Appraisal Institute President Shares Op-Ed on GSE Privatization Impacts

Implications of Fannie Mae and Freddie Mac Privatization on the Appraisal Profession

President Donald Trump’s recent announcement regarding the potential privatization of Fannie Mae and Freddie Mac carries significant implications for the appraisal profession, as it may result in changing client demands, new work flow processes and technological developments. These government-sponsored enterprises (GSEs), under federal conservatorship since the 2008 financial crisis, play a pivotal role in the U.S. housing finance system by purchasing mortgages and repackaging them into mortgage-backed securities. A proposal to take them out of conservatorship and return them to private ownership could reshape the housing market—and, by extension, mortgage lending and the appraisal profession.


Legislative Path Remains Uncertain

Privatizing Fannie Mae and Freddie Mac would require legislative action by Congress. As of now, no formal legislative proposal has been introduced, and significant policy details remain unavailable. The path forward will depend on political will, market conditions, and competing priorities in Congress. Until clear legislative direction emerges, the appraisal profession—and the broader housing finance industry—will need to prepare for multiple possible outcomes, while continuing to advocate for policies that preserve transparency, consistency, and public trust.

The potential privatization of Fannie Mae and Freddie Mac represents a major transition for the U.S. housing finance system. While it presents challenges, it also opens new opportunities for appraisers who are prepared to evolve. By embracing innovation, reinforcing the value of human insight, and expanding their service offerings, appraisers can not only adapt—but lead—in the next chapter of housing finance.

Possible Scenarios for the Appraisal Profession

Scenario 1: Return to Traditional Underwriting Standards
Privatization may lead to a contraction of the GSEs’ portfolios and a renewed focus on traditional, lower risk underwriting practices. This happened in part during the first Trump Administration under Mark Calabria as the Director of the Federal Housing Finance Agency. A concerted effort was made to reduce the loan portfolios of both enterprises, backed by more traditional appraisal reports (full interior/external inspection appraisals and less use of alternative valuation approaches). Should a similar policy be enacted in the second Trump Administration, demand for comprehensive, high-quality appraisals may increase as private investors seek stronger risk assessment tools. Appraisers could play a crucial role in this more conservative lending environment, reinforcing the profession’s value in ensuring loan quality and market stability.

Scenario 2: Emergence of New Secondary Market Players and Competing Platforms
Reduced GSE involvement may open the door for private entities (large private sector financial services institutions) to play a larger role in the secondary mortgage market. In fact, some industry leaders have periodically floated the idea of building a fully private alternative to the GSEs, offering a competing platform for mortgage securitization. While such a platform could bring innovation, speed, and efficiency to the market, it may also favor “digital mortgages” and automated valuation models (AVMs) over traditional appraisal processes. This could marginalize appraisers unless they actively assert their value in the new framework. Appraisers will need to navigate the policies and practices of new market entrants, which may prioritize algorithmic valuation tools and digital workflows over on-site expertise. Advocacy and engagement with these new stakeholders will be essential to ensure that appraiser voices are included in the design of any emerging systems.

Scenario 3: Divergence in Appraisal Standards Between the GSEs
While under the Federal Housing Finance Agency’s oversight, Fannie Mae and Freddie Mac have operated with relative consistency—particularly in policies related to appraisal modernization, hybrid appraisals, and property data collection. This alignment has been possible because FHFA has served as a central referee. Without that centralized regulatory control, each GSE would have the latitude to set its own appraisal policies. The result could be fragmented standards, conflicting guidance, and two divergent appraisal regimes—creating confusion for lenders, investors, and appraisers alike. Although a federal regulator would likely maintain some oversight, its influence over day-to-day policy decisions could diminish significantly. Appraisers would need to navigate increased complexity, potentially adjusting practices depending on which enterprise is purchasing the loan. For instance, one GSE may opt for more hybrid appraisals than another, and any new entry into the secondary market may take an entirely different approach. Meanwhile, federal loan guarantee programs like the Federal Housing Administration and the U.S. Department of Veterans Affairs may opt for different approaches as well. 

Key Considerations for Appraisers

Potential for Elevated Mortgage Rates
Without government guarantees, mortgage-backed securities may be seen as riskier by private investors, resulting in higher mortgage rates. A slowdown in housing activity could follow, reducing transaction volumes and appraisal assignments. Appraisers may need to mitigate this by expanding into non-lending valuation services.

Embrace Technological Advancements
To remain competitive, appraisers should incorporate emerging tools—not just AVMs, but data analytics platforms, and AI-driven valuation aids—into their workflow. Leveraging technology can improve efficiency while reinforcing the appraiser’s role as a trusted advisor.

Highlight the Value of Human Expertise
Automated systems cannot fully replicate the nuanced analysis that appraisers provide. Appraisers understand local markets and how elements such as school districts, major roadways, access to recreational facilities and neighborhood amenities impact market appeal above and beyond an algorithm. They evaluate property quality and condition and assess atypical factors and how those factors impact purchasing decisions, and therefore, value. Emphasizing this expertise will help preserve the profession’s relevance in a tech-heavy landscape.

Diversify Service Offerings
Appraisers should explore service lines beyond mortgage lending, including tax appeals, estate planning, litigation support, homeowner and condo association reserve studies and consulting. This diversification can provide income stability amid fluctuating housing market conditions.

Engage in Continuous Education
Keeping pace with industry trends, regulatory developments, and best practices is essential. Ongoing professional development will enable appraisers to navigate regulatory shifts and technological disruption with confidence.

The Appraisal Institute Can Help Appraisers Navigate Challenges and Opportunities

The Appraisal Institute already offers an impressive lineup of course offerings to help appraisers build their appraisal practices, prepare for technological change and advancements and diversify practice areas. Relative to the new Uniform Appraisal Dataset and Appraisal Forms redesign process, which will transform the way in which mortgage lenders interface with appraisers over the next two years, the Appraisal Institute is offering a robust lineup of educational programs beyond the core URAR course. In addition to the foundational seminar developed in collaboration with Fannie Mae and Freddie Mac, the Appraisal Institute is rolling out companion seminars covering more practical methodology and business issues resulting from the new paradigm. These follow-up programs are designed to give appraisers the tools they need not only to comply with the new standards, but to enhance the quality, credibility, and defensibility of their reports in a more demanding regulatory environment.

Further, the Appraisal Institute is bringing these learning opportunities to appraisers nationwide through both in-person seminars and synchronous virtual delivery. Special offerings will also be held this summer at Val Expo 2025, where attendees can gain hands-on experience with the new reporting structure in the context of real-world case studies. This is just a start, as additional companion courses are already under development. 

The Appraisal Institute remains committed to supporting its members through education, advocacy, and resources to ensure they thrive in a changing marketplace.

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