Trump instructs Fannie Mae to purchase $200 billion in mortgage-backed securities, bypassing the Federal Reserve's manual QE?

President Trump intervened in the mortgage market through executive action by instructing government-supported mortgage agencies Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities (MBS), which was seen by the market as a bypass of the Federal Reserve’s “manual” quantitative easing (QE). This move, on one hand, affected mortgage rates and housing affordability, and on the other hand, raised concerns about accelerating inflation.

Bypassing the Fed to Stimulate the Economy: Trump Orders GSE to Expand MBS Holdings

Yesterday, Trump posted on the social platform Truth Social that he would instruct government-sponsored enterprises (GSE) to buy $200 billion in mortgage-backed securities, aiming to lower mortgage rates and reduce the housing and repayment burdens on American families.

Some market observers described this approach as “Presidential QE,” because its effects are similar to the Fed’s previous practice of easing financial conditions by purchasing MBS. However, this time, the decision-making authority comes from the White House rather than the Federal Reserve.

According to Trump and the Federal Housing Finance Agency (FHFA), the plan will be executed by Fannie Mae and Freddie Mac. The key to enabling this plan is that during their first term, these two mortgage agencies did not sell off their holdings, allowing them to accumulate substantial cash reserves:

“This is one of many steps I am taking to restore housing affordability, something the Biden administration has completely destroyed.”

(Trump Administration Implements 50-Year Mortgages: Helping Young People Afford Homes or Promoting “Debt for Future Generations”?)

Who Will Implement It? Fannie Mae and Freddie Mac as Policy Tools

The Wall Street Journal (WSJ) reporter Nick Timiraos pointed out that under current agreements with the U.S. Treasury, each of the two agencies can hold up to $225 billion in mortgage-related investments.

As of November 2025, both companies have used about $124 billion of their respective limits, leaving roughly $100 billion of operational capacity each, making Trump’s proposed $200 billion plan feasible.

Mortgage Agency Asset Expansion Sparks Market Speculation

In fact, the actions of government mortgage agencies have been foreshadowed for some time. Over the past few months, Fannie Mae and Freddie Mac have significantly expanded their “retained portfolios,” meaning they are holding more mortgages and MBS themselves rather than selling them to the market.

According to public data, this investment scale has grown by over 36% in six months. Besides lowering lending rates and improving profitability, some speculate that this may also be related to potential future public listings.

(Is Trump Considering Privatizing Fannie Mae and Freddie Mac for IPO? Investment Opportunity or Hidden Risk of Rising Mortgage Rates?)

Lowering Mortgage Rates but Increasing Inflation? Diverging Interpretations of Policy Effects

Market opinions on this measure are divided. Renowned economist Peter Schiff pointed out that if mortgage agencies shift large amounts of funds toward buying MBS, the funds available for purchasing U.S. Treasuries will decrease, potentially pushing up bond yields and intensifying inflationary pressures.

Additionally, the White House is also considering allowing the public to use retirement or education savings as down payments, which has raised concerns that this could further stimulate demand, push up home prices, and undermine the policy’s original intent.

For years, housing affordability has become a politicized economic issue. Trump’s use of executive authority to mobilize government mortgage agency assets injected liquidity into the housing market, but the ultimate effects remain to be seen over time.

This article, “Trump instructs Fannie Mae to buy $200 billion in mortgage bonds, bypassing the Fed’s manual QE,” first appeared on Chain News ABMedia.