Federal housing officials have quietly approved a major expansion in how much mortgage debt Fannie Mae and Freddie Mac can hold, adding new risk to the government-backed lenders while raising fresh questions about how effective the move will be in lowering mortgage rates.
According to a report from the Associated Press, Federal Housing Finance Agency Director Bill Pulte authorized the two mortgage giants to significantly increase their holdings of mortgage-backed securities following President Donald Trump’s push to reduce borrowing costs.
Bond Purchase Limits Quietly Raised
An internal email sent by the Federal Housing Finance Agency to executives at Fannie Mae and Freddie Mac stated that, effective immediately, each company could hold up to $225 billion in mortgage bonds. This removed prior caps that limited each firm to roughly $40 billion.
If fully used, the expanded authority would allow the two companies to purchase as much as $170 billion more in mortgage bonds than originally outlined in the president’s $200 billion buying plan.
Neither the FHFA nor the White House confirmed whether President Trump or Treasury Secretary Scott Bessent approved the increase before it was implemented.
Concerns Over Risk and Oversight
The decision marks a sharp reversal from nearly two decades of policy aimed at limiting risk at Fannie and Freddie following their collapse during the 2008 financial crisis. Both firms were placed into federal conservatorship after suffering massive losses tied to mortgage investments.
Before publication of the AP report, Pulte criticized the story on social media, calling it “fake news,” and said the agency was only providing “flexibility,” not committing to exceed the original $200 billion target.
Lawmakers involved in housing and financial oversight were less reassured. Some warned that the expanded bond buying could expose taxpayers to new risks without addressing the core problem in the housing market: a lack of supply.
“This will do little, if anything, to lower mortgage interest rates over the long term,” said Elizabeth Warren, adding that the move raises concerns about growing risk at both companies.
Why Lower Rates May Not Last
Housing experts note that while large bond purchases can push rates down temporarily, the effect often fades if housing supply remains tight. Lower rates without more homes for sale can simply lead to higher prices, offsetting any savings for buyers.
Fannie and Freddie already dominate the mortgage market, buying most loans issued by lenders and packaging them into securities sold to investors. Their close ties to the federal government allow them to borrow cheaply, but that same backing means losses could ultimately fall on taxpayers.
Under conservatorship rules, the Treasury caps their combined investment portfolios at $450 billion. While that limit remains, the new authority allows each company to take on a far more aggressive posture within it.
Looking Ahead
Analysts say the expanded buying power could also be tied to longer-term plans to boost earnings ahead of a possible public offering of Fannie and Freddie shares. However, funding purchases near the new limits would likely require borrowing, increasing leverage at a time when mortgage markets remain sensitive to economic shifts.
For now, the move highlights the growing tension between efforts to lower mortgage rates quickly and the long-term risks of expanding government exposure to the housing market. Whether the strategy delivers lasting relief or creates new problems remains an open question. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.
