WASHINGTON–While there has been considerable discussion of privatizing the two government-sponsored enterprises in mortgage lending, especially as a new Congress and administration take office, at least one analyst is saying the market shouldn’t hold its breath.
In its analysis of such a move, Moody’s Investors Service said that privatizing Fannie Mae and Freddie Mac is unlikely in the near term, in large part because it’s cost prohibitive.
“Privatization would be credit negative for the GSEs because it increases the risk of funding disruptions owing to the many questions about how privatization would occur given the amount of debt the GSEs must refinance,” Moody’s analyst Brian Harris said in a report.” And, confidence in (the GSEs’) financial standing would be critical given the need to refinance their debts during any transition to becoming a private company.”
According to Moody’s, Fannie Mae’s outstanding debt totaled $351.6 billion as of Q3 2016, while Freddie Mac’s was $378.1 billion.
The two companies have been under government control since the financial crisis, even as numerous members of Congress and others have called for both Fannie and Freddie to be returned to private ownership.