We're at quite the intersection of political rhetoric, market structure, and stubborn economic reality. The headline catalyst this week came from President Trump, who asserted that Fannie Mae and Freddie Mac are now worth “an absolute fortune” and directed his representatives to pursue $200 billion in mortgage-backed securities (MBS) purchases to push mortgage rates lower. The announcement was light on details and heavy on uncertainty, raising immediate questions about legal authority, congressional involvement, and execution. FHFA Director Bill Pulte quickly signaled alignment with the president’s intent, but markets treated the proposal cautiously, aware that even large-scale MBS buying does not guarantee sustained declines in mortgage rates, particularly in a housing market constrained by supply rather than financing availability.
That same tension between rhetoric and reality was evident in Trump’s call to ban large institutional investors from purchasing single-family homes. While politically resonant, the proposal overlooks the fact that institutional investors own only a small share of the national housing stock and are unlikely to be the primary driver of unaffordability. Analysts and major media outlets were quick to note that such a ban would do little to lower prices in most markets and could further discourage investment and new construction. The deeper issue remains the nation’s estimated four-million-home shortage, compounded by homeowners locked into ultra-low pandemic-era mortgage rates who are unwilling to sell, keeping inventory and transaction volumes near post-financial-crisis lows.
Agency mortgage activity showed signs of normalization rather than resurgence. December MBS issuance landed near historical averages, and full-year 2025 issuance rose modestly from 2024 but remained below pre-QE norms. Loan production reached its highest level since 2022, driven largely by refinancing, while purchase activity stayed subdued. Ginnie Mae continued to gain market share at the expense of Fannie Mae, reflecting tighter conventional credit and persistent affordability pressures. This shift is increasingly important for investors, as it changes the credit, prepayment, and delinquency profile of the Agency MBS universe compared with the QE-era dominance of conventional loans.
Labor market indicators softened, with job openings falling to a one-year low and payroll growth coming in weaker than expected in December (+50k), even as productivity surged and unit labor costs declined. Treasury yields drifted lower on the week, but mortgage-backed securities underperformed, with spreads widening amid choppy trading and mixed demand. Prepayment speeds continued a slow recovery, concentrated in higher-coupon cohorts, while overall refinance incentives remained limited. Beneath the national averages, state-level labor deterioration is becoming increasingly relevant for mortgage investors, particularly in regions that also show elevated Ginnie Mae delinquencies.
The week reinforced a familiar conclusion: housing affordability will not be solved by headline policy gestures alone. Rising homeowners insurance costs, which now consume a meaningful share of monthly payments, are quietly reshaping borrower qualification and migration patterns. At the same time, the industry is revisiting structural questions around liquidity support for independent mortgage banks, the role of the Federal Home Loan Banks, and capital rules that affect credit availability. Markets remain focused on labor trends as the key swing factor for rates in 2026, with expectations centered on gradual Fed easing and a slow normalization of yields. Until supply meaningfully improves, the mortgage market will continue to wrestle with affordability constraints that no amount of political signaling or incremental rate relief can fully overcome.