Trump instructed the "Two-Faced" United States to purchase $200 billion in MBS to drive down mortgage rates.

President Trump has instructed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities (MBS), which he sees as the latest move to lower housing costs before the midterm elections in November. Trump announced this move on social media on Thursday, stating "this will lower mortgage rates, reduce monthly payments, and make homeownership more affordable." He also added that he decided not to sell Fannie Mae and Freddie Mac during his first term, allowing them to accumulate "$200 billion in cash," which is why he made this statement. Trump said, "This is one of the many measures I have taken to restore affordability, which the Biden administration has completely destroyed." In response to this news, mortgage-backed securities rose relative to U.S. Treasury bonds, and stocks related to mortgages, including Rocket Cos. (RKT.US) and LoanDepot (LDI.US), also went up. Fannie Mae and Freddie Mac are two government-sponsored enterprises in the United States that received government assistance during the 2008 financial crisis. These two companies have been increasing their holdings of mortgage-backed securities. The latest data shows that in the five months leading up to October, the debt and loan portfolios held by these two housing finance giants (i.e. the portion they hold rather than sell to investors) have increased by over 25%. Strategists point out that this is a relatively direct way to lower mortgage rates because the increased demand for mortgage-backed securities (MBS) leads to a narrowing of risk premiums, affecting underlying mortgage rates. David Dworkin, President and CEO of the National Housing Conference, said "if the Trump administration allows Fannie Mae and Freddie Mac to expand their retained investment portfolios, there is no doubt that this will put downward pressure on mortgage rates - possibly lowering rates by at least 0.25 percentage points, or even more." Freddie Mac stated on Thursday that as of the week ending January 8th, the average 30-year mortgage rate was 6.16%, close to the lowest level since October 2024. Citigroup estimated at the end of last year that if these two government-sponsored enterprises increase their investment portfolios by $250 billion, the risk premium of bonds could decrease by about 0.25 percentage points, possibly translating into a similar decrease in mortgage rates paid by consumers. However, some analysts do not believe this move will have a significant impact. Neil Dutta, Chief Economist at Renaissance Macro Research, pointed out that mortgage spreads have already narrowed. Dutta said, "So, I'm not sure how much more impact this move can have. It seems like most of the impact has already been squeezed out." Federal Housing Finance Agency Director Bill Pulte stated on Thursday that bond purchases "can be executed very quickly. We have the capability, and we have enough funds, and we will carry out this task in a very smart and massive way." Pulte mentioned that Trump's plan announced on Wednesday to ban institutional investors from purchasing single-family homes, combined with the bond purchase plan, forms a "one-two punch." Trump said he plans to elaborate on this plan and other proposals to increase housing affordability at the World Economic Forum in Davos, Switzerland later this month. Before these measures were announced, Trump's advisors had repeatedly warned that the cost of living had become a political burden for the Republican Party, and could lead to the party losing control of Congress in the upcoming Fall elections. Pulte said earlier in an interview on Thursday that Trump will decide whether to proceed with an IPO for Fannie Mae and Freddie Mac in one to two months. However, Jaret Seiberg, Managing Director at TD Cowen, stated in a research report that the bond purchase plan may indicate that such plans have been shelved. Seiberg said, "We believe the president's comments are not favorable to ending the conservatorship of government-sponsored enterprises (GSE). Trump has praised his decision in the first term not to let these companies go public. He also stated that he can use these companies to help address housing affordability issues. This does not sound like a President eager to bring these companies to market."