Pulte increases mortgage bond purchase limits for lenders

Bill Pulte, President Trump’s federal housing finance director, granted government-backed mortgage lenders the authority to hold significantly more bonds than previously permitted, according to an email obtained by The Associated Press. The Jan. 12 email from the Federal Housing Finance Agency eliminated caps that prohibited Fannie Mae and Freddie Mac from each holding more than $40 billion in mortgage bonds, raising the limits to $225 billion apiece. The move reverses nearly two decades of post-2008 financial-crisis safeguards, according to the AP.

The authorization exceeds what Trump initially ordered—a $200 billion bond purchase intended to lower mortgage rates. While Pulte later said the lenders would not exceed that amount, analysts note the decision reverses bipartisan consensus established after the government bailed out both companies during the 2008-09 financial crisis, potentially introducing new risks for the government-backed lenders.

Background: The Bond Purchase Order

The move stems from Trump’s directive earlier this month that Fannie Mae and Freddie Mac purchase $200 billion in mortgage bonds to lower mortgage rates. The January 12 email from the Federal Housing Finance Agency that increased the caps appeared designed to give the lenders room to pursue that goal. Neither Pulte nor the FHFA addressed whether Trump or Treasury Secretary Scott Bessent was consulted before the new caps were established.

Pulte’s Response

Before the AP article was published, Pulte took to X to dispute its characterization. “FHFA simply gave each entity legal flexibility to go beyond their previous caps,” Pulte wrote. He added that despite the lenders’ new authority, they would not exceed $200 billion.

After the story was published, the agency issued a statement saying that “Fannie and Freddie will not be allowed to go beyond the president’s buy.” The White House, Fannie Mae and Freddie Mac did not respond to requests for comment. The Treasury Department said Pulte has been “collaborative and transparent” in working with the department, but the statement did not address the bond purchases.

Reversing Two Decades of Safeguards

The changes effectively reverse nearly two decades of bipartisan consensus that limits should be imposed on the lenders. After the government bailed out Fannie Mae and Freddie Mac during the 2008-09 financial crisis, both were placed into government conservatorships. The federal government forced both lenders to draw down their mortgage investment portfolios, with the Treasury capping the combined total at $450 billion. The FHFA went further, gradually reducing the amount of mortgage bonds each could retain, which had been lowered to $25 billion per company earlier this year.

Now, with the newly granted limits, both lenders can adjust their portfolios to pursue a far more aggressive approach toward buying mortgage bonds, potentially introducing greater risk.

Expert Concerns

Several congressional figures involved in the post-financial-crisis response have raised concerns about the new approach. They say any benefit from mortgage bond purchases will be temporary unless the tight supply of homes can be increased. Without more housing supply, they argue, any decrease in interest rates will only drive up home prices as sellers adapt to lower borrowing costs by raising asking prices.

“This is just a smoke screen 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 increased risks to Fannie and Freddie,” said Sen. Elizabeth Warren of Massachusetts, the top Democrat on the Senate’s banking committee.

Jim Parrott, who served on the National Economic Council during Barack Obama’s presidency, likened Trump’s plan to a “sugar high.” He noted that while Trump’s announcement briefly drove mortgage rates down, they ticked back up after Trump threatened a takeover of Greenland. “It may have an effect, but it will be fleeting,” Parrott said.

Edward Pinto, a resident fellow at the American Enterprise Institute and former Fannie Mae executive, echoed the concern. “It’s easy for the federal government to make a mistake here. They’ve done it in the past,” Pinto said.

Many economists and housing policy experts have criticized the plan as a gimmick, given the $13 trillion size of the U.S. mortgage market.

Pulte’s Expanding Influence

Pulte has used his position as head of the Federal Housing Finance Agency—normally a low-profile post within federal bureaucracy—to reshape the mortgage finance agencies. He appointed himself chair of Fannie Mae and Freddie Mac and has spearheaded efforts to initiate federal criminal investigations of some of Trump’s chief antagonists.

Pulte was identified as a driving force behind the administration’s decision to criminally investigate Federal Reserve Chair Jerome Powell, according to Bloomberg News. He has presided over the firing of executives at Fannie Mae and Freddie Mac, as well as ethics officials at Fannie Mae who were investigating him and his allies. In November, Pulte convinced Trump of the allure of a 50-year mortgage as a way to increase home buying and building—a proposal that would drastically increase the overall price of a loan.