Trump directs GSEs to buy $200B in mortgage bonds to lower rates

"Combined holdings at Fannie Mae and Freddie Mac grew at a 77% annualized pace over the six months ending in November 2025, rising by more than $68 billion to approximately $247 billion. There remains room for further expansion. Under the Preferred Stock Purchase Agreement (PSPA), each GSE's retained portfolio is capped at $250 billion, with an additional $225 billion limit imposed by the Federal Housing Finance Agency (FHFA) under a prior director."

"Supporters argue that the GSEs could quickly add demand to the MBS market as the Federal Reserve continues to scale back its presence. The Community Home Lenders of America (CHLA) has recently urged the U.S. Department of the Treasury and the FHFA to allow the GSEs to expand their retained portfolios when the spread between the 10-year Treasury yield and the 30-year mortgage rate exceeds 170 basis points, which would lower mortgage rates by roughly 30 bps."

"But critics caution that larger GSE portfolios could raise conflicts of interest and revive political concerns tied to the enterprises' role in the 2008 financial crisis, when outsized retained portfolios contributed to their collapse. Loan underwriting standards have improved significantly since then. Some industry participants favor alternative approaches to reduce rates, including changes to the loan-level price adjustments (LLPAs) considered recently by FHFA Director Bill Pulte."

Combined Fannie Mae and Freddie Mac retained MBS holdings rose at a 77% annualized pace over six months to about $247 billion, leaving room for further expansion. Each GSE's retained portfolio is capped at $250 billion under the PSPA, with an additional $225 billion limit imposed by the FHFA. Supporters argue expanded GSE purchases could add demand as the Federal Reserve scales back; CHLA recommends expansion when the 10-year Treasury–30-year mortgage spread exceeds 170 basis points, potentially lowering rates about 30 basis points. Critics warn larger portfolios could create conflicts of interest and revive political risks from the 2008 crisis, though underwriting standards have improved. Alternatives include LLPA adjustments considered by FHFA Director Bill Pulte. The average 30-year conforming rate was 6.33%.

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