The process of ending conservatorship would not be swift. Tara Darling, a real estate partner at Polsinelli, told GlobeSt.com that such a move “would likely take many years.” She outlined a lengthy process involving studies of the potential impacts on the housing market, opportunities for public input, participation by the FHFA and Treasury, and either significant capital accumulation or a large government write-off.

Darling noted, “In order for the Treasury to exit, it would likely require a sale of the Treasury’s stock.”

Darling also highlighted the implications of maintaining an implicit guarantee, telling GlobeSt.com that it “involves the expectation that there would be a government ‘bailout,’ if and when needed.” If conservatorship ends but the guarantee remains, she said, a more formal arrangement would likely be required, potentially involving fees paid to the government. Such a formalized structure could provide greater long-term stability, less subject to changes in presidential administrations.

The debate over whether to keep or remove the guarantee is not just an academic one—it has real consequences for the multifamily market. Fannie Mae and Freddie Mac play a central role in providing liquidity for multifamily loans by purchasing them from private lenders and packaging them into mortgage-backed securities. This activity ensures a steady flow of capital to the market and supports affordable housing initiatives.

If privatization proceeds without a government guarantee, the cost of capital for these loans could increase, potentially leading to higher interest rates for borrowers and stricter credit standards, especially for affordable housing developers and borrowers with lower credit scores.

Jim Milano, a member of McGlinchey Stafford, told GlobeSt.com that the market’s primary concern is the presence of a U.S. government guarantee, whether implicit or explicit. “It doesn’t matter if the GSEs are in conservatorship or spun off as private—publicly-traded—companies, as long as there is some sort of U.S. government guaranty, even if only implicit.”

Nik Agharkar, owner and managing member of Crowne Point Tax, echoed this view, telling GlobeSt.com that without Congress formally removing the guarantee, “investors will still treat them as quasi-government entities.” In practice, this would create a hybrid structure: a private company in name, but with many of the safety nets of conservatorship.

There are potential upsides to a privatization scenario. Agharkar noted to GlobeSt.com that an IPO could unlock shareholder value and raise substantial cash for the Treasury—possibly as much as $250 billion. Management would have more independence and could reinvest profits, rather than channeling all earnings to the government. However, without a government guarantee, Fannie and Freddie would need to maintain larger capital cushion, between 2% to 4% of their mortgage portfolios—and could face credit-rating downgrades. Plus, it would come with increasing borrowing costs and the expense of lending through extension.

Ultimately, keeping the implicit guarantee while ending conservatorship would preserve much of the current system’s stability, especially for multifamily lending. It would enable GSEs to operate with private-sector characteristics while still benefiting from government support, thereby continuing to provide liquidity and support for affordable housing.

However, it would also blur the lines between public and private, raising questions about market competition, risk, and the true independence of Fannie Mae and Freddie Mac.