The group representing small and mid-sized independent mortgage banks made its wishes known in a letter this week to Treasury Secretary Scott Bessent and Federal Housing Finance Agency Director Bill Pulte, whose office oversees both government-sponsored enterprises. CHLA came up with suggestions it said best protected IMBs, particularly smaller lenders, and invited nonbanks to add their names to the letter. 

"We write as independent mortgage banks  — nonbank mortgage loan originators — to identify essential elements of a Fannie Mae and Freddie Mac exit from conservatorship," the letter began. "We do so in the wake of reports that the Trump Administration plans a public offering of these two entities later this year."

Five recommendations from CHLA

CHLA listed key policies it said ought to remain in place in recommendations to the Trump administration for carving any future path out of conservatorship for the GSEs, highlighting the effectiveness of the status quo in some instances. 

Notably, it pushed back against consolidation. Recent talk surrounding the GSEs have moved beyond just a conservatorship exit or public listings to suggestions of a possible merger. 

"Fannie and Freddie should not be combined into a market monopoly. Further, the GSEs should operate under a utility model," CHLA underscored.  

The group also said Fannie Mae and Freddie Mac must retain "critical" mortgage loan products that support its mission to provide affordable homeownership opportunities across class and communities. Lower revenue potential of such loans could lead the GSEs to discontinue offering them altogether, CHLA said.

As the Federal Reserve's pullback from purchases of mortgage-backed securities has helped fuel higher interest rates, CHLA called for a post-conservatorship model that would have Fannie Mae and Freddie Mac make "temporary, opportunistic" MBS purchases to drive housing costs lower. 

In a push against any favoritism toward large banks that might emerge, CHLA also explicitly came out against awarding any GSE charters to Wall Street, saying "competition should be at the mortgage origination level — and not at the level where a GSE guarantee is granted to a handful of megalenders

"Nor should preferential treatment be given through mechanisms like up-front risk sharing or granting a few megalenders access to the Common Securitization platform," the letter said. Earlier this summer, Pulte renamed the joint-venture secondary trading platform operated by the GSEs from Common Securitization Solutions to U.S. Financial Technology. 

Furthermore, CHLA pointed to what it considered successful outcomes from decisions made during President Trump's first term and underscored the value of keeping related policies in place, including guarantee-fee parity among lenders and a competitive cash window. In 2020, CHLA led an initiative to turn an informal g-fee parity policy into a permanent requirement and pushed to keep such terms in place.

The GSEs' exit from conservatorship exit could create a business environment leading to a return to practices favoring large lenders, it argued. 

"G-fee parity precludes one of the most pernicious pre-2008 housing crisis practices  — preferential pricing for large, reckless lenders," the letter stated. "A robust competitive cash window ensures that Fannie and Freddie purchase all qualified single-family loans from all approved seller-servicers, at rates that are competitive with lender securitizations."

Potential hurdles to GSE changes

While Director Pulte and President Trump have made strong public hints on social media and broadcast interviews of the changes they want to see, any of their suggested moves will receive heightened scrutiny for the effects on the housing market and the long-established mission of GSEs to provide liquidity for affordable homeownership. 

"The mission of a for-profit company is to fulfill the wants and needs of its shareholders through the board of directors. The mission of a government-sponsored enterprise is to comply with its mission. These are incredibly different things," said Mike Peretz, executive director of banking and payments at technology and management consultancy firm Capco. 

With private markets unlikely to prioritize today's home affordability challenges, "you need the GSEs more than ever," he added. 

Earlier this week Pulte posted a video spotlighting the proposed Great American Mortgage Corp. touted by the president, with the entity's banner strategically placed beneath logos of both Fannie Mae and Freddie Mac.  

A merger of the GSEs would likely raise antitrust concerns, though, and many experts also see potential legal and political questions behind combining the two enterprises that have no clear answers yet.  

"The complete lack of information on a major policy change/initiative introduces new unquantifiable risks for Fannie and Freddie, in our view," wrote Ed Groshans, senior policy and research analyst at Compass Point in a recent research note. 

"Our assessment is the risks cannot be analyzed or addressed until more information is provided by the Trump administration."