The Federal Housing Finance Agency (FHFA) is increasing its purchases of mortgage-backed securities (MBS) to lower borrowing costs. Fannie Mae and Freddie Mac are using their own capital to acquire these bonds, aiming to offset the Federal Reserve's ongoing reduction of its own MBS holdings, which currently total approximately $2 trillion.
President Trump directed the program on January 8, 2026, setting a target of $200 billion in total purchases. An initial tranche of $3 billion was executed on the same day using existing liquidity. The FHFA has authorized each enterprise to hold up to $225 billion in mortgage bonds as of January 2026.
By the end of January 2026, the entities had added $12.5 billion in MBS to their portfolios. This intervention contributed to a decline in mortgage rates to 5.95%, down from levels near 8% in 2024. Analysts estimate the program could reduce 30-year mortgage rates by 10 to 25 basis points.
This strategy marks a shift for the enterprises, which had previously reduced their combined portfolios from a peak of $1.5 trillion to roughly $158 billion by late 2022. The current initiative serves as a replacement for the Federal Reserve, which allows about $15 billion in bonds to roll off its balance sheet monthly.
