Fannie Mae and Freddie Mac’s Campaign to Lower Mortgage Rates

From May through October 2025, Fannie Mae and Freddie Mac increased their mortgage-backed securities (MBS) holdings by nearly one-third, reaching their highest level of holdings in nearly four years. The move renews the discussion around the future of the government-sponsored entities (GSEs) under the Trump administration.

Why Expansion Matters

Fannie and Freddie play a central role in the U.S. mortgage market, purchasing residential loans from lenders and either holding them or packaging them into mortgage-backed securities for sale to investors. Their retained portfolios represent the mortgages and MBSs they keep on their own balance sheets, rather than distributing into the secondary market.

By increasing their mortgage portfolio, the supply of MBSs available to investors is reduced, and that scarcity increases the value of remaining securities, compresses yields, and can ultimately (and hopefully) lower the interest rates lenders charge borrowers.

Expanding GSE portfolios is one of the most direct ways the government can influence mortgage rates without direct monetary policy intervention.

A Policy Tool Aligned With the Trump Administration

The timing is notable. President Donald Trump has repeatedly criticized the Federal Reserve for not cutting interest rates aggressively enough and has made housing affordability a core economic priority, with proposals for 50-year mortgages, among other considerations. 

The average 30-year fixed mortgage rate is currently 6.22%, as of mid-December.

Prelude to Privatization?

Beyond mortgage rate relief, the strategy may serve a second objective: improving the financial profile of both GSEs ahead of a potential public offering. That said, analysts like Chris Whalen, founder of the Institutional Risk Analyst and Whalen Global Advisors, question the readiness of the enterprises under the tutelage of FHA director Bill Pulte. 

The two GSEs have been in government conservatorship for nearly 15 years, since the 2008 financial crisis.

What to Watch 

Fannie and Freddie could add as much as $100 billion more to their portfolios in 2026, a significant portion of the estimated $1.5 trillion in mortgage loans issued each of the past few years. Keep an eye on the 10-year Treasury, which, despite recent Fed rate cuts, has failed to stabilize below 4%. Fannie and Freddie’s portfolio expansion is likely a large part of the reason why mortgage rates fell this summer, and could continue to do so into the new year.