Trump Orders Fannie, Freddie Into Mortgage Bond Market

Donald Trump is pushing the government’s two biggest housing finance engines back into the mortgage bond market, in an effort to demonstrate a commitment to affordability.

The president ordered Fannie Mae and Freddie Mac to buy up to $200 billion of mortgage-backed securities in what the White House is framing as a bid to make homeownership cheaper, the New York Times reported.

The directive, announced Thursday in a social media post, would mark a sharp turn for the government-controlled firms and revive a strategy that helped fuel their near-collapse during the 2008 financial crisis.

Details were sparse, but markets didn’t wait: the spread between mortgage bond yields and Treasuries tightened by about 10 basis points shortly after Trump’s announcement, a notable shift in a market that tends to move slowly.

Large-scale buying by Fannie and Freddie could boost demand for mortgage-backed securities, lifting bond prices and pushing mortgage rates lower. Bond prices and rates move in opposite directions.

Housing advocates were quick to endorse the idea. David Dworkin, chief executive officer of the National Housing Conference, told the Times that mortgage rates would “undoubtedly fall” if the firms reentered the market as buyers for their own portfolios.

Skeptics are less convinced the impact would be dramatic or lasting. Mortgage rates are shaped by a tangle of forces, from Federal Reserve policy to inflation expectations.

Scott Buchta, head of fixed income strategy at Brean Capital, said the move could shave as much as a quarter-point off rates, a modest but potentially meaningful shift for affordability and refinancing activity.

For Fannie and Freddie, the plan carries historical baggage. Buying mortgage bonds for their own books was one factor that magnified losses when defaults surged in the late 2000s, forcing a federal bailout and conservatorship that still hasn’t ended, despite promises of an initial public offering during Trump’s first year of his term.

Their core role today is to buy mortgages from lenders, package them into securities and sell them to investors, a system designed to keep credit flowing without exposing the firms to outsized market risk.

The firms’ regulator, Federal Housing Finance Agency Director Bill Pulte, a Trump ally who also chairs both boards, quickly endorsed the idea online, saying the agency was “on it.”

The announcement lands as Trump looks to show progress on housing costs ahead of midterm elections. This week, he also floated barring large Wall Street firms from buying single-family homes and is mulling allowing buyers to tap retirement accounts for down payments, proposals aimed squarely at voter frustration with high prices and borrowing costs.

— Holden Walter-Warner