The recent announcement regarding a potential Initial Public Offering (IPO) has stirred considerable interest, although the post lacked detailed information. As of now, the official White House news page has not provided any updates on the matter. According to a report from the Wall Street Journal (WSJ), the Trump administration anticipates that the IPO could generate approximately $30 billion from the initial stock offering. Furthermore, certain government officials are estimating the value of the Government-Sponsored Enterprises (GSEs) to exceed $500 billion.
Trump's announcement hints that the proposed IPO may be offered under the umbrella of a new entity known as the Great American Mortgage Corporation. However, analysts expressed skepticism about whether such a significant undertaking could be completed by the end of the year. Bose George, an analyst at Keefe, Bruyette & Woods (KBW), remarked, “I feel like getting it all done before the end of the year seems very difficult. They need to figure out capital levels. Once the process gets started, it will be clear that it’s not doable in four months. If there’s a real sense of urgency, it can be done sometime next summer.”
Analysts from Wells Fargo, Mario Ichaso and Jonathan Carroll, conveyed their concerns in a report last Friday, stating, “We now place the odds of release at 40% as fundamental challenges remain and execution risk is elevated.” This cautious outlook underscores the complexities involved in the IPO process, particularly in the mortgage industry, where the preservation of government guarantees is paramount.
The mortgage industry heavily prioritizes that the new company retains some form of government guarantee. This safety net is crucial for stabilizing the mortgage market and keeping interest rates low. In a social media post from May, Trump emphasized his commitment to the IPO while reaffirming that the U.S. government would maintain its implicit guarantees, stating, “I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President.”
Logan Mohtashami, a lead analyst at HousingWire, has extensively discussed Trump’s plans for the GSEs on the HousingWire Daily podcast. He noted that the Trump administration's focus on lowering mortgage rates will significantly influence their decisions regarding the IPO. “The most important thing about an IPO of Fannie Mae and Freddie Mac is that the administration provides some type of government support to the companies so pricing doesn’t get hit. The Trump administration has said often that they won’t do this if they believe it would cause mortgage rates to rise,” Mohtashami explained.
Mohtashami has expressed skepticism regarding the intent behind Trump's social media posts, suggesting that they often serve as "test balloons" to gauge public and market reactions. While specific details about the IPO have yet to be disclosed, he believes that a comprehensive plan for the release is likely being developed. “In the meantime, wait until more information is released,” he advised.
As the situation develops, stakeholders in the mortgage market will be closely monitoring any updates related to the IPO and its potential impact on housing finance.
