Trump wants to buy mortgage bonds. Why experts are puzzled.
- - Trump wants to buy mortgage bonds. Why experts are puzzled.
Andrea Riquier, USA TODAYJanuary 10, 2026 at 5:28 AM
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The recent suggestion by President Donald Trump that Fannie Mae and Freddie Mac buy mortgage bonds in order to lower the cost of home loans is unlikely to help average Americans struggling to afford homeownership and may be harmful to financial markets, many observers say.
On Jan. 8, Trump said on Truth Social that he was directing his “representatives” to buy "$200 BILLION DOLLARS IN MORTGAGE BONDS,” seemingly referring to Fannie and Freddie. Shortly after, Bill Pulte, the Trump appointee who oversees the agency that regulates the two companies, said he was “on it!”
It was the second time that week in which the president appeared to suggest some sort of policy intervention for the housing market, where a long-time dearth of new construction has made homes unaffordable for many Americans. On Jan. 7, Trump said he wanted to ban institutional investors from buying single-family homes.
The White House “has clearly lost the narrative when it comes to financial markets,” said Phillip Basil, director of economic growth and financial stability at Better Markets. “If you want to lower rates, Treasury markets are the first stop. They are the basis for everything. The White House is pursuing the exact opposite of what they should be doing.”
Fannie and Freddie play a critical, but often misunderstood, role in the housing market. They buy mortgages from banks and other lenders, which allows those companies to turn around and extend more credit to other borrowers. Fannie and Freddie package the loans into bonds, which smooths out the risk.
The Fannie Mae headquarters
Investors like pension funds and insurance companies buy the bonds, which offer a steady stream of income. That process keeps the mortgage market – which has about $13.5 trillion of outstanding debt, according to a recent Urban Institute analysis – humming. It allows any borrower with strong enough credit to go a lender and get a home loan lasting as long as 30 years – but also have the option to refinance at any point during the life of the loan.
Mortgage rates tend to follow the same path as the 10-year U.S. Treasury note, in part because the average age of outstanding home loans is 6.3 years, according to a 2025 analysis by ICE Mortgage Technology for USA TODAY.
Treasury yields are elevated in part because the United States government runs a steep deficit, which was only exacerbated by Trump’s signature 2025 tax and spending bill.
“The increase in debt and deficits drives up interest rates,” the Yale Budget Lab wrote last July when the bill was signed into law. “By 2054, the 10-year Treasury yield is 1.4 percentage points higher than it would have been if the bill were not passed.”
Bond investors are also likely to shy away from financial markets where it appears politicians have too much sway, said Corey Frayer, director of investor protection for the nonpartisan Consumer Federation of America.
“It is a problem that once again Trump believes he can unilaterally direct an independent agency and the leader of that agency will not question him. That’s a problem even when the policy direction could benefit borrowers,” Frayer told USA TODAY.
Buying mortgage bonds to avert housing crisis
Housing finance experts note that buying mortgage bonds has been a means of stabilizing the housing market in the past, but by the Federal Reserve, not Fannie and Freddie. Furthermore, that step was taken during periods of extreme crisis, like the aftermath of the 2008 financial meltdown and the COVID-19 lockdown.
The central bank’s enormous balance sheet allowed it to buy much more than what the president is suggesting. An analysis from Redfin shows that the Fed bought $2.5 trillion in mortgage bonds between 2020 and 2022, for example.
“It is unclear what policy problem within the FHFA’s remit President Trump is trying to solve,” said Peter Conti-Brown, a professor of financial regulation at the University of Pennsylvania's Wharton School, in emailed remarks to USA TODAY.
“If the answer is that interest rates are simply too high, then we should all be alarmed: If successful, this effort would dramatically undermine the independence of the Federal Reserve to govern monetary policy through interest rates, its primary mechanism.”
Ultimately, most housing-watchers say the biggest reason homes are unaffordable is a lack of supply, not financing costs. At 6.16% in the most recent week, the 30-year-fixed rate is down from recent highs and also well below its long-time average of about 7.70%.
More: Why is housing so expensive? There simply aren't enough homes.
“The pandemic housing boom is over and we're back to a very low level of new housing construction, which means that this housing supply shortage is probably going to keep getting worse,” said Daryl Fairweather, Redfin’s chief economist. “I think that is really what I would want to see the administration talking about: how are we going to get more supply of housing in the places people most want to live.”
For Basil, of Better Markets, “What should be done is the hard work of foundational policies to underpin the housing market. This kind of quick fix doesn’t help. It only increases moral hazard and puts (Fannie and Freddie) in a more precarious position.”
And Frayer thinks it’s ironic that a president preparing to release Fannie and Freddie to the private sector first wants to tap their balance sheets to score a political win.
“I think the market will see this as the administration panicking,” he said.
This article originally appeared on USA TODAY: Trump nudges Fannie, Freddie to buy mortgage bonds, puzzling experts
Source: “AOL Money”
