Trump is interested in purchasing mortgage-backed securities. Experts are left wondering why.

Trump's Proposal for Fannie Mae and Freddie Mac Sparks Debate

President Donald Trump recently suggested that Fannie Mae and Freddie Mac purchase mortgage-backed securities to reduce borrowing costs for homebuyers. However, many experts argue that this move is unlikely to make homeownership more accessible for most Americans and could even destabilize financial markets.

On January 8, Trump announced on Truth Social that he had instructed his team to acquire "$200 BILLION DOLLARS IN MORTGAGE BONDS," apparently referencing Fannie and Freddie. Bill Pulte, a Trump appointee who leads the agency overseeing these entities, responded by saying he was “on it!”

This was the second instance in a week where Trump hinted at government intervention in the housing sector, which has long struggled with a shortage of new homes, making prices out of reach for many. Just a day earlier, he proposed barring institutional investors from purchasing single-family residences.

“The administration has lost control of the financial market narrative,” commented Phillip Basil, director of economic growth and financial stability at Better Markets. “If the goal is to lower rates, the Treasury market should be the focus, as it underpins everything. The current approach is counterproductive.”

Understanding Fannie Mae and Freddie Mac's Role

Fannie Mae and Freddie Mac are central to the mortgage industry, though their function is often misunderstood. They buy home loans from lenders, enabling those lenders to issue more credit. These loans are then bundled into securities, spreading out the risk.

Institutional investors, such as pension funds and insurance companies, purchase these securities for their reliable returns. This process keeps the $13.5 trillion mortgage market active, according to a recent Urban Institute report. It also allows qualified borrowers to secure long-term home loans with the option to refinance at any time.

Mortgage rates typically move in tandem with the 10-year U.S. Treasury yield, partly because the average mortgage lasts about 6.3 years, as reported by ICE Mortgage Technology in 2025.

High Treasury yields are partly a result of the federal government's significant deficit, which was worsened by Trump’s 2025 tax and spending legislation.

“Rising debt and deficits push interest rates higher,” explained the Yale Budget Lab when the bill became law. “By 2054, the 10-year Treasury yield is projected to be 1.4 percentage points above where it would have been without the bill.”

Concerns About Political Influence and Market Stability

Corey Frayer, director of investor protection at the Consumer Federation of America, warned that investors may avoid markets where political leaders exert excessive influence.

“It’s troubling that Trump believes he can direct an independent agency without challenge, even if the policy might help borrowers,” Frayer told USA TODAY.

Can Buying Mortgage Bonds Prevent a Housing Crisis?

While purchasing mortgage-backed securities has previously helped stabilize the housing market, it was the Federal Reserve—not Fannie Mae or Freddie Mac—that took such action, and only during major crises like the 2008 financial collapse and the COVID-19 pandemic.

The Federal Reserve’s vast resources allowed it to buy far more than what Trump is proposing. For example, the Fed acquired $2.5 trillion in mortgage bonds from 2020 to 2022.

Peter Conti-Brown, a financial regulation professor at the University of Pennsylvania’s Wharton School, questioned the rationale behind Trump’s proposal, noting that if the aim is simply to lower interest rates, it could undermine the Federal Reserve’s independence in setting monetary policy.

Supply Shortages Remain the Core Issue

Most housing analysts agree that the main factor driving up home prices is a lack of available properties, not high borrowing costs. The current 30-year fixed mortgage rate, at 6.16%, is below its historical average of about 7.7%.

Further Reading: Why is housing so expensive? There simply aren't enough homes.

“The surge in homebuilding during the pandemic has ended, and new construction is now at very low levels,” said Daryl Fairweather, chief economist at Redfin. “This ongoing shortage is likely to worsen, and the real focus should be on increasing housing supply where demand is highest.”

Basil from Better Markets added, “What’s needed are comprehensive, foundational policies to support the housing market. Quick fixes like this only heighten risk and put Fannie and Freddie in a more vulnerable position.”

Frayer also pointed out the irony of a president who plans to privatize Fannie and Freddie now seeking to use their resources for political gain.

“The market will likely interpret this as a sign of panic from the administration,” he said.

Originally published by USA TODAY: Trump nudges Fannie, Freddie to buy mortgage bonds, puzzling experts