Trump’s $200 Billion Mortgage Buying Spree ‘Unlikely’ To Move Rates Much

President Donald Trump has instructed Fannie Mae and Freddie Mac to launch a massive buying spree of mortgage-backed securities to push mortgage rates lower, but experts are skeptical that the move will have a dramatic impact.

Trump said on Jan. 8 he would have Fannie and Freddie, which have been under federal control since a 2008 bailout, purchase $200 billion worth of mortgage-backed securities (MBS), which would nearly double their combined holdings and take them close to their regulatory asset cap.

"This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable," Trump promised on his Truth Social.

Mortgage rates did respond favorably to the news, with daily 30-year rates dipping below 6% on Friday for the first time in nearly three years.

In theory, increasing Fannie and Freddie's MBS holdings should be favorable for mortgage rates through the simple laws of supply and demand. Increasing demand for mortgages makes them more valuable, encouraging lenders to originate more loans at more competitive rates.

However, with the total U.S. market for mortgage bonds estimated at around $12 trillion, it's unclear whether the $200 billion buying spree proposed by Trump would be enough to make much of a difference in the long run.

"Details remain limited, but it’s difficult to see this proposal moving mortgage rates in a large or lasting way," says Realtor.com® senior economist Joel Berner. "A one-time infusion of roughly $200 billion, or even a series of smaller purchases that add up to that figure, is unlikely to meaningfully alter long-term mortgage pricing."

For context, commercial banks in the U.S. currently hold about $2.7 trillion in MBS. And the Federal Reserve still holds more than $2 trillion in mortgage bonds, three years after the central bank began reducing its MBS holdings.

While the Fed isn't actively selling MBS, about $15 billion of the central bank's mortgage bond holdings hit maturity and roll off the balance sheet each month.

Mortgage Bankers Association Chief Economist Mike Fratantoni says that there isn't enough detail yet on the proposed Fannie and Freddie purchases to have a clear sense of the market impact.

"The timing and pace of and the financing used to make these purchases would matter. However, it is likely to put some modest downward pressure on mortgage spreads," says Fratantoni. "Particularly at a time when the Federal Reserve continues to allow its MBS holdings to roll off, these purchases could help somewhat." 

Victor Kuznetsov, managing director and co-founder of Imperial Fund Asset Management, noted that the "spread" between mortgage bonds and comparable Treasury securities tightened about 1 percentage point immediately following the announcement, but that about two-thirds of that gain quickly disappeared.

"In the short term, expect mortgage rates to level tighter than 2025 averages, but investment bank researchers tend to agree that most of these MBS purchases have already been priced into rates," says Kuznetsov. "Inflation, geopolitical events, and the Federal Reserve's monetary policy will continue to affect mortgage rates in 2026."

Meanwhile, Shannon McGahn, National Association of Realtors® executive vice president and chief advocacy officer, praised the move, saying “President Trump’s plan to purchase $200 billion in mortgage-backed securities (MBS) will help address the high spread between mortgage rates and Treasury yields and help bring costs down for American families.

"In 2023, the National Association of Realtors joined others in the industry to urge federal leaders to take limited actions to support the MBS market to reduce historically high mortgage costs that have priced too many people out of owning a home," says McGahn.

"Today’s announcement reflects the kind of market-stabilizing policy we’ve championed. We stand ready to work with the Administration to ensure it delivers real relief for homebuyers and the broader housing market.”

Purchases would take Fannie and Freddie close to maximum holdings

Fannie and Freddie purchase home loans to package into investment vehicles known as mortgage-backed securities, which they then typically sell to investors. This helps ensure ready investment demand for mortgages, bringing liquidity and stability to the market.

The two companies inevitably hold some MBS on their balance sheets, whether as part of the pipeline before sales, or as a supplement to cash flow by collecting interest payments directly, instead of through guaranty fees paid by lenders.

Before 2008, Fannie and Freddie ballooned their combined holdings to more than $1.5 trillion as a way to juice earnings, by borrowing heavily at low interest rates and plowing the money into high-yield debt and increasingly risky assets.

That strategy backfired in the subprime mortgage crisis, which blew up their balance sheets with large valuation and credit losses, necessitating the federal bailout that landed Fannie and Freddie in conservatorship.

Under the strict rules of conservatorship, the two government-sponsored entities (GSEs) were forced to shrink their retained portfolios and rebuild capital.

“Coming out of the financial crisis, and throughout the policy debates for the past several decades, there has been widespread agreement that the GSEs should not return to having the large balance sheets that they had pre-crisis," says Fratantoni. "The liquidity and hedging challenges they faced with such large mortgage portfolios ultimately were destabilizing for the market.

“It would be important for any increased purchase activity to be done carefully with these concerns in mind,” he adds.

Since May, Fannie and Freddie have both been quietly increasing their combined holdings, which reached a four-year high of $247 billion in November.

Trump's plan would take those holdings to nearly $450 billion, which is the regulatory maximum for Fannie and Freddie, which are currently limited to a maximum of $225 billion each in retained mortgage assets.

In theory, the Federal Housing Finance Agency, which controls Fannie and Freddie, could lift those balance sheet caps, but FHFA Director Bill Pulte shrugged off that suggestion in an interview with CNBC on Friday.

"Well, $200 billion is a lot, a lot of capital. This is a very big buy. We're very excited about it. We've already begun executing upon it," said Pulte.

Trump continues to focus on mortgage rates to fix affordability

Trump's plan for Fannie and Freddie continues his focus on mortgage rates as the main solution to the housing affordability crisis, after he recently admitted that he did not want to let home prices come down.

Trump said last month that he wanted to ensure that current homeowners continue to have a "big value for their house," a goal that he admitted conflicted with his desire to expand homeownership opportunities to more young people.

If home prices remain static or continue to rise, the only remaining affordability levers are rising incomes and falling mortgage rates.

A recent Realtor.com analysis found that mortgage rates would have to fall to 2.65% to restore the relative housing affordability seen in 2019, when the typical mortgage payment required about 21% of the median household income.

Incomes would have to rise by 56% to restore the market to 2019 affordability levels.

"Overall, while the goal of improving affordability is broadly shared, policies that fail to address the underlying supply shortage are unlikely to deliver meaningful or lasting relief," says Berner. "Sustainable progress depends on adding homes through new construction and expanded inventory in chronically constrained markets, rather than short-term interventions that primarily shift demand."