Trump wants to buy $200B in mortgage bonds to lower housing costs
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President Trump said in a post on Truth Social on Thursday that the government would buy $200 billion in mortgage bonds in an effort to reduce housing costs.
Why it matters: The directive is one of a series of steps that Trump has recently announced to address the affordability concerns of voters. It's not clear it would make a big impact on housing.
Driving the news: In the post, Trump said the purchases "will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable."
Zoom in: Trump noted that Fannie Mae and Freddie Mac, the two mortgage agencies under the government's control, now have $200 billion in cash.
- "We are on it," Bill Pulte, the regulator who oversees Fannie and Freddie, said on X. "Thanks to President Trump, Fannie and Freddie will be executing."
- Fannie and Freddie have already been adding to their portfolios of mortgages and bonds in an effort seen as trying to push down mortgage rates, Bloomberg has reported.
- Their combined holdings of loans and bonds they keep rather than sell on to investors rose to $234 billion, the most since 2021, per Bloomberg, with another $100 billion expected this year.
Zoom out: Back in 2020, when the economy was in the grips of the pandemic, the Federal Reserve bought a huge amount of mortgage-backed securities to help drive long-term interest rates down.
- At its peak, the Fed's MBS holdings totaled more than $2.7 trillion.
- $200 billion could move rates only at the margin.
What they're saying: "The housing affordability challenge is not a function of finance," Joe Brusuelas, chief economist of RSM, told Axios. "It's plentiful and a 6.25% mortgage a historically cheap."
- "The problem is a function of supply. Under those conditions, all it would do is drive prices higher."
By the numbers: Mortgage-related stocks like LoanDepot and Rocket Companies rallied in after-hours trading.
- Mortgage-backed securities also caught a bid relative to Treasuries following the news.
The bottom line: This is the second announcement in two days from Trump aiming to address housing affordability, after he posted about banning large institutional investors from buying single-family homes.
- It's unclear if either proposal will do so.
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