Analysts are increasingly skeptical that the Trump administration will follow through on plans to recapitalize and release the GSEs. Some seek broader reform.
Since the Iran war started, interest rates have returned to where they were when President Trump directed the GSEs to purchase $200 billion in MBS and most analysts say GSE reform is now off the table.
Fannie Mae and Freddie Mac appear to be using aggressive pricing at the cash window to boost whole loan purchases, then retaining the most attractive coupons.
FHFA quietly increased the cap on the GSEs’ holdings of agency MBS from $40 billion apiece to $225 billion. That’s the same as the cap on their entire retained mortgage portfolios.
Some critics argue that forcing Fannie Mae and Freddie Mac to intervene in the mortgage-backed securities market may indicate their recapitalization and release from conservatorship is now on hold.
The president wants Fannie and Freddie to buy $200 billion in agency MBS to lower interest rates and reduce the cost of buying a home. Initial reaction from MBS analysts was mixed.
Bill Ackman’s plan calls for Treasury to forgive its senior preferred shares, a strategy that some industry observers say would be politically risky for President Trump.
Although FHFA Director Bill Pulte recently put the value of the GSEs at $1 trillion, most estimates are between $300 billion and $600 billion. Meanwhile, Commerce Secretary Howard Lutnick suggested that only a small portion of the GSEs will be sold via a stock offering.