President Trump said he is ordering the two big government-controlled mortgage finance firms to start buying bonds backed by mortgages, his latest bid to make it easier for Americans to buy a home.
In a post on social media on Thursday, Mr. Trump said he was directing Fannie Mae and Freddie Mac to buy up to $200 billion in mortgage-backed bonds. While Mr. Trump’s announcement was short on details, bond investors reacted quickly to the potential for giant government purchases of mortgage bonds.
Following the statement, the difference between the interest rates on mortgage bonds and Treasuries narrowed by 0.1 percentage points, a sharp move in that market and an early indication that the initiative could have some effect on the mortgage market.
Some analysts questioned the extent of the impact on consumer mortgage rates over time, given that those rates are influenced by a number of factors, including Federal Reserve policy.
Mr. Trump’s announcement is part of a recent effort by the White House to show it is responding to the public’s concerns about the cost of living and specifically the issue of housing affordability. It is an issue that could dog Republicans in this year’s midterm elections.
On Wednesday, Mr. Trump said he wanted Congress to bar big Wall Street firms from buying more single-family homes to operate as rental properties. Some housing experts have said institutional buyers of single-family homes have driven up home prices and led to higher rents in some communities.
Mr. Trump is also said to be considering asking Congress to permit home buyers to take money out of their retirement savings to pay for down payments.
A move by Fannie and Freddie to buy mortgage backed securities would be a back-to-future moment of sorts. Buying risky mortgage-backed securities was one investment strategy that got the two firms in trouble in the run-up to the 2008 financial crisis, when many homeowners fell into default. The federal government was forced to step in and take them over to avoid bankruptcy.
The main job of Fannie and Freddie is to buy mortgages from banks and loans and package them into bonds that are sold to investors. In selling home loans to Fannie and Freddie so they can be packaged into bonds, banks and lenders are freed up to do more lending.
In theory, if Fannie and Freddie once again became a buyer of mortgage bonds it would provide a new investor for those securities, pushing up the price of those mortgage bonds and, in theory, might also help reduce mortgage rates broadly. Bond prices move inversely to rates.
“There is no question if Fannie and Freddie get back into buying mortgage bonds for their portfolios, mortgage rates will undoubtedly fall,” said David Dworkin, president and chief executive officer of the National Housing Conference, a coalition of affordable housing providers.
Mr. Dworkin, a former Treasury official during the Obama and first Trump administrations, said Mr. Trump’s idea was an intriguing one. But some mortgage analysts questioned how much of an impact it would have.
“This could have a small impact on affordability,” said Scott Buchta, head of fixed income strategy at Brean Capital, in emailed comments, with rates falling by as much as 0.25 percentage points.
But he added that the move could give a boost to mortgage refinancing activity, which is still economically important.
The average 30-year mortgage rate stood at 6.23 percent on Thursday, it’s lowest since September 2022, according to Bankrate.
Mr. Buchta said that if mortgage rates fall below 6 percent, that would be “a huge positive” for the psychology of the market.
Fannie and Freddie are overseen by the Federal Housing Finance Agency and its director, Bill Pulte, a stalwart ally of Mr. Trump. One of the first things that Mr. Pulte did after being sworn into office last year was to appoint himself as the chairman of the boards of both companies.
“We are on it, Mr. President,’’ Mr. Pulte said Thursday on social media, responding to Mr. Trump’s proposal.
Just a few days ago, the Urban Institute, a liberal-leaning think tank, published a report commenting on the fact that the big market for mortgage-backed securities was “operating without a net” because the Federal Reserve had reduced its role as buyer of last resort for mortgage bonds. The report noted that the Fed often calmed the markets by buying mortgage-backed bonds.
The report speculated that Fannie and Freddie could once again become buyers of last resort for mortgage bonds. But the report concluded that would be a potentially dangerous thing, recalling how the two firms nearly fell into bankruptcy after buying up too many bonds before the financial crisis.
“It’s the danger of repeating the past and turning them back into the hedge funds they once were,” said Laurie Goodman, one of the reports’ authors.
Matthew Goldstein is a Times reporter who covers Wall Street and white-collar crime and housing issues.
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