An email obtained by The Associated Press, sent by the Federal Housing Finance Agency to key officials at Fannie Mae and Freddie Mac, removed limits that prevented the lenders from holding more than $40 billion in mortgage bonds each. The email dated January 12 specifies that “effective immediately,” the revised limit for mortgage bonds they can hold in their portfolios has been increased to $225 billion each.
If the mortgage buyers were to fully utilize this new authority, it would represent approximately a $170 billion rise in bond purchases beyond what the president instructed them to acquire. Neither Pulte nor the FHFA responded to inquiries regarding whether Trump or Treasury Secretary Scott Bessent were consulted before this increase was implemented.
These alterations to the purchasing regulations effectively overturn nearly two decades of bipartisan agreement that imposed restrictions following the government bailout of Fannie Mae and Freddie Mac after the financial crisis of 2008-09, which resulted in both being placed into government conservatorship.
Before this report was published, Pulte responded on X, denouncing it as “fake news.” “FHFA simply provided each entity with legal flexibility to exceed their former caps,” Pulte wrote on Friday, asserting that even with the lenders’ new bond purchasing authority, they would not “surpass $200 billion.”
Requests for comments from the White House, the Treasury Department, Fannie Mae, and Freddie Mac went unanswered.
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Some members of Congress who were involved in the repercussions from the financial crisis have expressed concerns regarding Pulte and the Republican administration’s new strategy. They contend that any advantages from the mortgage bond purchase will be temporary unless the tight housing supply is enhanced. They argue that without this increase, any reduction in interest rates will merely elevate home prices as sellers adjust to the borrowing cost decreases by raising their asking prices.
“This is just a diversion for Trump and Bill Pulte to tweet about — it will do little, if anything, to lower mortgage interest rates over the long term and raises questions about heightened risks for Fannie and Freddie,” stated Sen. Elizabeth Warren of Massachusetts, the leading Democrat on the Senate banking committee.
This incident illustrates the latest chapter of Pulte’s turbulent time in a typically low-profile role within the federal bureaucracy.
Pulte, who also appointed himself chair of Fannie Mae and Freddie Mac, has utilized the position to develop his political presence and has led efforts to initiate federal criminal investigations against some of Trump’s primary adversaries.
Pulte is identified as a key proponent behind the administration’s choice to criminally investigate Federal Reserve Chair Jerome Powell, according to Bloomberg News, sparking backlash from notable Republicans in Congress.
Pulte has overseen the dismissal of executives at Fannie Mae and Freddie Mac, along with ethics officials at Fannie Mae who were investigating him and his associates. He has urged Trump to support policy ideas that received significant criticism. In November, Pulte persuaded Trump of the merits of a 50-year mortgage to stimulate home buying and building—a proposal that would substantially inflate the overall cost of a loan.
Fannie Mae was established in 1938 as part of the New Deal to support the mortgage industry. Congress created Freddie Mac in 1970 to further enhance liquidity in the housing market. These institutions purchase the majority of mortgages issued to homeowners, which are then bundled into bonds sold to investors.
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Both entities currently function as private companies but are subject to added regulation because of their government charters and can borrow capital at significantly lower costs. Due to this government affiliation, markets broadly recognize their financial products as federally guaranteed.
However, a conflict exists between the lenders’ public mission and their goal of generating profits, leading to periods of increased risk-taking, reminiscent of the situation before the financial crisis. This risk ultimately resulted in both being placed under government conservatorship.
Consequently, the federal government mandated Fannie Mae and Freddie Mac to reduce their mortgage investment portfolios, which the Treasury capped at $450 billion. The FHFA further restricted the quantity of mortgage bonds they could keep on hand, dropping it as low as $25 billion earlier this year, records indicate.
Pulte is now overseeing a reversal of that trend. Both lenders remain bound by the Treasury’s $450 billion cap. However, with their newly granted limits, they can adjust their portfolios to adopt a significantly bolder—and riskier—approach towards acquiring mortgage bonds.
Pulte initially adopted a cautious strategy. In recent months, the FHFA granted small increases to Fannie Mae and Freddie Mac’s mortgage bond purchasing capabilities, effectively serving as a trial run for Trump’s announcement this month, as per housing market analysts.
With both lenders now empowered to expand their positions, they could leverage this to enhance earnings ahead of a potential initial public offering that would permit investors to acquire substantial stakes in the companies. Nevertheless, neither entity appears to have sufficient cash or liquid assets to undertake a $225 billion purchase, which may necessitate incurring debt, analysts suggest.
Despite Pulte asserting that Fannie Mae and Freddie Mac would not acquire more bonds than Trump mandated, the email from his agency to the lenders did not directly address this concern.
The email instructed the companies to escalate bond investments to “exert meaningful downward pressure” on rates. Both entities were directed to submit purchasing strategies to the FHFA, but the agency also clarified that the “initiation of increases” in purchases did not require prior approval.
These actions underscore how mortgage interest rates have become a political burden for Trump as the midterm elections approach in November, a period that will determine Republicans’ control of Congress.
However, the plan, as outlined by Trump, has already faced criticism from several economists and housing policy experts as fleeting gimmicks, given the massive size of the $13 trillion US mortgage market.
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“It does raise the question of whether we’re allowing the genie back out of the bottle. That wouldn’t be so concerning if the genie hadn’t caused immense damage the last time,” stated Jim Parrott, who served on the National Economic Council during President Barack Obama’s administration and advised him on housing matters.
Edward Pinto, a resident fellow at the conservative-leaning American Enterprise Institute, compared Trump’s initial $200 billion announcement to a “sugar high.”
“It may produce some effects, but they will be short-lived,” noted Pinto, a former executive at Fannie Mae. He pointed out that while Trump’s announcement briefly lowered mortgage rates, they rose again after Trump threatened a takeover of Greenland. “It’s easy for the federal government to err here. They’ve made mistakes in the past,” Pinto remarked.
