After months of murmurs, the Trump administration is reportedly prepping to take mortgage giants Fannie Mae  (FNMA)  and Freddie Mac  (FMCC)  public, per the Wall Street Journal. The report adds that officials believe the offering could raise $30 billion in such a debut, valuing the two at “roughly $500 billion.”

The two firms are operated by the federal government, which receives its profits and manages its day-to-day business through a conservatorship. The two firms were taken into government control after they faced significant losses on mortgage securities during the Great Financial Crisis in 2008. 

In particular, the firms were heavily exposed to subprime mortgages. The government’s takeover of the firms at the time helped stabilize the market. However, after 17 years under government management, officials in the White House believe that the firms have replenished their reserves and should be privatized. 

One big incentive to doing so? A multi-billion dollar windfall for the federal government.

Why IPO Freddie and Fannie?

An IPO of the two firms might read as perplexing for the unacquainted, seeing as though the two firms have traded on the OTC markets for nearly two decades despite being government-supported enterprises (GSEs). However, while the firms are run by the government, it is not a majority owner (at least, not directly.) 

Instead, as part of the 2008 agreement, the U.S. government received warrants which entitled it to acquire the vast majority of the two businesses. Aside from that, the companies maintain their current private ownership. Among their largest shareholders is Pershing Square’s Bill Ackman, a vocal proponent of their privatization.

Ackman, who has owned a sizable stake in the two for over a decade, has been banking on their privatization. In January, Ackman claimed that ending that conservatorship could boost the two stocks and help the government realize billions in profits from an IPO. Since the start of the year, when Ackman began boosting his investment case, Fannie and Freddie are up 183% and 132%, respectively.

What Happens After Privatization?

The GSEs currently serve a public mission: expanding housing access and increasing mortgage market stability. They do this by effectively guaranteeing the mortgages and lowering the risk of borrowing. 

However, analysts warn that if Fannie and Freddie were privatized, doing away with this guarantee and public mission could affect housing access and affordability. Fair housing advocates say that those impacts would be most dramatic for lower income Americans and minorities. However, privatization of the two firms would almost certainly lead to higher rates, as the firms focus on shareholder value.