Fannie Mae and Freddie Mac have been quietly stockpiling billions in mortgage-backed securities in recent months, growing their combined retained portfolio by 31 percent from May to October, according to the latest figures shared by Fannie Mae.
That means that their combined mortgage holdings have risen to a whopping $233.6 billion, the highest in four years.
Experts told Bloomberg, which first reported the move, that the increase suggests Fannie Mae and Freddie Mac may be trying to lower borrowing costs and improve their profitability ahead of a potential public offering which President Donald Trump has been pushing for.
Why It Matters
Stubbornly high borrowing costs have been a thorn in Trump’s side this year, with the president repeatedly lashing out at the Federal Reserve for not cutting interest rates as early or as much as he would have liked.
Not only could Fannie Mae and Freddie Mac’s stockpiling of billions in mortgages have the effect of bringing rates down, offering some relief to American homebuyers, but it would also check another one of Trump’s boxes: making the two housing-finance giants more appealing to potential investors.
Trump said earlier this year that he was giving “very serious consideration” to taking Fannie and Freddie public more than 15 years after they went under government control to stabilize the U.S. economy in the wake of the 2008 crisis.
What To Know
Fannie Mae and Freddie Mac play a massive role in the U.S. housing market, buying residential mortgages on the secondary market and either holding on to them or, more often than not, bundling them and selling them as mortgage-backed securities to investors.
Their retained portfolios comprise the portion of bonds and loans they hold on to. The two companies have not explained why they have increased their portfolios so much in recent months, fueling speculation.
Newsweek contacted Fannie Mae and Freddie Mac by email on Tuesday for comment.
One possibility is that they are trying to lower mortgage rates, one of the goals of the Trump administration to improve affordability in the housing market.
By holding onto mortgages instead of selling them, Fannie and Freddie are limiting the availability of mortgage-backed securities that investors can purchase and make them more valuable on the open market and eventually incentivize lenders to lower their rates.
The president has encouraged the two housing-finance giants to intervene to alleviate the affordability crisis this year, writing on Truth Social in October: “I’m asking Fannie Mae and Freddie Mac to get Big Homebuilders going and, by so doing, help restore the American Dream!”
Despite Trump’s promise to lower the cost of homeownership and the cost of living for Americans, mortgage rates have remained stubbornly high this year. As of the week ending on December 11, the average 30-year, fixed-rate mortgage was 6.22 percent, according to Freddie Mac, down from 6.6 percent a year earlier.
The accumulation of mortgage-backed securities could also be in preparation for taking the two companies public. However, the Trump administration has given no indication of when exactly this might happen.
What People Are Saying
Realtor.com senior economist Joel Berner said in a recent report: “Fannie and Freddie adding to their balance sheets basically represents a boost in demand for mortgage-backed securities.
“This would shift up the price and down the yield on the going market value for home loans, and that depressed yield would equate to lower mortgage rates.”
Vitaliy Liberman, a portfolio manager at DoubleLine Capital, told Bloomberg: “If you want to lower mortgage rates, one of the most direct ways to do so is simply directing the GSEs [Government-Sponsored Enterprises] to purchase more mortgage bonds. This administration is looking at everything.”
President Donald Trump wrote on Truth Social in October: “Before I became President, ‘OPEC’ kept oil prices high. It wasn’t right for them to do that but, in a different form, is being done again—This time by the Big Homebuilders of our Nation.
“They’re my friends, and they’re very important to the SUCCESS of our Country, but now, they can get Financing, and they have to start building Homes. They’re sitting on 2 Million empty lots, A RECORD. I’m asking Fannie Mae and Freddie Mac to get Big Homebuilders going and, by so doing, help restore the American Dream!”
What Happens Next
Not only have the two mortgage giants increased their combined retained portfolios, but analysts told Bloomberg that they may continue adding as much as $100 billion more next year.