Greg Rutolo | Loan Factory

Greg Rutolo

A new $200 billion mortgage bond buying program was ordered by President Donald Trump. It is designed to nudge mortgage rates lower and briefly improve affordability. Still, it is unlikely to “fix” the housing market on its own because supply remains severely constrained. For lenders, agents, and consumers, this seems like a powerful catalyst for short‑term rates. It does not seem to be a long‑term cure for high prices and low inventory.

What is the $200 Billion Bond Purchase Program?

President Trump has directed his “representatives” to instruct the housing agencies. Fannie Mae and Freddie Mac are to buy about $200 billion in mortgage‑backed securities (MBS). They will use their large cash reserves for this purpose.

The administration’s stated goal is to drive up mortgage bond prices. It aims to push mortgage rates down and show visible action on housing affordability. This is planned ahead of the 2026 midterm elections.

Officials have signaled that the program will work similarly to past quantitative easing efforts. Yet, it will be focused specifically on mortgage bonds rather than a broad mix of Treasuries and MBS.

How Mortgage Bond Buying Can Lower Mortgage Rates

When a large buyer steps into the MBS market, demand rises. Prices typically increase. Yields on those bonds fall. This can translate into lower 30‑year fixed mortgage rates for consumers.

Independent housing economists estimate that a buy of this size will shave roughly 0.25 to 0.50 percentage points off average 30‑year mortgage rates if fully implemented.

Historically, large‑scale MBS purchases by the Federal Reserve pushed rates to record lows. This enabled millions of borrowers to refinance. However, they also contributed to today’s “rate‑lock” problem. Owners cling to ultra‑low loans.

Short‑Term Impact on Housing and Mortgage Origination’s

Average mortgage rates are now hovering in the low‑6% range. Even a modest drop into the high‑5s would meaningfully reduce monthly payments for many buyers on the margin.

A visible rate improvement will pull some sidelined buyers back into the market. It boost buying volume. It also create a mini‑refinance wave among homeowners stuck with the very highest post‑pandemic rates.

Lenders see a shift in their pipelines toward rate-driven opportunities. There is renewed refinance interest. More rate-sensitive first-time buyers will emerge. A pickup in cash-out or home-equity transactions occur as borrowing costs ease slightly.

Why Lower Rates Won’t Fully Fix Affordability

The U.S. still faces a significant housing shortage. Experts emphasize that the core problem is a chronic lack of supply. It is not just about the level of mortgage rates.

This type of intervention is effectively a Band‑Aid on a deeper issue. It will not reduce rates enough to undo the mortgage rate lock‑in effect. This effect keeps would‑be sellers from listing.

If demand increases slightly with lower rates, and supply remains tight, home‑price inflation can be renewed. This inflation quickly erodes much of the payment savings that buyers gain from lower rates.

Key Risks and Policy Questions to Watch

Drawing heavily on Fannie Mae and Freddie Mac’s cash reserves to fund bond purchases will leave them more exposed. They will face increased risks if home prices soften. Their exposure will also grow if credit losses rise in a downturn.

The move is politically timed and outside the Fed’s standard toolkit. Markets are watching closely for legal, regulatory, or congressional pushback. This limit the scale or duration of the program.

Investors and housing professionals will be tracking how this initiative interacts with other promised housing policies. These policies include potential limits on institutional single-family home buying. They also encompass broader affordability reforms.