Housing market affordability is so strained that Trump directs Fannie and Freddie to buy $200B mortgage bonds

Key Takeaways:

• Trump directs Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds.
• The plan aims to lower mortgage rates by boosting demand for mortgage-backed securities.
• The “mortgage spread” reached peak levels in 2023 but has since begun to compress.
• GSEs were once major buyers of MBS but reduced their holdings during conservatorship.
• Uncertainty remains on the ultimate effect of this large-scale bond purchase.

The Directive and Its Rationale

On Thursday, President Donald Trump announced that Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) in conservatorship, will buy an additional $200 billion in mortgage bonds. “Because of this, I am instructing my representatives to buy $200 billion in mortgage bonds,” he wrote. “This will drive mortgage rates down, monthly payments down, and make the cost of owning a home more affordable.”

Trump’s proposal comes amid mounting challenges in home affordability. The administration hopes that by leveraging GSEs to act as buyers in the mortgage-backed securities (MBS) market, it can mitigate recent rate increases and ease the monthly cost of homeownership.

How Bonds Influence Mortgage Rates

Long-term yields such as the 10-year Treasury yield and the 30-year fixed mortgage rate are influenced by the overall demand for bonds. When investors buy more bonds, prices rise and yields typically decline. Mortgage rates often drop in tandem with falling yields.
Recent mortgage rate trends partially reflect the Federal Reserve’s move from quantitative easing—when it was actively purchasing MBS—to quantitative tightening, which removed a major buyer from the market. The absence of the Fed’s purchases has contributed to higher mortgage rates.

Past Roles of GSEs and the Fed

Before the Great Financial Crisis, Fannie Mae and Freddie Mac played a key role as the mortgage market’s “buyers of last resort,” purchasing MBS to keep spreads in check. Following the crisis and the imposition of conservatorship, their capacity to buy and hold these securities was curtailed.
In that vacuum, the Federal Reserve stepped in. Through major rounds of quantitative easing, the Fed bought substantial volumes of MBS, helping stabilize the housing market in 2009 and again in 2020 at the onset of the pandemic. When the Fed stopped these purchases and shifted to quantitative tightening in 2022, a significant measure of market support faded away.

The Potential Impact

With Trump’s announcement, analysts are watching closely to see how an additional $200 billion in GSE-retained mortgage bonds could compress the “mortgage spread.” This spread, the difference between the 10-year Treasury yield and average 30-year fixed mortgage rate, reached 2.96 percentage points at its peak in June 2023—significantly above the historical average of 1.76 points. Over the past two years, the spread has slowly compressed to 2.05 points in December 2025.
According to John Burns Research and Consulting, if Fannie Mae and Freddie Mac move forward with the $200 billion purchase, the GSEs will be close to their joint limit of $450 billion for retained mortgage holdings. As of the end of June 2025, the GSEs hold only $0.06 trillion in agency MBS out of a total $9.26 trillion market, suggesting that a $200 billion boost could shift dynamics significantly—though the exact degree of impact remains unclear.

Looking Ahead

Market observers from Bloomberg to industry research firms are focused on how effectively the GSEs can stabilize the mortgage market in the absence of the Federal Reserve’s aggressive bond-buying strategies. While some immediate pricing movement in MBS has been observed, longer-term outcomes for mortgage rates and affordability will hinge on broader investor participation and economic conditions.
If successful, Trump’s directive could bring renewed affordability to prospective homebuyers and reestablish the GSEs as a stabilizing force in U.S. housing finance—an echo of their role prior to the Great Financial Crisis. Yet questions remain about the sustainability of this approach, especially as the GSEs near their legal holdings cap.