To the Point With Bob: Why Preserving Competition Between Fannie Mae and Freddie Mac Matters
(To the Point with Bob is a periodic blog by MBA President & CEO Bob Broeksmit, CMB.
You can view this and past blogs here)
The Trump Administration has signaled that it is prepared to take meaningful steps to alter the long-standing conservatorship of Fannie Mae and Freddie Mac, which has now entered its eighteenth year. One idea some have mentioned is the potential merger of the two government-sponsored enterprises (GSEs), or their placement under common holding company ownership.
While it is appropriate to consider a wide range of options, this particular proposal is not new. A similar idea was put forward by the National Economic Council during the Obama administration and received careful review across the industry. It was ultimately rejected for sound reasons that remain as relevant today as they were then. MBA has long maintained that preserving at least two GSEs is essential to maintaining a competitive, efficient, and resilient housing finance system.
The Risks of Consolidation
Competition between Fannie Mae and Freddie Mac has been central to their success in providing liquidity and stability to the mortgage market. Creating a government-conferred monopoly would diminish innovation, degrade service to market participants, and heighten systemic risk by concentrating housing finance operations within a single entity.
Conservatorship itself has already constrained the GSEs’ ability to compete and innovate. Many stakeholders have described this as the “HUDification” of the enterprises—a gradual erosion of their entrepreneurial and competitive character. A merger or common ownership structure would compound this problem, undermining the very rationale for re-privatization and reducing the incentives necessary for robust competition under a sound regulatory framework.
The Value of Competition
Today, competition between the GSEs generates tangible benefits to the primary market and to consumers, including:
• Diverse technology solutions that enhance seller/servicer interactions;
• Risk-sharing transactions, particularly in the multifamily sector, where each GSE has developed distinct securitization approaches;
• Specialized market expertise in areas such as condominiums, manufactured housing, and renovation products;
• Distinct approaches to ensuring high quality mortgage originations, including with respect to enforcing the representations and warranties made by lenders;
• Product development that expands access to sustainable mortgage credit; and
• Customer service that ensures lender needs are met efficiently and effectively.
These competitive dynamics ultimately accrue to the benefit of lenders, borrowers, and taxpayers, helping to sustain the stability and dynamism of the U.S. housing finance system.
Where Alignment Is Appropriate
There are, of course, areas where alignment between the GSEs has been and should continue to be pursued. The secondary mortgage market and consumers benefit from standardized servicing practices, uniform documentation, consistent appraisal standards, and the successful implementation of the uniform mortgage-backed security (UMBS). Likewise, market conduct and pricing oversight by the GSEs’ regulator is critical to ensuring equal access and a level playing field for originators of all sizes and business models. These areas of alignment promote efficiency and fairness without diminishing the competitive benefits derived from maintaining two distinct enterprises.
A Path Forward
The conservatorship of the GSEs was never intended to be permanent. For the first time since the Great Financial Crisis, the Administration appears poised to advance serious reform, and we appreciate that all ideas are being considered. This moment presents a unique opportunity to set a path toward ending conservatorship, lock in critical safeguards, and build on the strengths of our current system—most notably, the wealth-creation engine that is homeownership facilitated by the 30-year fixed-rate mortgage.
As policymakers weigh potential paths forward, preserving meaningful competition between Fannie Mae and Freddie Mac must remain a guiding principle. A housing finance system built on innovation, resiliency, and consumer benefit depends on it.
