Plan to use Fannie and Freddie cash stirs hope, skepticism and new risk questions
United States president Donald Trump’s move to direct Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds puts the government-sponsored enterprises back at the center of the housing debate and raises fresh questions over how far policy could really push down borrowing costs ahead of November’s midterm elections.
The announcement came as home prices have continued to outpace incomes for years, a trend rooted in a long‑running construction shortfall dating back to the post‑2008 recovery.
Higher financing costs since the pandemic have layered on a mortgage rate lock‑in dynamic, with millions of borrowers sitting on loans near 3% and reluctant to sell, further choking supply.
Trump said the bond purchases would be funded from within the housing finance system itself. The president argued that because he chose not to privatize the GSEs in his first term, “it is now worth many times that amount — AN ABSOLUTE FORTUNE — and has $200 BILLION DOLLARS IN CASH,” money he now wanted used to “BUY $200 BILLION DOLLARS IN MORTGAGE BONDS.”
“This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,” Trump said in a Truth Social post.
Policy tool with limits
Market reaction in agency mortgage‑backed securities was immediate, with prices rallying relative to Treasuries and mortgage‑linked stocks including Rocket Cos. and LoanDepot gaining on the news. Yet analysts questioned how much relief borrowers would actually feel.
“At a high level I feel this is putting a Band‑Aid on a deeper issue and it probably wouldn’t lower rates enough to really undo the mortgage rate lock-in effect,” said Daryl Fairweather, chief economist at Redfin.
Fairweather estimated the government purchases could trim “0.25 to 0.5 percentage points off the rate for a 30-year fixed rate mortgage,” while warning they would not solve “a chronic shortage of homes on the market.”
David Dworkin, president and CEO of the National Housing Conference, took a somewhat more optimistic view, arguing that if Fannie and Freddie were allowed to grow their retained portfolios “there’s no question it will have downward pressure on mortgage rates – probably at least a quarter of a point, maybe more.”
But other economists stressed spreads have already tightened. “Much of the juice appears to have been squeezed,” said Neil Dutta, head of economics at Renaissance Macro Research, cautioning that the incremental impact on rates could be modest.
Bigger affordability picture
The plan also raised balance‑sheet and governance concerns. Drawing heavily on GSE cash cushions intended as a buffer against downturns could leave the system more exposed if the housing market weakened again, analysts said, potentially complicating any future initial public offering of the entities.
Trump’s bond‑buying directive arrived alongside a separate pledge to “ban large institutional investors from buying more single-family homes,” framed as a way to tilt the market back toward individual buyers.
Institutional landlords still hold only a small share of single‑family rentals nationwide – about 3% as of mid‑2022 – even as investor activity remains a flashpoint in affordability debates.
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