Pulte brings Fannie, Freddie together to talk deregulation

The conservator of two government-sponsored enterprises that buy and securitize many mortgages originated in the United States said he's arranged some unusual talks between them to get their input on deregulation.

"In following President Trump's deregulation mandate, I ordered the executives of Fannie and Freddie to meet and provide me [with] regulatory changes," Bill Pulte, director of the renamed Federal Housing Finance Agency said in an X post on Thursday. "To my surprise, they hadn't been allowed to talk, despite being heavily regulated together."

Pulte, who has rebranded the FHFA as U.S. Federal Housing, said there'll be "more to come" regarding information from those meetings, which he announced amid a flurry of other other activity this week.

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Pulte's comments about his interest in bringing the two enterprises closer together follow an announcement about repositioning their existing joint venture, and may point to further exploration of collaborative reform.

As evidenced by their existing JV, other efforts in which the FHFA has asked Fannie and Freddie to work collaboratively and frequent appearances at industry events together, Pulte's statement that Freddie and Fannie haven't "been allowed to talk" could be hyperbole. 

That said, there's been a distinction between projects they've collaborated on like the joint venture, and the competition between them to get the "best" loans mortgage lenders produce with some differences in criteria and process, so to that degree they have been at odds at times.

Is a Fannie Mae and Freddie Mac merger likely?

Some pundits say because the GSEs' existing JV was created to put their mortgage securities on equal footing, Pulte could be looking into finding ways to resolve their differences or identify the complementary strengths of each in preparation for a merger.

"With no real difference in the type of security issued or in price, product or service, or in business model, why should they be allowed to stay separate?" Clifford Rossi, academic director of the University of Maryland's Smith Enterprise Risk Consortium said in commentary earlier this year.

Rossi, who also has been risk management executive for the GSEs and a regulator, said in his commentary that Pulte's earlier decision to name himself chairman of both enterprises' boards and the exit of Freddie's CEO without a permanent successor may point to a possible merger.

Freddie's president and interim CEO, Michael Hutchins, recently "agreed to extend his tenure in the dual role." But if no permanent successor is named, his tenure as far as serving in both positions could end later this year, according to a Securities and Exchange Commission filing.

Fannie Mae CEO Priscilla Almodovar has remained in place through the post-election transition period and Pulte said in late April that he didn't foresee any further executive changes.

Why Pulte's statements may not signal a Fannie Mae, Freddie Mac merger

Pulte's move to chair both boards has raised some Democratic eyebrows, but others say it's not cause for concern.

"Under the conservatorship, the boards of the enterprises are not only not independent, they are forbidden from having a fiduciary responsibility to shareholders and have their sole responsibility to the conservator," said National Housing Conference President and CEO David Dworkin.

"This is why Director Pulte putting himself on both boards and taking on responsibilities of board chairs is really a distinction without a difference. Every FHFA director already had that authority. He's essentially made it more transparent," said Dworkin, who also is a former Treasury official.

While Rossi said ending the GSEs' "duopoly" could head off a "race to the bottom" in loan quality as they compete, something NHC has also shown concern about, Dworkin said the enterprises' regulator also will need to be mindful of antitrust laws as it reforms the GSEs.