President Donald Trump will direct Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds, aiming to lower mortgage rates and increase homeownership affordability for consumers.
Trump made the announcement on Thursday afternoon on Truth Social. Trump said he is giving “special attention” to the housing market and that, because he chose not to sell Fannie and Freddie in his first term, the government-sponsored enterprises are now flush with $200 billion in cash.
TRUMP MOVES TO BAN INSTITUTIONAL INVESTORS LIKE BLACKSTONE FROM BUYING SINGLE-FAMILY HOMES
“Because of this, I am instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS,” the president said. “This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable. It is one of my many steps in restoring Affordability, something that the Biden Administration absolutely destroyed.”
“We are bringing back the AMERICAN DREAM that was destroyed by the last Administration. MAKE AMERICA GREAT AGAIN!” Trump added.
The Washington Examiner contacted both the Treasury Department and the Federal Housing Finance Agency for more details, but didn’t receive responses.
In recent years, mortgage rates have been high relative to other interest rates. For example, the difference between the average rate on a 30-year fixed-rate mortgage and the yield on a 10-year Treasury security rose from about 1.5 percentage points in 2021 to over 3 percentage points in 2023.
That made mortgages more expensive, leading to some calls in the industry for government help. Since then, however, the difference has drifted back down, and it is closer to 2 percentage points.
Fannie and Freddie support the secondary market for mortgages by buying mortgages from originators, packaging them into securities, and selling them to investors, with guarantees. In some cases, the government-sponsored enterprises hold the securities in their own portfolios, rather than selling them on to investors.
In the wake of the government bailouts in 2008, Fannie and Freddie have shrunk their portfolios of mortgage-backed securities. Currently, they hold about $234 billion. Under the terms of their bailout agreement with the Treasury, though, they can hold another $200 billion.
SHOULD THE FEDERAL GOVERNMENT GRADE EVERY STATE AND CITY ON ITS ZONING RULES?
A significant factor in the market for mortgage-backed securities is that the Federal Reserve has been shrinking its holdings of such assets. As of 2023, it had approximately $2.7 trillion in mortgage-backed securities guaranteed by Fannie and Freddie Mac. Its holdings have shrunk to $2 trillion as it has moved to normalize monetary policy.
