Washington—Federal Housing Finance Agency Director Bill Pulte has quietly expanded the buying power of government-backed mortgage giants Fannie Mae and Freddie Mac, authorizing each to hold up to $225 billion in mortgage bonds. The move, detailed in a January 12 email from the FHFA to executives at the two companies, lifts prior caps of $40 billion per entity and builds on President Donald Trump’s recent order for $200 billion in total purchases aimed at curbing elevated lending rates. If fully executed, the authorization could inject up to $170 billion more than Trump’s directive into the $13 trillion U.S. mortgage market, reversing nearly two decades of post-crisis restraints.

The Associated Press first reported the email’s contents, which instruct the companies to ramp up investments to ‘exert meaningful downward pressure’ on rates. Fannie Mae, born from the New Deal in 1938, and Freddie Mac, established in 1970, purchase the bulk of U.S. home loans, bundling them into bonds sold to investors. Their government charters allow cheaper borrowing, but aggressive risk-taking fueled the 2008-09 financial crisis, prompting a taxpayer bailout and conservatorship. Post-crisis, the Treasury Department imposed a $450 billion combined portfolio cap, while FHFA further slashed holdings to as low as $25 billion each earlier in 2026. The Detroit News highlighted how Pulte’s action signals a sharp policy pivot.

While the companies must submit purchase plans to FHFA, they can begin ramping up without prior approval. Pulte, who appointed himself chair of both firms, dismissed early coverage as ‘fake news’ on X, asserting the change provides ‘legal flexibility’ but that purchases won’t exceed $200 billion. Neither the White House, Treasury—led by Secretary Scott Bessent—nor the companies responded to inquiries on coordination with Trump.

Pulte’s Turbulent Reign at FHFA

Pulte’s tenure has been marked by controversy. He has pushed for investigations into Federal Reserve Chair Jerome Powell, drawing Republican backlash as reported by Bloomberg, fired executives and ethics officials at Fannie and Freddie, and championed a widely criticized 50-year mortgage product. Recent months saw incremental bond limit hikes as a ‘test run’ for Trump’s announcement, per housing analysts cited in the Associated Press report republished on Yahoo Finance.

The timing aligns with political pressures ahead of November 2026 midterms, where Republican congressional majorities hang in the balance. Mortgage rates, hovering above 6% despite Federal Reserve cuts, have stifled home sales—December saw a 5% uptick but 2025 marked one of the weakest years in decades, according to Freddie Mac data shared by market watcher Walter Bloomberg on X. Trump’s January order already nudged 30-year rates below 6% for the first time since 2022, with Morgan Stanley noting a 15 basis-point spread tightening, as posted by analyst sebby_d on X.

Bitcoin advocate Lark Davis on X hailed the initial $200 billion buy as bullish for risk assets, dubbing it ‘QE,’ while Ark Invest updates emphasized its role in housing rebound theses. Yet, skeptics warn of fleeting gains without addressing supply shortages.

Echoes of 2008 Crisis Risks

Sen. Elizabeth Warren (D-Mass.), top Democrat on the Senate Banking Committee, lambasted the plan as ‘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,’ quoting ABC News. Congress members scarred by the crisis fallout argue benefits evaporate absent more home construction, potentially inflating prices further.

Jim Parrott, former Obama housing adviser, cautioned, ‘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.’ Edward Pinto, ex-Fannie executive and American Enterprise Institute fellow, termed it a ‘sugar high’ with ‘fleeting’ effects, recalling how rates rebounded after Trump’s Greenland remarks. Both quoted in the original AP article via user shares on X.

The firms lack liquid assets for the full $225 billion without issuing debt, amplifying leverage risks in a market where institutional buyers have crowded out families—though new policies prioritize owner-occupants, per Dr. Joseph Ford Cotto on X.

Market Mechanics and Midterm Stakes

FHFA’s email reverses bipartisan guardrails, enabling ‘far more aggressive—and riskier’ strategies. Trump’s push follows Fed rate cuts that barely dented mortgage spreads; rates hit 6.06%, a three-year low, boosting applications to multi-year highs, as FHFA itself noted in releases. Yet, analysts like Fugitive Caesar on X decry propping up boomers at youth expense, suggesting direct FHA aid instead.

ExxAlerts on X reported rates below 6% post-Trump order, while UncleLuigi echoed Warren’s critique. FHFA’s 2026 conforming loan limits rose to $832,750 baseline, reflecting 3.26% home price gains, with $88 billion multifamily caps each—signaling broader support but not resolving inventory woes.

As midterms loom, Pulte’s gambit tests whether short-term rate relief sways voters or reignites crisis fears. Housing remains a flashpoint, with Trump’s team framing it as affordability wins amid stagnant supply.

Expert Verdict on Long-Term Viability

Without supply boosts, lower rates risk bidding wars, per congressional critics in Arkansas Democrat-Gazette. Pulte’s self-chairmanship and firings underscore a politicized FHFA, diverging from its low-profile norm. Market watchers eye implementation: will Fannie and Freddie hit $200 billion or push limits?

The $13 trillion market’s fate hinges on execution amid Fed policy and economic crosswinds. Initial tests yielded modest rate dips; full rollout could compress spreads further, but Pinto warns of federal missteps’ history. Investors like Cathie Wood see rebound potential, yet Warren’s camp flags taxpayer exposure.

For industry insiders, this marks a high-stakes unwind of conservatorship-era prudence, blending electoral calculus with mortgage mechanics in uncharted territory.