President Donald Trump announced a significant federal intervention in the mortgage market, directing the government to purchase $200 billion in mortgage bonds using cash reserves from Fannie Mae and Freddie Mac. The initiative represents Trump's response to persistent voter concerns about housing affordability as Americans continue to face elevated home prices and mortgage costs.

Government Mortgage Bond Purchase Details

Trump stated on social media that the two government-controlled mortgage companies, Fannie Mae and Freddie Mac, possess $200 billion in cash that will fund the bond purchases. Both companies have remained under government conservatorship since 2008 following the housing market collapse during the Great Recession.

"This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable," Trump posted on social media. White House officials have not yet provided specific timelines for implementing the purchase program.

Current Mortgage Market Conditions

The mortgage market faces significant challenges with rates averaging around 6.2% according to Freddie Mac data. Thirty-year mortgage rates have remained above 6% since September 2022, contributing to housing affordability concerns across the country.

The elevated rates have created a "mortgage rate lock-in effect," where homeowners with pandemic-era low rates of 3% or less remain reluctant to sell their properties, reducing market inventory and limiting housing options for potential buyers.

Economic Impact Analysis

Daryl Fairweather, chief economist at Redfin, provided analysis suggesting the government mortgage bond purchases could reduce 30-year fixed mortgage rates by 0.25 to 0.5 percentage points. However, she characterized the approach as "putting a Band-Aid on a deeper issue" that may not sufficiently address underlying market constraints.

"Lowering mortgage rates by maybe a quarter point or half a point maybe, will encourage more demand on the margins, but I don't think it's going to solve the restrictions that exist in the housing market," Fairweather explained. She noted that the purchases would not address the chronic shortage of homes on the market, which continues to make homeownership unaffordable for many Americans.

Federal Reserve Context and Market Background

The Federal Reserve has historically purchased mortgage bonds during economic downturns to help reduce interest rates, enabling many homeowners to refinance at favorable terms. The Fed currently holds approximately $2 trillion worth of mortgage-backed securities on its balance sheet, down from $2.7 trillion in June 2022 as it unwound holdings following pandemic recovery.

According to St. Louis Federal Reserve data, outstanding mortgage debt totaled roughly $21.1 trillion as of mid-last year. Many homeowners capitalized on low interest rates during the pandemic to refinance their mortgages at rates of 3% or lower, contributing to the current inventory shortage as these homeowners avoid selling.

Housing Market Challenges and Risks

The initiative carries potential risks as Trump would utilize cash reserves designed to serve as buffers against economic downturns similar to the Great Recession. This approach could leave Fannie Mae and Freddie Mac more vulnerable to negative housing market developments, representing a calculated bet that such scenarios remain unlikely.

Home prices have consistently outpaced income growth due to persistent construction shortfalls, creating challenges for first-time homebuyers and existing owners seeking to upgrade properties. These affordability issues have persisted across multiple administrations and represent ongoing recovery challenges from the 2008 housing market collapse that triggered the global financial crisis.

President Donald Trump announced a major initiative directing the purchase of $200 billion worth of mortgage bonds, aiming to bring down housing costs for American families. The announcement sent immediate ripples through financial markets, with mortgage bonds rallying and home-lender stocks posting substantial gains in after-hours trading.

Market Response and Stock Performance

The market reaction was swift and pronounced across multiple sectors. Home-lender stocks experienced significant rallies, with several companies posting double-digit gains in after-hours trading.

Risk premiums on mortgage debt narrowed following the announcement as investors increased their purchases of bonds backed by home loans compared to Treasuries. In the Treasury market, the yield on 10-year notes, which serves as a benchmark for mortgage rates, edged lower shortly before market close. The dollar remained relatively unchanged following Trump's social media announcement.

Implementation and Market Scale

Federal Housing Finance Agency Director Bill Pulte responded quickly to Trump's announcement, stating that Fannie Mae and Freddie Mac can execute the purchases "very quickly." The scale of the proposed program represents a significant intervention in the mortgage market, though it constitutes a relatively small portion of the overall market.

The current portfolio holdings of $234 billion represent the largest since 2021, indicating that both agencies have already been increasing their bond purchases in recent months.

Expert Analysis and Market Implications

Priya Misra, a portfolio manager at JPMorgan Investment Management, characterized the announcement as "a bazooka by the administration," noting that mortgage-backed securities (MBS) spreads reacted strongly. However, she emphasized that details remain limited about the program's implementation.

Gennadiy Goldberg, head of US rates strategy at TD Securities, suggested that the increase in Fannie and Freddie portfolio holdings is likely to continue, which should help bring down rates moderately. He noted that while this program could provide some relief, "the biggest driver of mortgage rate downside would be lower Treasury yields."

Not all experts view the initiative favorably. Christopher Maloney, a mortgage strategist at Bok Financial Services Inc., expressed skepticism about the proposal's effectiveness, arguing that while it might succeed in making mortgages cheaper, it could simultaneously drive home prices higher. He emphasized that "the affordability problem comes from the supply side of the ledger."

Recent Market Performance

The mortgage bond market has shown strong performance recently, with demand broadly rising in recent months. This increased demand has pulled spreads on mortgage bonds to around their tightest levels since 2022. US mortgage-backed securities gained 8.6% in 2025 amid strong demand, marking their best performance since 2002 according to Bloomberg index data.

Some investors anticipate that banks may also increase their purchases of mortgage-backed securities, partly because rising deposits have provided them with additional capital to deploy. The additional demand created by the proposed $200 billion purchase program would likely push premiums down further, potentially translating into lower mortgage rates for US households.