The President of the United States Donald Trump stated this Thursday (8) that he ordered “his representatives” in the government to purchase of US$200 billion in mortgage bonds to reduce interest rates and monthly installments, according to a post on its social network Truth Social.
Fannie Mae and Freddie Mac are now worth “an absolute fortune” and have enough cash to finance the directive, he wrote in the post.
“Because I chose not to sell Fannie Mae and Freddie Mac in my first term… they are now worth many times that amount — A TRUE FORTUNE — and have 200 BILLION DOLLARS IN CASH. Therefore, I am instructing my representatives to BUY 200 BILLION DOLLARS IN MORTGAGE SECURITIES,” he wrote.
“This will cause mortgage rates to fall,
Traditionally, the Federal Reserve has been the largest buyer of mortgage-backed securities. During the pandemic, the central bank purchased hundreds of billions of dollars in bonds, which contributed to the extremely low mortgage interest rates that many Americans were able to obtain during these years.
Generally, when the Fed or another entity buys more mortgage-backed securities, i.e. mortgage bonds, it reduces the interest rates charged on mortgages. But this is not always the case, as the US Central Bank does not directly control the rates on these loans.
For example, the Fed cut its benchmark interest rate several times last year and in 2024, which would also traditionally help lower mortgage rates.
However, mortgage rates have remained high in part because Americans who got low mortgage rates during the pandemic aren’t moving.
With the brief exception of spring 2020, since the housing and financial crisis that ended in 2010.
The United States needs about 4 million homes to fill supply shortages and restore home prices to affordable levels across the country, according to Goldman Sachs Research.
Trump has been considering the IPO (going public) of Fannie Mae and Freddie Mac for years, including during his first term. THE CNN International reported in August that Trump and his economic advisers are planning a sale of shares in the two companies.
Trump did not specify who the representatives were, nor when or how the purchases would be made. It’s also unclear whether the Republican can authorize this without congressional support.
Bill Pulte, director of the Federal Housing Finance Agency, which oversees the operations of Fannie Mae and Freddie Mac, said his agency would take over the initiative.
“We’re on it, Mr. President!” Pulte wrote on X shortly after Trump’s Truth Social post.
