Can Donald Trump’s mortgage bond push lower home loan rates? New Fannie–Freddie limits reignite risk debate

Core Viewpoint - The Federal Housing Finance Agency (FHFA) has lifted portfolio caps for Fannie Mae and Freddie Mac, allowing each to hold up to $225 billion in mortgage bonds, significantly increasing their purchasing capacity and raising concerns about systemic risk in the housing finance system [4][5][8]. Group 1: Policy Changes - The new directive allows Fannie Mae and Freddie Mac to increase bond purchases by approximately $170 billion beyond the previously established $200 billion buying program [4][8]. - This change reverses nearly two decades of bipartisan policy aimed at preventing excessive risk-taking by these entities following the 2008–09 financial crisis [5][8]. Group 2: Market Reactions - Analysts express concerns that the increased flexibility for bond buying could lead to a more aggressive approach, potentially heightening systemic risk in the housing market [5][8]. - Political pressure is mounting to demonstrate progress on mortgage affordability ahead of the US midterm elections, but skepticism remains regarding the effectiveness of bond purchases in sustainably lowering rates without addressing housing supply issues [6][8]. Group 3: Leadership and Scrutiny - Bill Pulte's leadership at FHFA has come under scrutiny due to his high-profile approach, including self-appointment as chair of both Fannie Mae and Freddie Mac and controversial policy proposals [7][8]. - The FHFA's directive allows for bond investment increases without prior agency approval, raising alarms among market observers about potential government missteps [9].