Trump orders $200 bn mortgage bond purchase to boost housing affordability

US President Donald Trump says Fannie Mae and Freddie Mac will use $200 billion in cash to buy mortgage bonds, a move he claims will lower mortgage rates and make home ownership more affordable

US President Donald Trump on Thursday (local time) said he has directed his representatives to buy $200 billion worth of mortgage bonds, a move he claimed would help reduce mortgage rates and lower monthly payments at a time when Americans are worried about rising home prices. The announcement was made on his social media platform, Truth Social.

Where will the $200 billion come from?

Trump said the funding for the bond purchases would be drawn from Fannie Mae and Freddie Mac, the two government-backed mortgage firms that remain under federal conservatorship. Trump said the two entities have $200 billion in cash that will be used to buy mortgage bonds. He credited his decision during his first term not to sell Fannie Mae and Freddie Mac, saying it was made against the advice of “experts” and has significantly increased their value.

 

 

“Because I chose not to sell Fannie Mae and Freddie Mac in my First Term, a truly great decision, and against the advice of the ‘experts,’ it is now worth many times that amount — an absolute fortune — and has $200 billion dollars in cash,” Trump wrote. 

How is the plan expected to lower mortgage rates?

Trump said buying large volumes of mortgage bonds would push down mortgage rates, reduce monthly repayments, and make home ownership more affordable. He described the move as part of a wider effort to restore housing affordability in the US, which he said had been eroded in recent years.

 

“This will drive Mortgage Rates down, monthly payments down, and make the cost of owning a home more affordable,” Trump wrote.

 

In a lengthy social media post, Trump also accused former US President Joe Biden of neglecting the housing market while focusing on other issues, including crime, border security, inflation, the Afghanistan withdrawal, and the condition of the US military.

 

Trump said his administration was reversing the damage caused by the previous government and working to bring back what he called the “American Dream”.  ALSO READ | Why Trump has moved US out of India-led International Solar Alliance

What is the housing regulator’s response?

Soon after the announcement, Federal Housing Finance Agency (FHFA) director Bill Pulte said the regulator, which oversees Fannie Mae and Freddie Mac, would take forward the initiative.

 

Posting on X, Pulte urged builders who work with the two mortgage firms covering most of the US construction sector to start expanding their lot supply. He said more details on next steps would follow.

Why are mortgage rates still high in the US?

The US Federal Reserve has traditionally been the largest buyer of mortgage-backed securities. During the Covid-19 pandemic, it purchased hundreds of billions of dollars worth of such assets, helping push mortgage rates to historic lows, CNN reported.

 

While increased purchases of mortgage-backed securities typically reduce mortgage rates, the relationship is indirect, as the Fed does not set home loan rates.  ALSO READ | 500% tariff on India? Trump 'okays' Bill targeting purchase of Russian oil 

Despite several cuts to the Fed’s benchmark interest rate last year and again in 2024, mortgage rates have stayed elevated. One reason is that homeowners who locked in low rates during the pandemic have chosen not to sell, restricting housing supply.

 

According to CNN, home inventory and sales remain close to their weakest levels since the housing and financial crisis that ended in 2010. The US is estimated to be short by around 4 million homes needed to restore affordability.

 

Trump did not specify who would execute the bond purchases, nor did he outline a timeline or operational framework. It also remains uncertain whether the plan can be implemented without approval from the US Congress.