Ever since President Donald Trump floated the idea of “bringing Fannie Mae and Freddie Mac public” in a social media post on May 21, speculation has abounded about what that process could look like.

Did Trump actually mean that he wanted to privatize the government-sponsored mortgage giants by ending their federal conservatorship status? Did he mean that the companies, which currently trade over the counter on the Pink Sheets, would be relisted via a public share offering on the New York Stock Exchange?

Bill Pulte, director of the Federal Housing Finance Agency (FHFA) — which has acted as the conservator of Fannie and Freddie since the 2008 financial crisis — added to the confusion when he told Bloomberg TV that he doesn’t see “any scenario where the president isn’t in control of Fannie Mae and Freddie Mac.”

Fannie and Freddie purchase mortgages from lenders and package them as mortgage-backed securities, which helps keep interest rates lower by making the secondary mortgage market more liquid. Besides the logistical questions raised by Trump’s cryptic social media message, many industry observers have speculated about how mortgage rates would be impacted by a conservatorship exit and/or public stock offering.

Marty Green, a principal with Polunsky Beitel Green LLP, a law firm that provides legal support to residential mortgage lenders, recently spoke with Scotsman Guide about these questions and others related to Fannie and Freddie.

If the Trump administration decides to release Fannie and Freddie from federal conservatorship through a public stock offering, what do you think needs to be done logistically to ensure that borrowers, lenders, investors and the broader economy are not negatively impacted?

First of all, I think it’s really critical that they telegraph exactly what the plan is and give people — particularly industry players and industry participants — an opportunity to weigh in on any concerns that they have, because I think that would lead to a more thoughtful release than what you would have if they just sort of announce a plan and already start to implement that without people really having a chance to view any concerns or to make suggestions for how that plan might actually be improved.

How long do you estimate that whole process would take to play out?

I think it’s going to take a while just to work through all of the details. They would need to really be adequately capitalized to exit. Part of that could be accomplished in a public offering, which would probably be the largest public offering ever. But in addition to that, they would probably need some additional time to continue to accumulate capital. And then there also has to be some decision made about how the government is going to be compensated for its interest in them that it has today.

Are we talking years, or could it be accomplished in less than a year?

I think it’s more than a year. There’s really not an urgency to rush and get something done, although I think the administration would certainly like to see them privatized and would certainly like to see the conservatorship end — it would like to get credit for doing that. I think there’s adequate time for them to do that in a thoughtful manner before the end of this administration. They may commence it within the next year, but I think any thoughts that it’s going to be concluded within a year or less is probably misguided.

If Fannie and Freddie exit conservatorship, how do you think mortgage rates would be impacted in the short and long terms?

You know, it’s interesting. I think the answer is probably that it depends. I think that there are certain models here that could reassure the markets that we kind of have business as usual in terms of the role that Fannie and Freddie are going to be playing in the mortgage market. And I think at some point, the certainty of them exiting from conservatorship also has a positive aspect to it, because right now there’s an uncertainty. So, I think overall if it’s done well and it’s done thoughtfully, it should have very little impact in terms of the short-term rates — except that element of certainty that I mentioned, which could actually eventually lower rates a little bit perhaps.

FHFA Director Bill Pulte said the administration is exploring ways to sell shares in Fannie and Freddie while still keeping the companies under FHFA control. Is that feasible, and do you think a public offering would be able to attract investor interest in that scenario?

They could do that prior to there being an exit from conservatorship, but a lot of investors would want to know what the plan for the exit was. So again, there may be a sequence where you get private capital coming in more before the conservatorship has ended, but sort of in anticipation of that conservatorship ending within some reasonable period of time and some understanding of what that might look like.

President Trump indicated on social media that the government would maintain an “implicit guarantee” and bail out the companies if they encounter severe financial hardship. Is the executive branch’s word good enough to maintain market stability, or do you think an explicit guarantee from Congress would be necessary?

I think the implicit guarantee is almost there no matter what, just because of the sheer scale and importance of what Fannie Mae and Freddie Mac are to the mortgage markets. Housing finance is what, one-sixth of the economy or something like that? Practically, you can’t have a critical player in one-sixth of your economy collapse without the government stepping in.

In your estimation, is removing Fannie and Freddie from conservatorship the right move?

You know, it’s an interesting question. On the one hand, you could say things are working pretty well. They’re continuing to accumulate capital. And to some extent, the government, I think, likes having control of them in a way that it’s easier for them to implement policy. On the other side of it, though, is that conservatorship was never intended to be permanent. And the longer it continues, the more permanent it looks. And so I think that the administration on the other hand would like to see it more privatized, much more like it was before [2008] or in some other, better and improved way that they can envision.