By Niket Nishant and Manya Saini
(Reuters) -U.S. President Donald Trump’s administration is preparing for the initial public offerings of mortgage finance giants Fannie Mae and Freddie Mac later this year, the Wall Street Journal reported on Friday, citing people familiar with the matter.
The plans under discussion could value the companies at roughly $500 billion or more combined, and could fetch $30 billion in a share sale, the report said, citing people familiar with the matter.
The move would mark a key milestone for the companies, which have been under federal conservatorship since 2008. Fannie and Freddie were created by the Congress to support the housing market by ensuring affordable mortgage financing, but crumbled after being severely bruised during the financial crisis.
They were bailed out with taxpayer funds, and the Department of Treasury received preferred shares in return, which paid billions of dollars in dividend over the years.
Over the years, efforts to return them to private control have continued, including under Trump’s first term, but have failed to get traction.
MORTGAGE MARKET BACKBONE
Fannie and Freddie buy mortgages from lenders, holding them in their portfolios or bundling them into mortgage-backed securities for sale.
The cash, lenders receive from these sales, fuels more lending, helping ensure a steady supply of mortgage financing for homebuyers, apartment investors and other multifamily property purchasers.
By converting mortgages into MBS and guaranteeing payment of principal and interest, Fannie and Freddie lure investors into the secondary mortgage market, increasing the funds available for housing.
With Trump back in the White House, hopes have resurfaced that their long-pending privatization could finally be completed.
Billionaire investor Bill Ackman, who has held stakes in Fannie and Freddie for more than a decade, said last year he was counting on Trump to finish the job.
However, any unwinding of the government’s could be complex, given the trillions in mortgages the companies guarantee. Trump also said in May that he would retain an oversight role over the companies even if they went public.
Fannie and Freddie did not immediately respond to Reuters requests for comment on the WSJ report. Their shares rose 21% each, hitting their highest in more than a month. Both trade over the counter.
Trump met the CEOs of Citigroup and Bank of America earlier this week to discuss the administration’s plans to privatize the mortgage giants, Reuters had reported earlier.
(Reporting by Niket Nishant and Manya Saini in Bengaluru; Editing by Anil D’Silva, Shilpi Majumdar and Shailesh Kuber)
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