FHFA Clears Way for Government Lenders to Double Mortgage Bond Purchases
Washington, Saturday, 24 January 2026.
Quietly reversing post-2008 safety protocols, FHFA Director Pulte authorized government lenders to exceed previous caps, potentially adding $170 billion in risk to aggressively suppress mortgage rates.
Unprecedented Expansion of Purchasing Authority
In a decisive break from post-2008 financial safeguards, Federal Housing Finance Agency (FHFA) Director Bill Pulte has quietly authorized government-sponsored enterprises Fannie Mae and Freddie Mac to drastically increase their mortgage bond portfolios. According to internal communications dated January 12, 2026, the FHFA raised the cap on mortgage bond holdings for each entity from $40 billion to $225 billion [1]. This adjustment represents a massive 462.5% increase in the allowable retained portfolio size for each lender, effectively granting them the legal flexibility to purchase significantly more debt than the $200 billion directive previously issued by President Trump [1][3]. While the move is ostensibly designed to lower mortgage rates, it fundamentally reverses nearly two decades of bipartisan consensus established to limit taxpayer risk following the housing market collapse and subsequent government conservatorship of these entities [1][2].
Political Maneuvering Meets Economic Reality
The timing of this authorization appears closely linked to the upcoming November 2026 midterm elections, where mortgage rates have emerged as a significant political liability for the Trump administration [1][2]. By flooding the market with demand for mortgage-backed securities, the administration hopes to suppress interest rates and stimulate housing activity. However, the directive has drawn sharp criticism from lawmakers and economists alike. Senator Elizabeth Warren dismissed the strategy as a “smoke screen,” arguing it will do little to lower rates long-term while raising questions about the increased risk exposure for Fannie and Freddie [1][3]. Despite the FHFA’s assurance that the lenders would not “exceed $200 billion” in actual purchases, the new caps provide the technical capacity for a $170 billion increase beyond the President’s initial order [1][2].
A Pattern of Volatility and ‘Sugar High’ Economics
Economic experts warn that these interventions may offer only fleeting relief, likened by Edward Pinto of the American Enterprise Institute to a “sugar high” [2][3]. Historical data suggests that while such announcements can trigger a temporary dip in rates, external geopolitical factors—such as President Trump’s previous comments regarding Greenland—can quickly reverse these gains [1][3]. Furthermore, this aggressive bond-buying strategy aligns with what observers describe as “shadow” economic strategies employed by “agents of chaos” within the administration, including Pulte himself, who has recently been at the center of conflicts involving the Federal Reserve [5][6]. With the U.S. mortgage market valued at approximately $13 trillion, critics argue that a $200 billion intervention is a “gimmick” that risks reigniting the very financial instability the FHFA was tasked with preventing after the Great Recession [1][2].