KBW: Window for Fannie, Freddie privatization is narrowing

The window for Fannie Mae and Freddie Mac to be returned to the private sector “appears to be narrowing,” with a low probability of it happening before the midterms election in November, according to analysts at Keefe, Bruyette & Woods (KBW).

With the Trump administration’s focus having shifted to the Middle East conflict and housing affordability, the topic has become quieter in Washington, D.C., and across the mortgage market in 2026, following early signals of a potential stock offering for the government-sponsored enterprises (GSEs) last year.

“While there have been multiple posts on X about GSE privatization, we think in order for privatization to succeed, the administration needs to take action to address key issues, such as capital levels, the treatment of the government’s senior preferred (stock), and the nature of the implicit guaranty,” the analysts wrote in a report released Monday.

But resolving these issues while maintaining a stable secondary market for mortgage assets will take time. And “if much of the work isn’t done in 2027, it will probably be challenging in 2028 as the administration’s focus shifts to the 2028 presidential election,” the analysts said.

“Given that, we think the window for GSE privatization appears to be narrowing.”

The comments come as the GSEs prepare to release first-quarter 2026 earnings. KBW said net interest income for Fannie and Freddie is projected to rise amid an expected $200 billion increase in their retained portfolios, as announced by Trump in January.

“The GSEs, unlike the Federal Reserve when it was buying agency MBS while conducting quantitative easing, are behaving like other private market participants and buying agency MBS where they see value,” the analysts said.

Overall, KBW lowered its price target from $10 to $8.50 per share for Fannie Mae, and from $9 to $8.50 for Freddie Mac, reflecting a reduced likelihood of privatization.