The Trump administration is preparing to launch initial public offerings for mortgage finance giants Fannie Mae and Freddie Mac later this year, in a move that could mark one of the largest stock offerings in US history, the Wall Street Journal reported on Friday.
People familiar with the discussions told the paper the combined valuation for the companies could exceed $500 billion, with the government aiming to raise about $30 billion by selling between 5% and 15% of their stock.
Officials are still debating whether the two entities should list jointly or as separate companies.
The news sent both stocks sharply higher in over-the-counter trading, with Fannie Mae up more than 20% and Freddie Mac climbing nearly 18%.
From crisis-era bailouts to potential market return
Fannie Mae and Freddie Mac have been under federal conservatorship since 2008, when they became insolvent during the subprime mortgage crisis.
The US Treasury bailed out the firms with taxpayer funds in exchange for preferred shares, which have paid billions of dollars in dividends over the years.
The two were created by Congress to provide stability to the housing market by ensuring a steady supply of affordable mortgage financing.
Their collapse during the financial crisis highlighted the risks in the mortgage market, while their subsequent government control became a symbol of federal intervention in the housing sector.
Exiting conservatorship through an IPO would be a significant milestone.
Bill Pulte, head of the Federal Housing Finance Agency, has previously suggested the firms could sell shares while remaining under conservatorship, though details on such an arrangement remain unclear.
Arguments for and against selling the shares
President Donald Trump met earlier this week with the CEOs of Citigroup and Bank of America to discuss privatisation plans, Reuters reported.
His allies began laying the groundwork for potential IPOs months before his re-election.
Proponents argue that selling shares would reduce the federal deficit and return value to taxpayers.
However, bankers have expressed scepticism over the feasibility of completing such a large and complex transaction within the year.
Previous attempts to privatise the firms, including during Trump’s first term, failed to advance.
The companies have long benefited from an implicit government guarantee that reassured investors.
Analysts warn that removing or altering that backstop could lead to higher mortgage rates.
Trump has said he wants the guarantee to remain in some form, but has not explained how it would be implemented in a public company structure.
Government stake remains dominant
The Treasury Department holds warrants to purchase about 80% of the common stock in both companies, along with senior preferred shares.
Other investors hold junior preferred shares or common stock.
Any offering would involve the government selling part of its stake, though the scale of the sale and future ownership structure are still under discussion.
Whether the IPOs proceed on the accelerated timeline being discussed remains uncertain.
But if completed, they would rank among the largest share offerings ever, potentially reshaping the US housing finance market and altering the role of federal support in the mortgage system.
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