Is it possible for the GSEs to exit conservatorship without market disruption?

As Fannie Mae and Freddie Mac inch toward a possible release from federal conservatorship, industry leaders on Tuesday discussed potential paths for the government-sponsored enterprises (GSEs), emphasizing the need for market stability and competition.

The GSEs’ possible release and the timing of a change is the topic of much speculation. Recent commentary from U.S. Department of Commerce Secretary Howard Lutnick, who appeared on CNBC in September, said that the administration’s plans for an initial public offering (IPO) “could well be this year … sooner than people think.”

Lutnick said that only a small portion of the mortgage giants, which have been under federal conservatorship since the 2008 financial crisis, would be sold to the public.

Speaking at HousingWire’s Mortgage Banking Summit, Pete Mills, senior vice president of residential policy at the Mortgage Bankers Association, and Rob Zimmer, director of external affairs at the Community Home Lenders of America said the conversation in Washington has shifted from whether to end conservatorship to how to do it while protecting taxpayers and maintaining market stability.

“There’s a deal track and a market stability track,” Mills said. “The Treasury is highly focused on ensuring the 30-year fixed-rate mortgage remains available in all market conditions.”

Both Zimmer and Mills said any equity sale or secondary offering of GSE stock would likely require Fannie and Freddie to exit conservatorship under a consent order — a structured agreement that would impose benchmarks and restrictions while allowing limited private investment. “At some point, if they’re serious about selling equity, they’ve got to be out of conservatorship,” Zimmer said.

Zimmer added that maintaining two separate GSEs remains critical for competition and access to the secondary mortgage market, particularly for community lenders. “At CHLA, we don’t like monopolies — not in the private sector, not in government,” he said.

Zimmer and Mills also stressed that updated regulatory frameworks must be in place before any transition, which would formalize long-standing principles such as consistent guarantee fees, bright-line boundaries between the primary and secondary markets and operational safeguards to ensure equal access for small lenders.

“I think one of the big questions for the new regulator is, where do they compete and where do they align? With respect to GSEs, you’d like to see alignment on things like servicing standards and loss mitigation standards, alignment with respect to the Uniform Mortgage-Backed Security…I think if they’re closer to private companies, they’ll compete even more on technology, on service, on how they do risk-sharing transactions….and I think this is an area where I think we have to have competition, so the idea of merging the two into a single company I think would be a big mistake,” Mills shared with the audience.

Both Mills and Zimmer acknowledged that many in the industry today have never operated in a world without conservatorship. “You’ve gotten used to a fairly competitive market between large and small lenders,” Mills said. “Getting this right is really important, particularly to smaller institutions.”

Zimmer warned against allowing the GSEs to remain under direct political control, saying that would perpetuate a “seesaw mortgage policy” that shifts every four years with changing administrations. “We want sound housing policy that transcends politics,” Zimmer said.