Former U.S. President Donald Trump announced on Thursday that he is directing his representatives to purchase $200 billion in mortgage bonds, aiming to reduce housing costs. Trump stated on Truth Social that Fannie Mae and Freddie Mac have substantial cash reserves, making the purchase feasible. He believes this action will lower mortgage rates and monthly payments, making home ownership more affordable.
Federal Housing Finance Agency Director Bill Pulte confirmed on X that Fannie Mae and Freddie Mac will execute the purchase. Pulte told Reuters that the agencies have sufficient liquidity to carry out Trump’s order, including nearly $100 billion in available funds at each entity, considering assets beyond just listed cash. He anticipates the purchases will lower mortgage rates and stimulate the housing market.
Fannie Mae and Freddie Mac are government-owned entities that provide support to the housing market by purchasing home loans from banks and private mortgage companies. This action frees up lenders’ capacity to issue more loans, thereby increasing the availability of home finance credit and keeping mortgage interest rates down. Asked for further details, including on the timeline, Pulte demurred, saying they were very serious about executing on it.
Redfin’s head of economics research, Chen Zhao, noted that while the purchase could lower borrowing costs by 10 to 15 basis points, its impact would be relatively small compared to the Federal Reserve’s larger bond purchases during and after the pandemic. Pulte clarified that the Federal Reserve and the Treasury Department will not be involved in these mortgage-backed securities purchases, which will be funded by the liquidity on Fannie Mae and Freddie Mac’s balance sheets. Trump has also indicated further housing initiatives would be announced soon.
