DoubleLine Asks: Will Trump Reprivatize Fannie and Freddie in His Second Term?
DoubleLine has released a research paper analyzing the potential reprivatization of Fannie Mae and Freddie Mac under a possible second Trump administration. Portfolio Manager Kunal Patel, CFA, and Analyst Alex Shvartser examine the GSEs' history under conservatorship and evaluate the challenges of reprivatization.
The authors note that privatizing the GSEs would be a complex, multi-year project requiring coordination across all government branches. While acknowledging significant risks and unclear political or economic benefits compared to the current situation, they suggest the incoming administration might attempt aspects of privatization, potentially causing volatility in the Agency mortgage-backed securities market.
DoubleLine ha pubblicato un documento di ricerca che analizza la potenziale reprivatizzazione di Fannie Mae e Freddie Mac sotto una possibile seconda amministrazione Trump. Il Portfolio Manager Kunal Patel, CFA e l'Analista Alex Shvartser esaminano la storia delle GSE sotto amministrazione controllata e valutano le sfide della reprivatizzazione.
Gli autori osservano che privatizzare le GSE sarebbe un progetto complesso e pluriennale che richiederebbe coordinamento tra tutti i rami del governo. Pur riconoscendo i rischi significativi e i benefici politici ed economici incerti rispetto alla situazione attuale, suggeriscono che l'amministrazione in arrivo potrebbe tentare aspetti della privatizzazione, potenzialmente causando volatilità nel mercato dei titoli garantiti da mutui dell'agenzia.
DoubleLine ha publicado un documento de investigación que analiza la posible reprivatización de Fannie Mae y Freddie Mac en una posible segunda administración Trump. El Gerente de Cartera Kunal Patel, CFA y el Analista Alex Shvartser examinan la historia de las GSE bajo conservación y evalúan los desafíos de la reprivatización.
Los autores señalan que privatizar las GSE sería un proyecto complejo y de varios años que requeriría coordinación entre todas las ramas del gobierno. Si bien reconocen riesgos significativos y beneficios políticos o económicos poco claros en comparación con la situación actual, sugieren que la administración entrante podría intentar aspectos de la privatización, lo que podría causar volatilidad en el mercado de valores respaldados por hipotecas de la agencia.
더블라인(DoubleLine)은 Fannie Mae와 Freddie Mac의 잠재적인 재민영화에 대한 연구 논문을 발표했습니다. 포트폴리오 매니저 쿠날 파텔(Kunal Patel), CFA와 애널리스트 알렉스 쉬바르츠(Alex Shvartser)는 보존 관리 하의 GSE들의 역사와 재민영화의 도전을 분석합니다.
저자들은 GSE를 민영화하는 것이 모든 정부 부처 간의 조정이 필요한 복잡하고 다년간의 프로젝트가 될 것이라고 언급합니다. 현재 상황과 비교할 때 중요한 위험과 불확실한 정치적 또는 경제적 이점이 있음을 인정하면서, 그들은 새로 들어서는 행정부가 민영화의 측면을 시도할 수 있으며, 이는 기관 담보부증권 시장의 변동성을 초래할 수 있다고 제안합니다.
DoubleLine a publié un document de recherche analysant la possible reprivatization de Fannie Mae et Freddie Mac sous une éventuelle deuxième administration Trump. Le gestionnaire de portefeuille Kunal Patel, CFA et l'analyste Alex Shvartser examinent l'histoire des GSE sous tutelle et évaluent les défis de la reprivatization.
Les auteurs notent que privatiser les GSE serait un projet complexe et pluriannuel nécessitant une coordination entre toutes les branches du gouvernement. Tout en reconnaissant des risques importants et des bénéfices politiques ou économiques flous par rapport à la situation actuelle, ils suggèrent que l'administration entrante pourrait tenter certains aspects de la privatisation, ce qui pourrait entraîner une volatilité sur le marché des titres adossés à des hypothèques de l'agence.
DoubleLine hat ein Forschungspapier veröffentlicht, das die potenzielle Reprivatisierung von Fannie Mae und Freddie Mac unter einer möglichen zweiten Trump-Administration analysiert. Portfolio-Manager Kunal Patel, CFA und Analyst Alex Shvartser untersuchen die Geschichte der GSEs unter Treuhandverwaltung und bewerten die Herausforderungen der Reprivatisierung.
Die Autoren weisen darauf hin, dass die Privatisierung der GSEs ein komplexes, mehrjähriges Projekt wäre, das eine Koordination zwischen allen Regierungszweigen erfordern würde. Während sie erhebliche Risiken und unklare politische oder wirtschaftliche Vorteile im Vergleich zur aktuellen Situation anerkennen, schlagen sie vor, dass die kommende Administration möglicherweise Aspekte der Privatisierung anstreben könnte, was möglicherweise zu Volatilität auf dem Markt für von Agenturen unterstützte Hypothekenanleihen führen könnte.
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Insights
The current conservatorship structure, implemented during the 2008 financial crisis, has provided stability to the mortgage market through government backing. Any privatization effort would need to carefully address capital requirements, regulatory oversight and the transition of credit risk from government to private shareholders without disrupting the housing finance system.
Market participants should prepare for potential volatility in agency MBS spreads as policy details emerge. Key considerations include the GSEs' capital structure post-privatization, changes to their credit guarantee business model and the impact on mortgage rates for consumers. The most likely scenario would involve a gradual transition rather than an abrupt shift to minimize market disruption.
While this research paper highlights an important potential policy shift, several market dynamics warrant attention. The agency MBS market's reaction would likely be measured initially, as any privatization effort would face significant legislative and practical hurdles. Historical precedent suggests that major structural changes to the GSEs typically result in temporary spread widening followed by normalization as implementation details become clearer.
The timing of this discussion is particularly relevant given current market conditions. With mortgage rates at elevated levels and housing affordability challenges persisting, any policy changes affecting the GSEs must be carefully calibrated. The research appropriately identifies the lack of clear economic advantages to privatization over the current model, suggesting that market participants may view initial policy proposals with skepticism.
For investors in DoubleLine's mortgage-focused products, this analysis provides valuable forward-looking insights into potential market risks and opportunities, though immediate portfolio adjustments may not be warranted given the preliminary nature of these discussions.
The research paper, "Agency Mortgage-Backed Securities: Fannie and Freddie Private Again Under Trump 2.0?," can be accessed here: https://doubleline.com/wp-content/uploads/AgencyMBS-Privatization-of-Fannie_Freddie_Jan2025.pdf.
"Privatizing the GSEs, if pursued, would be a massive and complex project that would take multiple years and likely require coordination among all three branches of government," Messrs. Patel and Shvartser write. "While privatization has significant risks and unclear political or economic upside relative to the status quo, it is certainly possible, and there is a good chance parts of it will be attempted at some point by the incoming administration, which might be a catalyst for sporadic volatility in the Agency mortgage-backed securities market."
Kunal Patel, CFA, is a Portfolio Manager on DoubleLine's Structured Products team. Mr. Patel joined DoubleLine in 2016 as a Mortgage Trader specializing in Agency RMBS and was later promoted to Portfolio Manager in 2021. Prior to DoubleLine, he worked as a Managing Director responsible for CMO and specified pool trading at Cantor Fitzgerald. Prior to that, Mr. Patel worked as a CMO, ARMs and Specified Pool Trader and Deal Structurer at Morgan Stanley, BNP Paribas and RBS Greenwich Capital. He holds a B.A. in Economics from Cornell University. Mr. Patel is a CFA® charterholder.
Alex Shvartser is an Analyst on DoubleLine's Structured Products team. Mr. Shvartser joined DoubleLine in 2020 as an Analyst on the Agency RMBS team. Prior to DoubleLine, he was with TCW as a Senior Vice President, Investment Analytics. Prior to TCW, Mr. Shvartser was a Quantitative Analyst at ICE Canyon. Prior to ICE Canyon, he was Vice President at BlackRock in the Financial Modeling Group. Mr. Shvartser holds a B.S. in Electrical Engineering from the California Institute of Technology and an M.S. in Mathematics in Finance from
About DoubleLine
DoubleLine Capital is an investment adviser registered under the Investment Advisers Act of 1940. DoubleLine's offices can be reached by telephone at (813) 791-7333 or by email at info@doubleline.com. Media can reach DoubleLine by email at media@doubleline.com. DoubleLine® is a registered trademark of DoubleLine Capital LP.
©2025 DoubleLine Capital LP.
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