Republicans if Donald Trump wins presidential election I hope he fulfills The GOP’s long-standing goal has been to privatize mortgage giants Fannie Mae and Freddie Mac, which have been under government control since the Great Recession.

But Democrats and some economists especially warn about this. high mortgage rates this timeDoing this will ensure: buy a more expensive house.

Republicans argue that the Federal Housing Finance Agency has regulated the two firms for too long, stifling competition in the housing finance market and putting taxpayers at risk if another bailout is needed, as was the case in 2008. free two companies from government control While in office, Joe Biden’s victory in 2020 prevented that from happening.

Democrats are afraid Ending the conservatorship would cause mortgage prices to rise, as Fannie Mae and Freddie Mac would need to raise fees to compensate for the increased risks they would face without government support. The two firms underwrite nearly half of the $12 trillion U.S. mortgage market and underpin the U.S. economy.

Project 2025, handbook for the next Republican administrationContains an important call for the end of conservatism, even though Trump has made it He tried to push himself away. From the 920-page document Prepared by long-time allies and former officials of his administration.

“If (Donald Trump’s) Project 2025 agenda is implemented, it will add approximately $1,200 per year to the typical American mortgage,” the Democratic presidential candidate said Kamala Harris said at the August rally: in North Carolina, based on a 2015 analysis by economists Jim Parrott and Mark Zandi.

Parrott, an Urban Institute expert, and Zandi, chief economist at Moody’s Analytics, concluded that privatized Fannie Mae and Freddie Mac “will need to hold more capital against riskier loans… forcing them to either raise mortgage rates for those borrowers.” or lend them less.” Ultimately, they found that privatization would cause 30-year mortgage rates to increase by between 0.43% and 0.97%. If we apply this to the average homeowner’s mortgage balance of $244,500 in 2023, that would be about $730 to $1,670 more per year.

Parrott told the Associated Press he was surprised his analysis had resurfaced nearly a decade later, but he stood by it. “Privatization would result in a pretty significant increase in the cost of buying a home for most Americans,” said Parrott, who worked at the National Economic Council under then-President Barack Obama.

But to the economist Mark Calabria, who chaired FHFA during the Trump administration Under the presidency, these fears are unfounded, and the federal government has what it considers “legal authority” to return companies to private ownership.

“I didn’t find it a compelling or persuasive argument,” Calabria, now a senior advisor at the libertarian Cato Institute, said of Zandi and Parrott’s analysis.

Fannie Mae and Freddie Mac are now much healthier financially, Calabria said, and it’s “entirely possible” to remove them from conservatorship by 2027 after they raise the additional funds needed to strike out on their own.

“I don’t think there should be any concern that mortgages are suddenly going to become more or less expensive,” Calabria said. “If you want to strengthen our mortgage finance system so that people can get decent, responsible loans and that we don’t have to bail out the mortgage finance system again, we need to fix Fannie and Freddie. ”

Trump hasn’t said whether he wants to reconsider ending conservatism, but he lamented to Republican Sen. Rand Paul in 2021 that privatization efforts have failed.

“My administration has not been given the necessary time to resolve this issue,” he wrote to the Kentucky senator. Trump’s campaign declined to comment Tuesday on whether Trump still wants to end conservatism.

The key question, Parrott said, is whether privatized Fannie Mae and Freddie Mac will have an explicit or implicit guarantee that the government will step in and bail them out if they fail.

Parrott said how the Trump administration handles the issue will determine whether privatization will be “only slightly disruptive or significantly disruptive.”

Fannie Mae and Freddie Mac were private companies before they were taken over in 2008, but they still had an implicit government guarantee that bailed them out after the housing market crash and a wave of mortgage defaults.

Companies have long since repaid $187 billion in bailouts and given the government tens of billions of dollars more in dividends. But the bailouts have angered Republicans, and many hate reinstating such a guarantee, arguing that the government should not spend billions of taxpayer money bailing out mismanaged companies.

But without that guarantee, Parrott said, there was “a very real risk that the market would not accept the privatization of Fannie and Freddie,” which would throw the housing finance market into chaos and prevent anyone except those with “pristine credit” from being able to get a mortgage. It’s something Parrott calls a “worst case scenario.”

Calabria dismissed those fears and said there was no need for a federal guarantee. Other major firms the government bailed out during the 2008 recession, including Citibank, AIG and General Motors, remain publicly traded companies and do not need a conservatorship, he said.

“The same laws regarding Citibank apply to Fannie and Freddie; why do we treat them differently?” Calabria said. “Car companies had implied warranties behind them. We saved GM. Are those who oppose the end of conservatism also proposing that the government take over GM?”

While interest rates are expected to continue falling next year, Parrott believes those leading the Treasury Department under Trump’s new presidency will recognize the “market reality” that the privatization of Fannie Mae and Freddie Mac will cause mortgage rates to rise again.

So he doubts privatization will happen, even if failure to implement the plan would anger Trump allies who own large stakes in the two mortgage giants and stand to gain a huge windfall if they were privatized.

“It would be a pretty tough pill to accept that as president you’re going to have to tell homeowners… you’re going to take steps to raise mortgage interest to the level that everyone else is at. It’s so sad,” Parrott said.