Bill Pulte, the federal housing finance director under President Trump, has granted government-backed lenders the authority to nearly double their bond purchases, increasing their purchasing limit from $40 billion to $225 billion each for Fannie Mae and Freddie Mac.This change, effective immediately, aims to lower mortgage rates but introduces a new level of risk for these institutions.
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abcnews.go.comwyomingtruth.orgThe decision comes as part of a broader strategy announced by Trump, who had previously directed a $200 billion bond purchase to alleviate rising mortgage costs.However, the recent adjustments could lead to as much as a $170 billion increase in bond purchases beyond what was originally instructed.
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wyomingtruth.orgcnbctv18.comCritics, including some members of Congress who were involved in the 2008 financial crisis, have raised alarms about the potential implications of this policy shift.They argue that unless the tight supply of homes is addressed, any decrease in mortgage rates could merely drive up home prices, as sellers will likely adjust their asking prices to reflect lower borrowing costs.
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abcnews.go.comcnbctv18.com"This is just a smoke screen for Trump and Bill Pulte to tweet about," said Sen.Elizabeth Warren, the top Democrat on the Senate's banking committee.She emphasized that the long-term effects of this policy change are questionable and that it raises significant risks for Fannie Mae and Freddie Mac.
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cnbctv18.comThe changes to the purchasing rules effectively reverse nearly two decades of bipartisan consensus that sought to impose limits on these lenders following the government bailouts during the 2008 financial crisis.At that time, both Fannie Mae and Freddie Mac were placed into government conservatorship due to their financial instability.
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abcnews.go.comPulte, who also appointed himself as chair of both Fannie Mae and Freddie Mac, has been a controversial figure in this role.He has used his position to enhance his political profile and has been involved in various political actions, including efforts to investigate Trump's opponents.
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wyomingtruth.orgDespite Pulte's assurances that the lenders would not exceed the $200 billion initially outlined by Trump, the email from the Federal Housing Finance Agency (FHFA) did not clearly stipulate this restriction.The FHFA stated that the companies were expected to increase their bond investments to exert "meaningful downward pressure" on rates, but the commencement of these increases does not require prior approval from the agency.
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wyomingtruth.orgcnbctv18.comWith mortgage interest rates becoming a political liability for Trump as midterm elections approach, the administration's strategy has drawn criticism from economists and housing policy experts alike.Many view the plan as a gimmick in light of the massive $13 trillion US mortgage market, suggesting that it may provide only temporary relief.
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abcnews.go.com"It does raise the question of whether we're letting the genie back out of the bottle," commented Jim Parrott, who served in the National Economic Council during the Obama administration.He noted that the risks associated with this policy could have detrimental effects, reminiscent of past financial crises.
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cnbctv18.comEdward Pinto, a resident fellow at the American Enterprise Institute, described the initial bond purchase announcement as a "sugar high," suggesting that while it may have a short-term impact, it is unlikely to produce lasting benefits.
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cnbctv18.comAs the situation evolves, the implications of this increased buying authority for Fannie Mae and Freddie Mac remain to be seen.Analysts warn that without sufficient cash or liquid assets, these institutions may need to take on debt to fulfill the new bond purchase limits.
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wyomingtruth.orgIn summary, while the Trump administration aims to stimulate the housing market through aggressive bond purchasing, the long-term ramifications and potential risks associated with this strategy are increasingly coming under scrutiny.
