President Donald Trump announced Thursday that he is directing the federal government to purchase $200 billion in mortgage bonds, a move he says will help reduce mortgage rates and make homeownership more affordable for Americans.
In his announcement, Trump stated that Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants under federal conservatorship, are 'flush with cash' and will use their combined $200 billion in reserves to execute the bond purchases.
'Because of this, I am instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS. This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable,' Trump wrote.
Federal Housing Finance Authority Director Bill Pulte, who oversees Fannie Mae and Freddie Mac, confirmed on social media that the two government-run companies 'will be executing' the president's request. The announcement caused mortgage-backed securities to rally relative to Treasury bonds.
However, economic experts offered a more measured assessment of the potential impact. Daryl Fairweather, chief economist at real estate brokerage Redfin, estimated the government purchases could shave only 0.25 to 0.5 percentage points off the rate for a 30-year fixed-rate mortgage.
'At a high level I feel this is putting a Band-Aid on a deeper issue and it probably wouldn't lower rates enough to really undo the mortgage rate lock-in effect,' Fairweather said.
Some analysts have raised concerns about the approach. By spending Fannie Mae and Freddie Mac's cash reserves, the government would be depleting the financial buffer designed to protect against economic downturns similar to the 2008 financial crisis. This could leave the mortgage giants more vulnerable if the housing market experiences significant stress.
Mortgage rates have been averaging around 6.2% according to Freddie Mac, a level that has kept many potential homebuyers on the sidelines and existing homeowners reluctant to sell and give up their lower locked-in rates from previous years.
The housing affordability crisis has been a key political issue, with home prices remaining elevated despite higher interest rates that were intended to cool the market.
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