Trump mobilizes two major mortgage agencies to purchase $200 billion in MBS, aiming to suppress mortgage rates through open market acquisitions. However, market skepticism questions the effectiveness and fears it may further drive up home prices.
(Background: Trump signs bill “U.S. withdraws from 66 international organizations,” including the UNFCCC climate framework, challenging ESG regulations)
(Additional context: Trump family’s WLFI applies for a U.S. national trust bank license, intending to issue a stablecoin USD1 (one-year market cap exceeds $3.3 billion))

Table of Contents

• The execution path of a “mini QE” by the administration
• Structural blind spots caused by supply and demand imbalance
• Policy backlash and long-term strategic layout

With only ten months remaining until the 2026 midterm elections, President Trump once again uses administrative measures to influence financial gears. On January 8, he issued a directive via social media, instructing the Federal Housing Finance Agency (FHFA) to mobilize Fannie Mae and Freddie Mac to buy approximately $200 billion in mortgage-backed securities (MBS). This fund is locked into long-term MBS, with the goal of lowering mortgage rates without touching the Federal Reserve (Fed) benchmark interest rate.

The execution path of a “mini QE” by the administration

FHFA Director Bill Pulte explained that the two major government-sponsored enterprises (GSE) hold ample cash reserves, allowing them to immediately step in and purchase securities, then hold these positions in their own investment portfolios. The logic is straightforward: increasing demand for MBS naturally narrows spreads, ultimately reflected in mortgage rates. This approach bypasses the Federal Reserve’s open market operations and is described by the market as “targeted easing.” Compared to traditional quantitative easing, the scale is small, but the focus is highly concentrated.

After the announcement, MBS spreads immediately narrowed, and stocks of lenders like Rocket Companies and LoanDepot rose in tandem. Citibank and several brokerages estimate that $200 billion is only enough to lower the 30-year fixed mortgage rate from 6.16% by 10 to 50 basis points in a MBS pool worth trillions of dollars. Renaissance Macro Research economist Neil Dutta remains cautious about the effect, warning:

“Current spreads are already near bottom; how much more juice can be squeezed out will soon be revealed.”

For the credit market, this capital indeed signals short-term liquidity, but the scale is insufficient to rewrite the long-term debt cost curve.

Structural blind spots caused by supply and demand imbalance

Mortgage rates are just one part of the housing market. In recent years, U.S. housing inventory has been low, and construction costs remain high. The real bottleneck for buyers is supply, not capital. When financing costs are artificially lowered, increased demand may push buyers to chase limited housing, resulting in home prices rising again and offsetting the reduction in monthly payments. In other words, voters may see lower interest rates, but the barrier to homeownership is pushed further away.

Policy backlash and long-term strategic layout

Deeper impacts lie in the changing positioning of the two GSEs. Discussions about Fannie Mae and Freddie Mac returning to private ownership and ending government conservatorship have been postponed again due to this operation. TD Cowen analyst Jaret Seiberg pointed out that these two companies have shifted from “assets for sale” back to tools in the hands of the White House. While current actions may help Trump gain an image of suppressing mortgage costs ahead of the Davos forum, without supply-side support, they will only leave a more distorted price system in the future. Once the election fervor subsides, the market will inevitably face risks of suppressed risk premiums and higher home price benchmarks.

Trump’s $200 billion gamble results in only temporary narrowing of spreads and political gains; the U.S. housing market is once again pushed into a policy testing ground. Until supply constraints are addressed, this administrative “mini QE” may only cause another round of price dislocation.