Trump Orders $200 Billion Mortgage Bond Purchase

President Donald Trump announced on Thursday that he has ordered his representatives to purchase $200 billion worth of mortgage bonds. The move, shared in a Truth Social post, aims to drive down mortgage rates and monthly payments, making homeownership more affordable for Americans.

Trump stated that Fannie Mae and Freddie Mac, two government-owned mortgage giants, are currently valued at an “absolute fortune” and have enough funds to carry out the purchase. “Because I chose not to sell Fannie Mae and Freddie Mac in my First Term… it is now worth many times that amount — AN ABSOLUTE FORTUNE — and has $200 BILLION DOLLARS IN CASH,” Trump wrote in his post. “I am instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS.”

How the $200 Billion Mortgage Bond Purchase Works

Typically, the Federal Reserve has been the largest buyer of mortgage-backed securities, including mortgage bonds. During the pandemic, the Fed bought hundreds of billions of dollars worth of these securities, which helped to drive down mortgage rates to historically low levels. Traditionally, when more mortgage bonds are purchased, it lowers interest rates on mortgages, making homeownership more affordable.

However, it’s not always a guaranteed outcome. Even though the Fed has lowered its benchmark interest rate multiple times, mortgage rates have remained elevated. This is in part due to the fact that many Americans who locked in low mortgage rates during the pandemic have not been moving, contributing to the ongoing shortage in housing inventory.

Challenges in the U.S. Housing Market

The U.S. is currently facing a significant shortage of homes. Goldman Sachs Research estimates that the country is short by around 4 million homes to meet the demand and bring housing prices back to affordable levels. Home inventory and sales have remained near their lowest point since the housing crisis in 2010, with the exception of the spring of 2020.

Trump’s order aims to address these challenges by lowering the cost of homeownership through more affordable mortgage rates. However, it remains unclear whether Trump can authorize this initiative without congressional backing.

Trump’s Plan for Fannie Mae and Freddie Mac

Trump has been contemplating an IPO for Fannie Mae and Freddie Mac for years. In his first term, Trump and his economic advisors discussed the possibility of selling stocks in these entities. CNN reported in August that the Trump administration is still planning to move forward with this sale.

Bill Pulte, director of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, quickly responded to Trump’s post, confirming that the agency would take charge of the initiative. “We are on it, Mr. President!” Pulte wrote on X shortly after Trump’s Truth Social announcement.