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Ackman's Bold Plan to Replace Fannie Mae and Freddie Mac in the Mortgage Market
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Published in Stocks and Investing on Saturday, November 22nd 2025 at 1:15 GMT by HousingWire- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
Ackman’s Plan to Shake Up the Mortgage Market: What the Industry Is Saying
When a well‑known hedge‑fund strategist—Paul Ackman of the Ackman Group—announced a plan to “replace” the government‑sponsored enterprises (GSEs) that dominate the U.S. mortgage‑backed‑security (MBS) market, many in the housing‑finance community stopped what they were doing to listen. The proposal, which surfaced in a March 2024 article on HousingWire, outlines a private‑sector platform that would pool and securitize mortgages in a way Ackman claims will reduce costs, increase transparency, and create healthier competition for Fannie Mae and Freddie Mac. The article, which is anchored in a set of primary sources—including the FHFA’s regulatory framework, recent MBS‑trading data, and expert interviews—provides a thorough look at the proposal and the many reasons why most analysts view it with a healthy dose of skepticism.
The Current Landscape: Fannie Mae and Freddie Mac
Before diving into Ackman’s vision, the article explains how the GSEs have long served as the backbone of the mortgage‑funding system. Since their creation in 1938, Fannie Mae (Fannie) and Freddie Mac (Freddie) have guaranteed roughly 80 % of the mortgages in the United‑States, providing liquidity to lenders and allowing banks to recycle capital quickly. The FHFA, created by the Housing and Economic Recovery Act of 2008, now oversees both entities, with the agency’s “regulatory policy” page (available at [ FHFA.gov ]) detailing how the GSEs’ guarantees and risk‑sharing arrangements are meant to protect investors while ensuring affordable home‑ownership.
The article notes that the GSEs’ business model—collecting mortgages, guaranteeing them, and selling the resulting MBS on the secondary market—has proven remarkably resilient. However, critics argue that the model has also contributed to an over‑reliance on government guarantees and to a lack of competition among mortgage servicers and lenders.
Ackman’s Proposal: A “Private” Alternative
Ackman’s plan is, in essence, a private‑sector, fully‑backed MBS platform that would:
- Pool mortgages directly from a network of lenders that would include traditional banks, credit unions, and fintechs.
- Create its own rating system—an “independent” rating agency that would evaluate risk in a way Ackman claims will be more accurate and transparent than the public rating agencies.
- Issue MBS to investors that would not carry a government guarantee but would be backed solely by the underlying mortgage collateral.
- Charge lower fees than the GSEs, on the grounds that a private platform can eliminate the “political” overhead that, Ackman says, inflates the GSEs’ costs.
The article’s author draws parallels to the rise of fintech platforms like LendingClub and SoFi, suggesting that a similar disruption is conceivable in the secondary‑market side of mortgage financing. Ackman himself, quoted in the piece, emphasizes that the new platform would “reinstate a level of market discipline” that has been eroded by the implicit guarantees of the GSEs.
Industry Skepticism
The bulk of the article is devoted to skepticism. A number of key concerns are highlighted:
| Concern | Why It Matters |
|---|---|
| Regulatory Approval | The FHFA’s policy documents make it clear that any new platform that seeks to compete with Fannie or Freddie must demonstrate robust risk‑management and capital‑adequacy. The article cites an FHFA FAQ that underscores how new entrants must be “subject to the same capital‑and‑liquidity standards” that the GSEs follow. |
| Scale and Liquidity | The GSEs have an enormous liquidity pipeline; a private platform would have to attract a comparable volume of originations to be competitive. The article references Mortgage Bankers Association (MBA) data that shows that only 10 % of new mortgages go through alternative servicers. |
| Investor Appetite | Without a government guarantee, investors may perceive higher credit risk. The article notes that even the most “transparent” rating system can be difficult to convince investors to trust. A Wall Street Journal survey cited in the piece found that 77 % of MBS investors preferred guaranteed securities. |
| Credit Risk | The GSEs’ guarantee removes the borrower’s default risk from the MBS’s cash‑flow model. Ackman’s platform would have to absorb that risk. The article quotes a risk‑management expert from Bank of America who warns that “absorbing default risk in a private structure would necessitate significant capital buffers.” |
| Market Fragmentation | Critics say that a new platform would fragment the market further, creating complexity for borrowers and servicers alike. An analyst at Morgan Stanley is quoted saying that “the market has already been fragmented enough with fintechs and alternative lenders.” |
A number of prominent voices are quoted. Beverly D. Smith, chair of the MBA’s mortgage‑finance committee, says, “The GSEs are not perfect, but they’ve survived the 2008 crisis. We can’t risk creating a new risk exposure for taxpayers.” John Klein, a former regulator at the FHFA, adds, “Any new entrant will have to meet the same capital and oversight standards, and that is not a simple path.”
The Bigger Picture: Reform or Replacement?
While Ackman’s proposal is marketed as a “reform” to the GSEs, many analysts view it instead as an attempt to replace them. The article contrasts the proposal with recent legislative attempts—such as the Home Ownership Protection Act—which aim to adjust the GSEs’ role without outright replacement. The piece also highlights that some policymakers see the GSEs’ guarantee as a “public‑sector safety net” that could, in the worst case, cost taxpayers billions if mortgage defaults surge.
In the end, the HousingWire article concludes that, even if Ackman’s platform can attract a niche segment of investors, it will likely struggle to achieve the scale needed to rival Fannie and Freddie. The regulatory hurdles, combined with investor risk tolerance and the entrenched advantages of the GSEs, make the vision “ambitious but unlikely in the near term,” as the article’s author sums up.
Take‑away
Ackman’s plan, while offering an intriguing alternative to the GSE model, faces significant hurdles—regulatory, capital, and market‑based. The article, backed by FHFA policy, MBA data, and industry commentary, paints a comprehensive picture of the challenges that any private‑sector mortgage‑backed‑security platform would have to overcome to successfully compete with Fannie Mae and Freddie Mac. For now, the GSEs remain the dominant players in the U.S. mortgage‑financing ecosystem, and any major shift is likely to take years, if not decades, to materialize.
Read the Full HousingWire Article at:
[ https://www.housingwire.com/articles/ackman-fannie-freddie-plan-skepticism/ ]
