WASHINGTON— President Trump’s housing finance director quietly gave Fannie Mae and Freddie Mac the authority to sharply increase their purchases of mortgage bonds beyond what Trump publicly ordered, a move critics say could raise new risks for the government-backed companies, according to a new report.
An email obtained by The Associated Press shows the Federal Housing Finance Agency informed senior officials at the two mortgage giants on Jan. 12 that longstanding caps limiting each company to $40 billion in mortgage bond holdings were eliminated. The message said that, “effective immediately,” Fannie Mae and Freddie Mac could each hold up to $225 billion in such bonds, the AP reported.
According to the report, if fully used the expanded authority would allow roughly $170 billion more in bond purchases than the $200 billion total Trump directed the firms to buy in an effort to push down mortgage rates. The AP said neither FHFA Director Bill Pulte nor the agency said whether Trump or Treasury Secretary Scott Bessent was consulted before the limits were lifted.
Reversal of Policy
The change reverses years of bipartisan policy aimed at restricting risk at Fannie Mae and Freddie Mac following their 2008 government bailout and placement into conservatorship.
Before publication of this story, Pulte dismissed the report on social media as “fake news,” saying the agency merely provided “legal flexibility” and that the companies would not exceed $200 billion in purchases, the AP said. The White House, Treasury Department, Fannie Mae and Freddie Mac did not respond to requests for comment from the Associated Press.
Lasting Relief?
Democrats and some housing policy experts questioned whether the strategy would provide lasting relief. Sen. Elizabeth Warren of Massachusetts, the top Democrat on the Senate Banking Committee, said any rate impact would be temporary unless housing supply increases.
“This will do little, if anything, to lower mortgage interest rates over the long term and raises questions about increased risks to Fannie and Freddie,” Warren said in a statement.
Latest Flashpoint
The AP noted Pulte’s move is the latest flashpoint in a turbulent tenure at the FHFA, a typically low-profile post. He has also named himself chair of both companies and overseen firings of executives and ethics officials. Critics say his actions have politicized the agency.
Fannie Mae and Freddie Mac, which buy most U.S. mortgages and package them into bonds, remain subject to a $450 billion Treasury cap on their combined portfolios, the AP stated, but it added that analysts say the new limits allow for a far more aggressive approach that could boost earnings ahead of a potential public offering, possibly requiring the firms to take on additional debt.
