Fannie Mae and Freddie Mac Increase Mortgage-Backed Securities Purchases

Fannie Mae and Freddie Mac have begun increasing their purchases of mortgage-backed securities (MBS) in response to market volatility and a directive from President Trump to enhance housing affordability. This move aims to stabilize a market experiencing widening bond spreads and rising borrowing costs.

Background on Fannie Mae and Freddie Mac

Created by Congress, Fannie Mae and Freddie Mac play a crucial role in the U.S. Housing finance system by providing liquidity, stability, and affordability to the mortgage market. They achieve this by purchasing mortgages from lenders and either holding them in their portfolios or packaging them into MBS . This process allows lenders to free up capital for further lending, ensuring a continuous supply of mortgage money for homebuyers and investors .

Recent Actions and Market Impact

President Trump instructed the companies two months ago to purchase $200 billion in MBS to increase housing affordability. The recent increase in purchases is intended to mitigate the impact of rising mortgage rates, which reached a three-month high due to market pressures . However, the impact may be partially offset by broader market pressures, including geopolitical factors like the US-Iran conflict, which have contributed to higher borrowing costs and increased Treasury yields .

Growth of Retained Portfolios

Fannie and Freddie’s “retained portfolios”—the bonds and loans they hold rather than sell to investors—have been growing. As of January 2026, these portfolios reached $278 billion, a significant increase from $158 billion in late 2022, but still below the $1.5 trillion held before being placed under federal conservatorship in 2008 .

Mortgage-Backed Securities Explained

MBS are securities secured by a beneficial ownership interest in either a single mortgage loan or a pool of mortgage loans secured by residential properties. Fannie Mae guarantees the timely payment of principal and interest on these underlying mortgages . These securities are consistently rated “Triple A” (AAA), the highest quality rating . Fannie Mae securitizes and purchases primarily conventional, fixed-rate, or adjustable-rate, first-lien mortgage loans, as well as loans insured by the Federal Housing Administration (FHA), guaranteed by the U.S. Department of Veterans Affairs (VA), and those guaranteed by the Rural Development Housing and Community Facilities Program of the U.S. Department of Agriculture .

Key Takeaways

• Fannie Mae and Freddie Mac are increasing their purchases of MBS to stabilize the mortgage market.
• The move is partly in response to a directive from President Trump to improve housing affordability.
• Geopolitical factors and broader market pressures continue to influence borrowing costs.
• The companies’ retained portfolios have grown significantly in recent years.