By Gina Heeb, AnnaMaria Andriotis and Corrie Driebusch

Scott Turner, who was confirmed Wednesday to lead the Department of Housing and Urban Development, said a cross-government effort to privatize Fannie Mae and Freddie Mac will be a priority as he takes the helm of the agency.

In an interview with The Wall Street Journal, Turner said HUD would work with the Treasury Department and Congress on privatization of the mortgage-finance firms and that he would act as a "quarterback" of sorts in the process. The efforts to free the firms from government control would also involve the Federal Housing Finance Agency, which oversees Fannie and Freddie.

"There are partners that will be at the table and obviously we'll be one of them," said Turner, a former NFL player and Texas lawmaker. "When you're a quarterback, you've got to work with the entire huddle."

Separately, advisers, lawmakers and bankers have passed around proposals detailing how privatization could support the Department of Government Efficiency, the cost-cutting effort led by Elon Musk, according to people familiar with the discussions. Other proposals have discussed using proceeds from any transaction to fund the tax reforms President Trump has promised.

There is no guarantee a plan will come together quickly or be carried out, not least because it remains to be seen how much of a priority privatization is for Trump.

A different HUD

Turner says he will move quickly to launch a broad review to root out inefficiencies and streamline HUD , which aims to improve home affordability and access and oversees the Federal Housing Administration. All programs and policies "will be looked at with a fine-toothed comb," he said, including those related to diversity, equity and inclusion.

Also under discussion are return-to-office policies that would likely drive some workers to leave.

The changes will come at a fragile moment in the U.S. housing market, with many Americans priced out by elevated mortgage rates and prices.

Trump has called for departments and agencies to pursue policies that would lower housing costs. He also has sought cuts to the federal government, a crackdown on DEI initiatives, tariffs and mass deportations, moves that have drawn criticism from some housing advocates who say they will worsen affordability and accessibility.

Turner will seek to ease federal regulations to help lower housing costs and encourage state and local governments to do the same. He said he would continue to work on so-called opportunity zones, which were touted in the first Trump administration as a way to encourage investment in low-income areas.

The administration plans to allow more building on federal lands, which Turner said could include rural, urban and tribal areas. He plans to travel around the country, in part to see what land is available.

Turner would like to change the name of HUD to better reflect its reach, which he said should include rural and tribal communities. A new name would "take a lot of time and conversation and thought," he said, and require congressional support.

Privatization efforts

Fannie and Freddie bundle and sell mortgages, with a government-backed guarantee to protect investors from losses when homeowners default. That allows banks and others to originate more 30-year, fixed-rate mortgages.

Skeptics have cautioned that privatizing Fannie and Freddie could, if not done carefully, drive away buyers of mortgage-backed securities and lead to higher mortgage rates.

As part of the 2008 financial crisis rescue, the Treasury Department got warrants to purchase about 80% of Fannie and Freddie's common shares, as well as senior preferred shares. Other investors own junior preferred shares and common shares.

At least one proposal circulating among members of Trump's team in recent months that was seen by the Journal estimates the privatized entities would be valued above $330 billion, with over $250 billion of that coming from the warrants' conversion to common shares.

Fannie and Freddie would raise another $20 billion to $30 billion from new investors as part of the plan, akin to an initial public offering. A raise of that size would put it on par with the largest IPOs of all time.

Privatizing Fannie and Freddie was touted as a way to "deliver a win for President Trump," according to one memo circulated late last year among members of the transition team and Congress and viewed by the Journal.

Politicians, policy analysts and bankers have grappled for years with whether there is a practical way to release Fannie and Freddie from government control. Attempts to do so before, including in Trump's first term, were short-lived because of how complex such a transaction would be. The Obama administration had also punted on the question of what to do with the firms.

Write to Gina Heeb at gina.heeb@wsj.com, AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Corrie Driebusch at corrie.driebusch@wsj.com

(END) Dow Jones Newswires

February 05, 2025 20:00 ET (01:00 GMT)

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