Multifamily Investors Brace for Change As Trump Mulls End to GSE Conservatorship

This government support has significantly shaped the mortgage lending landscape, often making it difficult for competitors to gain a foothold. Mark Calabria, senior advisor to the Cato Institute and former director of the Federal Housing Finance Agency during Trump’s first administration, told GlobeSt.com in an earlier interview, “What I experienced as director was a regular stream of people like insurance companies saying, ‘I lost that deal to Freddie by 10 basis points.’”

Experts estimate that fully removing the GSEs from conservatorship could take between two and four years. “I think it’s largely an uphill battle politically and while it does have merit to have IPOs and raise potentially $300 million for the government, the ripple effects could be more consequential than the benefit,” Clark Finney, first vice president and director of capital markets at Matthews Real Estate Investment Services, told GlobeSt.com. He added, “But I do think if an executive order happens this year, it will take an act of Congress for it to be permanent and the odds of that are low.”

If privatization does occur, LeaseLock Chief Economist Greg Willett explained to GlobeSt.com that it’s “likely that privatizing Fannie and Freddie will remove or at least significantly reduce the government backing that’s currently in place for securitized home mortgages.” This increased risk could push mortgage rates higher, creating a headwind for potential homebuyers and, conversely, a tailwind for rental housing demand.

What is interesting is that the GSEs have been “super profitable,” Jeff Klotz, CEO of The Klotz Group of Companies, told GlobeSt.com. “And, of course, they made the multifamily sector that we focus on that much more attractive to institutional and noninstitutional investors. The thought of something changing is scary to us in the business because you don’t know what you’re going to get. We rely on them heavily, so we would hate to experience challenges.”

Klotz also questioned whether the GSEs would maintain their focus on workforce lending, noting, “They have the best rates and better terms than the other lenders do.”

Willett added that ending conservatorship “wouldn’t necessarily shift their multifamily focus from middle-market and lower-end product,” but there is a real possibility that a push for profitability could take precedence over their role in market stabilization.