Housing Finance Gets a Shake-Up: What's the Real Deal?

The housing finance landscape is experiencing a significant shift. Bill Pulte, the leader of the Federal Housing Finance Agency (FHFA), has given Fannie Mae and Freddie Mac the go-ahead to acquire a much larger amount of mortgage bonds. This decision could have far-reaching effects on the housing market. In a January 12th email, Pulte removed the previous restrictions. Originally, each company was capped at holding $40 billion in mortgage bonds. Now, they can hold up to $225 billion each. However, Pulte clarified that the actual spending will not exceed the $200 billion limit set by President Trump. This move contradicts the agreements made after the 2008 financial crisis, which led to the bailout of Fannie and Freddie and the implementation of limits to avoid future crises. Critics are concerned that this could increase risk in the housing market.Pulte has dismissed reports about this change as "fake news, " stating that the new rules provide more flexibility but do not allow for increased spending beyond Trump's limit. The FHFA has supported this statement. However, not everyone is on board. Some lawmakers who dealt with the aftermath of the 2008 crisis are skeptical. They argue that even if mortgage rates decrease, the lack of available homes could negate any benefits. They view this move as a political gesture rather than a meaningful solution. Pulte's tenure at the FHFA has been marked by controversy. He has made significant changes, such as dismissing executives and promoting a 50-year mortgage plan, which has been widely criticized. Additionally, he has been involved in contentious investigations, including one targeting Federal Reserve Chair Jerome Powell. Fannie Mae and Freddie Mac are pivotal players in the housing market. They purchase most mortgages and convert them into bonds for investors. Their government-backed status makes these bonds highly secure.