).
Fannie and Freddie’s footprints expanded; Wall Street issued private-label MBS.

The tipping point

As prices peaked in 2006-2007, defaults rose. The GSEs were overwhelmed with poor loans.

The crisis moment

On September 6, 2008, the U.S. government placed Fannie Mae and Freddie Mac into conservatorship, injecting ~$190 billion in capital to stabilize them and the broader housing market. This was a turning point.

Recovery & Reform: 2009-2024

After the crash:

The GSEs became profitable again, but under strict oversight.
They remained central: a large portion of U.S. mortgages still flows through them.
Reform efforts circulated, but complete privatization didn’t happen.

2025: The Push Toward an IPO

Now comes the next chapter.

The administration and FHFA are exploring an IPO for Fannie Mae and Freddie Mac (or other structural reforms) by late 2025.
Key issues:
- Will the implicit or explicit government guarantee remain?
- How will guarantee-fees (g-fees) change?
- How will mortgage investor risk, capital requirements, and liquidity behave?

According to policy research, changes in g-fees or the guarantee status can push mortgage rates higher because they widen the risk premium investors demand. SIEPR

Understanding the Mortgage Spread - The Hidden Lever

What is the mortgage spread?

The mortgage spread is the difference between the 30-year fixed-rate mortgage and the 10-year U.S. Treasury yield. Example: Mortgage rate 7.25 % – Treasury yield 4.25 % = a 3.00 pp (300 bps) spread.

The spread reflects how much extra return lenders/investors require over a “risk-free” benchmark. It’s composed of credit risk, prepayment risk, and liquidity risk. Federal Reserve Bank of New York+1

Why does it matter?

When the spread widens
1. Lenders/investors see more risk
2. Mortgage rates climb faster than Treasury yields
3. Affordability drops.
When the spread narrows
1. Lending gets cheaper relative to Treasuries
2. More buyers qualify
3. Market activity can pick up.

What history tells us

Time period	Spread behavior	Market implication
1990s	Narrow ~150 bps	Stable access, strong credit flow
Crash of 2008	Spiked >300 bps	Credit froze, borrowing got expensive
2010-2019	Narrowed	Recovery mode, rates are more predictable
Pandemic (2020+)	Widened	Uncertainty, market stress
Present (2025)	Elevated (~275-300 bps)	Caution returns, affordability under pressure

What This Means for All Types of Players

First-Time Homebuyers

Even if the Fed holds rates steady or cuts, rates for you may not drop much unless the spread narrows.
Ask your lender about float-down locks, or prepare for budgets that assume a slightly higher rate.
Keep credit clean: When spreads widen, lenders tighten underwriting, increase FICO, and lower DTI (debt-to-income) ratios.

Investors (Residential & Multi-Family)

Higher spreads = slightly higher cost of capital = lower yield unless you adjust your pricing or target stronger markets.
Look for deals where financing cost shifts are already priced in—early movers win.
Monitor spread movements weekly; they can signal entry windows before rates move for the masses.

Builders & Developers

If mortgage spreads stay high, buyer lock-in slows. Use rate buydowns, flexible terms, or up-front incentives to grease the path.
Track policy changes—especially guarantee fee revisions or guidance from FHFA, because those feed into your buyers’ financing costs.
Choose development markets wisely: if an area is more rate-sensitive (entry level, lesser credit), spread shifts hit harder.

How to Track It Like a Pro

Use these public, free, credible sources:

Federal Reserve Bank of St. Louis FRED: track MORTGAGE30US 30-yr fixed mortgage & GS10 (10-yr Treasury) used to compute spread.
Freddie Mac PMMS (Primary Mortgage Market Survey: weekly national mortgage rate averages.
Mortgage Bankers Association (MBA): commentary on the mortgage market and GSE reform.
Industry analysis sites (e.g., New York Fed staff reports) on MBS spreads, risk premiums, and investor behavior.

Three Possible Futures (12-24 Months)

Scenario	What Happens	Likely Impact on Abodes & Investment
Best-Case	Clear reform, guarantee intact, spreads narrow	Rates ease, sales volume picks up
Base-Case	Reform gradual, guarantee uncertain, spreads moderate	Steady market, moderate affordability
Worst-Case	Guarantee perception weakens, spreads widen	Rates higher, access tighter, deals lean

The mortgage market is changing. Behind the scenes of headlines and Fed statements lies a shift in how mortgages are guaranteed, priced, and funded. The mortgage spread - that silent difference between Treasury rates and your interest rate - may matter more than the Fed’s next move.

If you’re buying your first home, investing in real estate, or developing housing, awareness is your edge. Stay nimble. Stay informed. And above all, adapt your strategy to the actual cost of financing, not just the advertised rate.

Because in 2025, the story isn’t just about home rates. It’s about how credit, risk, and policy converge, and what that means for your property, budget, and future.