The U.S. housing market in 2025 continues to face significant challenges, with high home prices and elevated mortgage rates stifling both buyers and sellers. Billionaire investor Bill Ackman has proposed a bold solution to alleviate these issues by merging Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) critical to mortgage finance, and taking the combined entity public.
This plan aims to reduce costs, simplify regulation, and lower borrowing rates for millions of Americans.
Current Housing Market Challenges
The housing market continues to face challenges, with 30-year fixed mortgage rates averaging 6.63%, a decrease from the peaks of 2024 but still causing strain. This situation has discouraged many potential sellers from entering the market and has decreased affordability for buyers. Existing-home sales dropped 2.7% in June, even though median home prices hit a new high of 5,300. The annualized rate of housing starts for single-family homes has decreased to 883,000 units, indicating builder caution due to high financing and material costs. Builder confidence, evaluated by the National Association of Home Builders Housing Market Index, remains low at 33. On the rental front, an increase in multifamily supply has stabilized rents, but this has not made the road to homeownership any easier.
Ackman’s Proposal: Merging Fannie Mae and Freddie Mac
Ackman’s plan involves consolidating Fannie Mae and Freddie Mac into a single entity and launching it as a publicly traded company, potentially valued at around $500 billion. The GSEs play a vital role in the housing market by purchasing mortgages from lenders, bundling them into mortgage-backed securities (MBS), and selling them to investors, thereby freeing up capital for new loans. Since the 2008 financial crisis, both entities have operated under federal conservatorship, ensuring the availability of the 30-year fixed-rate mortgage.
Ackman argues that a merger would streamline operations, reduce oversight complexity, and lower mortgage rates by cutting costs. His proposal aligns with reported considerations by the Trump administration to privatize the GSEs through initial public offerings (IPOs).
Potential Impacts and Challenges
While Ackman’s idea has transformative potential, it comes with both opportunities and risks:
- Mortgage Rates and Guarantee Fees: A merged entity could lower mortgage rates if cost savings are passed on to borrowers. The Urban Institute suggests that adjustments to capital requirements and profit targets could shift guarantee fees (g-fees) by 10–25 basis points. However, the uncertainty surrounding an IPO could temporarily widen MBS spreads, potentially increasing borrowing costs in the short term.
- Liquidity Gains: Since 2019, Fannie Mae and Freddie Mac have issued a unified MBS to enhance market liquidity. A merger might yield smaller liquidity benefits than expected, as some efficiencies are already in place.
- Systemic Risks: Combining the GSEs would concentrate operational and financial risks into a single entity, posing a potential threat to the broader housing finance system if mismanaged. The Federal Housing Finance Agency (FHFA) and the Treasury would need to carefully balance affordability with shareholder demands in a privatized structure.
Conclusion
Ackman’s proposal to merge Fannie Mae and Freddie Mac and take the combined entity public is a bold attempt to address the housing market’s persistent challenges. While it could reduce costs and lower mortgage rates, it also introduces risks, including short-term market disruptions and concentrated systemic vulnerabilities. The plan’s success will depend on careful execution and robust oversight to ensure it benefits homeowners without destabilizing the housing finance system.
