Trump housing finance chief OKs more mortgage spending and adds risk for government-backed lenders

The Trump administration has significantly expanded the bond purchasing authority of government-backed mortgage lenders, potentially introducing new financial risks, according to documents obtained by The Associated Press.

Federal Housing Finance Agency (FHFA) Director Bill Pulte quietly authorized Fannie Mae and Freddie Mac to each hold up to $225 billion in mortgage bonds, nearly tripling their previous limits of $40 billion apiece. This dramatic increase, communicated in a January 12 email to top officials at both institutions, effectively adds $170 billion in potential purchasing power beyond President Trump’s recently announced $200 billion mortgage bond initiative.

The move represents a striking departure from nearly two decades of bipartisan consensus on limiting the mortgage giants’ portfolios after taxpayers bailed them out during the 2008-2009 financial crisis. Since that bailout, which placed both entities into government conservatorship, federal authorities had methodically reduced their allowed mortgage bond holdings to as low as $25 billion each earlier this year.

After the AP published its findings, Pulte posted on social media platform X, calling the report “fake news” and claiming FHFA “simply gave each entity legal flexibility” while maintaining they would not “exceed $200 billion.” The agency later issued a statement asserting that “Fannie and Freddie will not be allowed to go beyond the president’s buy.”

However, the FHFA email obtained by the AP did not explicitly limit the companies to Trump’s announced $200 billion figure. Instead, it instructed them to increase bond investments to “exert meaningful downward pressure” on rates and noted they could commence purchases without prior FHFA approval.

Critics, including Senator Elizabeth Warren (D-Massachusetts), have expressed alarm at the policy shift. “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 Warren, the top Democrat on the Senate’s banking committee.

The episode highlights Pulte’s controversial tenure at FHFA. Since his appointment, Pulte has taken the unusual step of naming himself chair of both Fannie Mae and Freddie Mac while cultivating a high political profile. According to Bloomberg News, he reportedly pushed for criminal investigations of Federal Reserve Chair Jerome Powell, a move that drew criticism from prominent Republicans.

Pulte has also overseen the firing of executives at both mortgage companies and ethics officials at Fannie Mae who were investigating him and his allies. He successfully persuaded Trump to endorse controversial housing policies, including a widely criticized proposal for 50-year mortgages that would dramatically increase the lifetime cost of home loans.

Fannie Mae and Freddie Mac play crucial roles in America’s housing market. Created during the New Deal era and expanded in 1970, these institutions purchase the majority of mortgages issued to homeowners, package them as bonds, and sell them to investors. While they exist as private companies, their government charters enable them to borrow at lower costs, and their financial products are broadly perceived as federally guaranteed.

Financial experts have expressed concern about reversing the post-crisis limits. “It does raise the question of whether we’re letting the genie back out of the bottle. That wouldn’t be so worrisome if the genie hadn’t done so much damage the last time around,” said Jim Parrott, a former Obama administration housing policy advisor.

Edward Pinto, a former Fannie Mae executive now at the American Enterprise Institute, characterized Trump’s mortgage bond initiative as a “sugar high” with only fleeting effects. He noted that while mortgage rates briefly dropped following Trump’s announcement, they later increased after unrelated presidential comments about Greenland.

The expanded purchasing authority comes as mortgage interest rates have become a political liability for Trump ahead of November’s midterm elections, where Republican control of Congress hangs in the balance. However, many economists have criticized the administration’s approach as unlikely to significantly impact the massive $13 trillion U.S. mortgage market.

Neither the White House nor the mortgage companies responded to requests for comment. The Treasury Department issued a statement describing Pulte as “collaborative and transparent” but did not address the bond purchases directly.