By Joy Wiltermuth
Freddie and Fannie have been growing their mortgage-bond holdings in recent months, but the 30-year fixed mortgage is still above 6%
The U.S. government has long been a major player in housing finance, mainly by providing the roughly $9 trillion market for agency-backed mortgage bonds with guarantees.
President Donald Trump late Thursday revived a longstanding debate within the housing market about what tools the U.S. government should use to make home ownership more affordable.
Trump, in a social-media post, said he directed his “representatives” to buy $200 billion in mortgage bonds. “This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.”
President Donald Trump said he would direct his “representatives” to buy $200 billion in mortgage bonds, in a social-media post.
The White House didn’t immediately clarify when asked about who those representatives might be. Trump is expected to talk about more about his housing plan at the upcoming economic summit in Davos, Switzerland, from Jan. 19-23.
But mortgage-industry specialists speculated that Trump might be referring to Freddie Mac (FMCC) and Fannie Mae (FNMA), two “government-sponsored enterprises” for the housing industry that have been in conservatorship since the 2008 housing crisis. The White House has been talking about privatizing both agencies.
“It’s hard to know for sure, but it seems like he’s instructing the GSEs to increase their retained portfolios,” said Michael Bright, a former manager of Ginnie Mae’s portfolio of mortgage bonds.
“This could boost GSE revenue in the short term, but buying to intentionally reduce rates has very limited upside,” he said. Bright is now chief executive of the Structured Finance Association, a trade group for investors, Wall Street lenders and others specializing in housing, consumer and corporate credit.
Bright said $200 billion in purchases isn’t “large enough to put significant downward pressure on rates, and buying at uneconomic levels eventually runs its course,” he told MarketWatch. “It’s the reason this practice has largely been abandoned since the financial crisis.”
Big year for mortgage bonds
The U.S. government has long been a major player in housing finance, mainly by providing the roughly $9 trillion market for agency-backed mortgage bonds with guarantees.
Government guarantees mean bond investors aren’t taking credit risks if homeowners default on their mortgages. That helps make credit more available. But the value of such bonds also can fall sharply when rate volatility spikes, as they did when the Federal Reserve began quickly hiking interest rates in 2022 to fight inflation.
Those rate hikes ended the brief but powerful era of 30-year fixed-rate mortgages that were below 3%, a period when home prices skyrocketed. It also led to worsening affordability, with mortgage rates still stuck above 6%, despite a healthy does of Fed rate cuts since late 2024.
“Mortgages have been on a tear for the last month or so,” said Brij Khurana, a portfolio manager at Wellington Management, referring to the mortgage-bond market Trump has in his sights. Still, many questions about Trump’s Thursday message will need answering, Khurana said, including a time frame for the $200 billion to be put to work in the market. “If it is over a period of three years, that is different,” he said.
Higher mortgage rates aren’t bad for everyone. Following a few rough years for agency mortgage bonds, the sector scored an 8.5% return in 2025, the highest since 2002, according to Jeana Curro, head of agency MBS research at BofA Global.
Khurana estimated mortgage bonds might rally another 15 to 20 basis points in the wake of Trump’s idea for more purchases, but that it “really is not going to move the needle on the affordability issue.”
“My point on affordability is that when you drive mortgage rates lower, housing prices generally go up,” Khurana said, noting the dearth of new housing stock created over the past decade-plus.
Another potential takeaway from Trump’s message? Concerns about the White House potentially rushing to privatize Freddie and Fannie in a midterm-election year might now be on the back burner. That’s predicated on the idea that the Trump administration now wants greater control over the agencies, and the ability to keep increasing their mortgage portfolios.
Read from June: This move by Trump could be ‘disastrous’ for the mortgage market and drive up costs for home buyers even more
After six months of growth, Freddie and Fannie both already own $120 billion in mortgage bonds, according to National Mortgage News.
-Joy Wiltermuth
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01-08-26 1906ET
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