Trump turns to mortgage bonds in fresh drive to ease housing affordability

Core Viewpoint - The U.S. government, through Fannie Mae and Freddie Mac, plans to purchase $200 billion in mortgage-backed securities to lower mortgage rates and improve housing affordability amid rising economic concerns [10][9]. Group 1: Financial Position of Fannie Mae and Freddie Mac - As of the end of September, Fannie Mae and Freddie Mac reported less than $17 billion in cash and cash equivalents, but have access to nearly $100 billion in available funds when considering broader balance sheet assets [10][11]. - Fannie Mae reported approximately $101 billion in combined cash, restricted cash, and securities purchased under agreements to resell in the third quarter, while Freddie Mac held nearly $91 billion in similar assets [2][10]. Group 2: Economic Context and Impact - Housing affordability is a significant political and economic issue in the U.S., with high mortgage rates and elevated home prices deterring many potential buyers [3][10]. - The planned intervention is reminiscent of the Federal Reserve's actions during the pandemic, which involved purchasing large volumes of mortgage-backed securities to stabilize markets [6][11]. - Economists suggest that the $200 billion purchase will have a modest impact on mortgage rates, potentially lowering borrowing costs by approximately 10 to 15 basis points [6][11]. Group 3: Government and Regulatory Actions - The current bond purchases will not involve newly created central bank money, and will be funded entirely through the balance sheets of Fannie Mae and Freddie Mac, without the involvement of the Federal Reserve or U.S. Treasury [8][11]. - The announcement follows President Trump's recent efforts to restrict institutional investors from purchasing single-family homes, indicating a broader strategy to address housing costs [9][10].