Delinquent Homeowners Up In Arms As Trump Announces, “No More Loan Modifications After January 20th!”
President-Elect Trump is planning some major changes to the lending industry when takes office on January 20, 2025. He has publicly told delinquent homeowners point blank, “No more loan modifications! If people can’t pay, we’ll take it away. period!”
Trump plans on privatizing Fannie Mae and Freddie Mac. This would essentially end government subsidies to the bailed out GSEs. These subsidies pay them to give homeowners a generous terms on loan modifications. Many American homeowners use loan modifications to restructure their mortgage to help them keep their home during a foreclosure.
Trump tried unsuccessfully to privatize Fannie and Freddie during his first White House term. However, some of his top allies have called on him to renew the push after his inauguration later this month.
Trump supporter Bill Ackman, who owns shares of Fannie and Freddie, has led the charge. He is clamoring on social media for the incoming administration to oversee their swift exit from government conservatorship.
Ackman claims that a successful emergence of Fannie and Freddie from conservatorship would generate more than $300 billion of additional profits to the federal government.
He also claims it would remove some $8 trillion in liabilities from the government’s balance sheet.
Privatization would be a major milestone for Fannie and Freddie. The GSEs were created by Congress to bring liquidity to the secondary mortgage market. Thus, ensuring a ready supply of loans for homebuyers.
The two entities were threatened with collapse in the 2008 financial crisis. As a result, the two entities were bailed out with taxpayer funds. In return for the bailout, the U.S. Treasury received preferred shares. These dividends have paid out more than $300 billion in dividends over the years. As a result, Fannie Mae and Freddie Mac have become a cash cow for the federal government.
Privatization Will Lead To Higher Interests Rates And No More Loan Modifications
Privatization of Fannie and Freddie could mean an enormous windfall for billionaire investors like Ackman. After Trump’s election, shares of the two entities more than doubled. They then took another leg sharply higher after Ackman expressed his confidence that Trump would conservatorship.
Homeowners would be the big losers. homebuyers because ending the conservatorship would put upward pressure on mortgage rates.
Persistently high rates are a major pain point for homebuyers. High interest rates are contributing to the nation’s worst home affordability picture in some 40 years.
On the campaign trail, Trump promised to bring mortgage rates back down to 3% or lower. However, financial experts say presidents typically have no direct control over mortgage rates.
Privatization also means that Congress loses it’s ability to force Fannie Mae and Freddie Mac to give delinquent homeowners loan modifications.
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Also, Check Out This MFI-Miami Article From 2019:
FHFA Is Prepping For Massive Fannie Mae And Freddie Mac IPO