President Donald Trump’s bombshell Truth Social post on Wednesday night sent the stock prices of Fannie Mae and Freddie Mac soaring.

But removing the government-sponsored enterprises (GSEs) from conservatorship after 16-plus years would be a complicated endeavor. And if they’re not removed carefully, costs for borrowers could spike.

Trump’s announcement that he’s considering a public offering of the companies sent Fannie Mae’s stock up 50% and Freddie Mac’s stock up 42% on Wednesday — big boons for the hedge funds that have held shares for years and have been waiting for the federal government to untangle the 2008-era framework that has restricted profits.

But analysts at Keefe, Bruyette & Woods (KBW) said Wednesday that “serious hurdles to privatization exist.”

Key challenges include determining the fate of the Department of the Treasury’s investment. Investors like Bill Ackman, the billionaire founder of Pershing Square Capital Management, argue the government could forgive it, given that the GSEs have paid $310 billion in dividends after drawing $193 billion in support since being placed into conservatorship in 2008. 

The KBW analysts also noted that capital standards must be recalibrated to deliver double-digit returns on equity for Fannie and Freddie. ROEs are now at 8% to 9%.

Current capital levels are at 4.25%, but analysts recommend between 2.5% and 3%, still well above pre-housing crisis levels. If not changed, guarantee fees would need to increase by 20 to 25 basis points. 

Government backstop 

Analysts also warned that the agency mortgage-backed securities (MBS) market continues to rely on the perceived government backstop for the GSEs. A return to a pre-Great Financial Crisis (GFC) implicit guarantee is possible — but only if the Treasury clearly communicates it, they said. 

”Post-GFC, the nature of the relationship changed after the credit line [of $2.25 billion available] increased sharply, the Treasury invested capital into the companies and the backing by Treasury arguably became more explicit given the conservatorship status of the GSEs. We think a return to the pre-GFC implicit guarantee is possible, but only if Treasury messages this effectively,” KBW analysts said. 

Meanwhile, the Mortgage Bankers Association (MBA) also advocated for a formal guarantee from the government. 

“MBA stands ready to work with the Trump administration on a thoughtful plan to end the conservatorships of Fannie Mae and Freddie Mac in a way that avoids any market disruption or increased costs for borrowers,” MBA president and CEO Bob Broeksmit said in a statement to HousingWire.

“We also believe strongly that any release must include an explicit federal backstop — paid for by the GSEs — of their mortgage-backed securities to protect taxpayers, consumers, and our housing finance system.”

Impacts on lenders, investors

Some bond traders said at the MBA Secondary and Capital Markets Conference earlier this week that they believe an exit from conservatorship would result in a 50-basis-point increase in mortgages.

For the average homebuyer purchasing a $414,000 house, such a hike would add roughly $40,000 in costs over the life of the loan — although it should be noted that most mortgages have a shelf life of seven to eight years.

Treasury Secretary Scott Bessent said earlier this year that any release from conservatorship would hinge on ensuring it didn’t increase mortgage rates. He also said Trump’s tax bill is the bigger priority.

Jefferies analysts echoed concerns that privatization without a government guarantee — implicit or explicit — would raise funding costs for the GSEs and likely drive mortgage rates higher. In such a scenario, the private entities would tighten underwriting standards, increase costs such as guarantee fees and make borrowing more difficult for marginal applicants.

“Uncertainty around GSE reform could lead to wider MBS spreads and volatility — past episodes have seen investors pull back. Disruption to the ~$290 billion-a-day TBA forward market for MBS would hinder lenders’ ability to hedge rate locks,” the Jefferies analysts said.

They added that without government support, the GSEs may impose stricter capital, liquidity and performance requirements on approved lenders and servicers to guard against losses.

“Smaller non-bank players could struggle to meet those standards, leaving a few large players to dominate the market,” they said.

Given the complexity of taking Fannie and Freddie public, Jefferies analysts said privatization is unlikely before 2026 or 2027.

Though a road map exists from the work that former Federal Housing Finance Agency director Mark Calabria did with then-Treasury Secretary Steve Mnuchin, much work still remains.

Indeed, one political source in Washington, D.C., speculated that Trump’s Wednesday social post was a way to either assuage House deficit hawks, or potentially that the GSEs’ investors convinced him to get the ball rolling on reform.

From traditional residential sales to large-scale, new development projects, a trio of seasoned professionals, Senada Adzem, Jorge L. Guerra and Miltiadis Kastanis, and moderator Eloy Carmenate took the Inman On Tour Miami stage to discuss how they’ve built careers that straddle both worlds.

Wild reason couple ordered to demolish dream home. Picture: Facebook; Supplied

A UK couple have been ordered to demolish their £1 million ($A2 million) dream home after they were found to have made a “flagrant breach” of the rules.

Jeremy and Elaine Zielinski were given permission to build a stallion semen collection centre and laboratory.

The two-storey building was set to have a reception, office, kitchenette, “analysis and lecture” lab, processing laboratory and staff changing room on the ground floor, The Sun reports.

While the first floor would be a staff living space with two bedrooms, each with an ensuite bathroom, and a combined living/kitchen space.

But instead the pair turned the property into a three-bedroom home overlooking the countryside in Great Abingdon, Cambridgeshire.

The council got wind of the unauthorised house and ordered the duo to knock it down.

The Zielinskis appealed the order, arguing it was excessive and the property could simply revert to the permitted use.

But a planning inspector has thrown out their appeal, saying the couple “constructed a dwelling from the off”.

The pair were criticised for their “clear and flagrant breach of planning policy”.

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A UK couple have been ordered to demolish their £1 million dream home. Picture: Supplied

Jeremy and Elaine Zielinski. Picture: Facebook

Despite the judgement, Mrs Zielinski, 79, told the Daily Mail she and her husband didn’t know they were breaking the law.

“We want to carry on living here. It’s a warm and comfortable home. I love it,” the GP’s receptionist said.

“It doesn’t make sense to tear it down. I don’t want to go and live in a caravan. If we are chucked out, we will be having to rely on the state.

“We would not have gone on and built this and put all our money into it unless we thought it was totally legal to do it.”

Her husband, 73, added: “I have not had a decent night’s sleep in years and, from the moment when we got the first visit in 2020 [from council officials], life has been shaky …

“We have lost £1 million ($A2 million) overnight as a result of this decision. If we could have a semen clinic on the site it would be worth at least £1 million.”

The council got wind of the unauthorised house and ordered the duo to knock it down. Picture: Supplied

The couple bought a house with an outbuilding set on 17 acres of land for £100,000 in 1986.

Planning permission was granted in 2014 by Greater Cambridge Shared Planning to build a replacement stable block and a specialist “stallion semen” horse laboratory, with a small upstairs flat linked to the lab use.

The plans were approved on the basis that it would be for a countryside business use, with the residential flat only to be used in connection with the laboratory use.

Instead, the planning inspector said it was built and used solely as a residential house from the start.

He said there was no lab or business running at the site, nor any evidence to show there ever was and that he house was a full home, not just a place for a worker to stay.

He also pointed out that the owner had sold their original house on the site and moved into this new home.

“Photographs provided by the appellant in February 2022 in response to the Council’s Planning Contravention Notice (PCN) show a complete absence of any laboratory space or research facility and that remained the case at the time of my accompanied site visit,” Inspector Chris Preston wrote.

“The ground floor has a decidedly residential appearance, with a domestic kitchen, equipped with kitchen units, cooker, island breakfast bar, with domestic furnishings and appliances.

The couple bought a house with an outbuilding set on 17 acres of land for £100,000 in 1986. Picture: Facebook

“A dining area is present next to the kitchen in the space which was shown to house a kitchenette/container storage and distribution on the approved plans.

“Next to that, where the plans depicted an office, is a domestic living room.

“What appears to be an office is present to the front in what was shown on the plans as a reception area.

“Throughout, the ground floor is decorated and equipped in a manner that belies a residential use.

“There is no obvious reception area that would indicate use by customers of a business.

“No laboratory has been installed, no research or stored equipment associated with the business is apparent, either on the photographs from 2022 or at the time of my visit.

“Upstairs, where the staff accommodation was intended to be, there are two bedrooms, in the locations shown on the approved plans and a living area/ lounge, equipped with a sofa and television.

“However, no kitchen appears to have been constructed on the upper floor. In other words, the living space is clearly spread over the two floors, as would be the case in a typical house.”

He said the council had been told the flat would be used by an additional worker, but in fact the appellant and his wife had since sold their existing house and moved into the new property.

He added: “The overriding impression is that what has been constructed is a dwelling house, occupied by the appellant and his wife, as opposed to a stallion semen collection centre/laboratory on the ground floor with residential accommodation above which is what the approved plans depicted.”

The house must be knocked down and all waste material removed by May 6 2026. Picture: Greater Cambridgeshire Shared Planning

He said there was also very little evidence that the stallion semen and collection business had “ever got off the ground to any notable degree.”

He added: “The lack of any clear record of the semen collection and analysis business, when added to the evidence that the laboratory and associated storage and analysis areas were never constructed raises serious doubts as to whether the 2014 permission was implemented.

“If the pandemic did cause issues with the business, the logical thing to do, if implementing the approved planning permission, would have been to construct the building as permitted, with accommodation at first floor level and space for the laboratories etc at ground floor level, even if that led to a delay in installation of those facilities.

“What actually appears to have happened is that the appellant constructed a dwelling from the off.

”The Inspector agreed that knocking the house down was a proportionate and necessary measure as the local planning policies had been clearly broken, and keeping the building but just stopping people from living there alone would not be enough.

Cllr Dr. Tumi Hawkins, Lead Cabinet Member for Planning at South Cambridgeshire District Council, said: “We welcome the Inspector’s clear decision, which supports our commitment to upholding planning policies in our Local Plan and the Neighbourhood Plan designed to protect our countryside.

“This case shows the importance of adhering to the specific uses and conditions that justify development in rural areas.

“Planning rules are there for a reason – including protecting our countryside, and this decision demonstrates that we will act when those rules are broken.”

The house must be knocked down and all waste material removed by May 6 2026.

Parts of this story first appeared in The Sun and was republished with permission.

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The post Couple ordered to demolish dream home appeared first on realestate.com.au.

The Reserve Bank of Australia’s latest interest rate cut has given Aussie homeowner’s plenty of reason to rejoice.

However, experts warn Tuesday’s decision could prove to be a double edged sword that could see investors dominate the market, while first home buyers continued to feel the housing squeeze.

Money expert and mortgage broker Julian Finch, founder and CEO of Finch Financial, said while rate cuts were often perceived as a means to enhance housing affordability, they typically had the opposite effect.

“People think rate cuts will make housing more affordable, but they rarely do,” he said.

“They drive demand, increase borrowing power and send prices up.

“That’s what we’re seeing now and it’s only going to intensify if the RBA cuts again.”

The RBA on Tuesday cut the cash rate by a quarter point to 3.85 per cent in a bid to ease pressure on mortgage holders, grappling with high living costs and elevated interest repayments.

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The RBA’s Michele Bullock during a press conference following the board’s announcement to cut the interest rate by 0.25 percentage points. Picture: NewsWire / Nikki Short

On an average Aussie loan of just above $600,000, a single rate cut of 0.25 per cent will save about $1200 a year, while the latest cut could provide savings of around $2400 a year.

With at least one additional rate cut likely by year’s end, Mr Finch said the RBA’s next move would have a significant psychological effect on the market, including the likely impact on the structural imbalance between supply, demand and access.

“We may get one more rate cut, but that won’t fix affordability. What’s needed is smarter housing policy, increased supply and lending practices that prioritise long-term stability over short-term boosts,” he said.

“Another cut might keep the economy moving but if it fuels another property price surge, we risk leaving more Australians behind.”

Leading finance expert and CEO of Finch Financial Services Julian Finch.

Mr Finch said the latest RBA cut had investors and cashed up buyers laughing all the way to the bank.

“The latest RBA move has already kickstarted the market and another rate cut is going to strap a rocket to it. Affordability is going to get worse, not better,” he said.

“Investors are in a stronger position to move quickly; they understand the game. A rate cut opens the door for them to re-enter, refinance and scale.

“Meanwhile, first home buyers are trying to keep up while facing rising prices and intense competition for limited stock.”

Mr Finch urged borrowers to avoid emotional decisions based on rate movement hype and instead focus on long-term strategy and sustainability.

“If you’re buying, don’t just ask how much you can borrow, ask how much you can comfortably repay if rates shift back up in the next two or three years,” he said.

“If you already have a mortgage, now is the time to renegotiate, refinance or explore fixing part of your loan. Don’t wait for the next rate change to act.”

The post RBA cut ‘straps rocket’ to property market appeared first on realestate.com.au.