Fannie Mae and Freddie Mac, under the direction of Federal Housing Finance Agency (FHFA) Director Bill Pulte, have been authorized to substantially increase their holdings of mortgage-backed securities. This decision quietly expanded their capacity to hold mortgage bonds from a previous cap of approximately $40 billion each to $225 billion each, effective immediately. If fully utilized, this new authority could lead to a $170 billion increase in bond purchases over what was initially planned by the President. This move represents a sharp reversal of nearly two decades of policy designed to limit the risk exposure of these government-backed entities, especially after their collapse during the 2008 financial crisis when they were placed into federal conservatorship.

This expansion of bond-buying power raises concerns among lawmakers and housing experts about potential new risks to taxpayers. While large bond purchases can temporarily lower mortgage rates, experts suggest that this effect is often short-lived if housing supply remains tight, potentially leading to higher housing prices without genuinely improving affordability. Senator Elizabeth Warren voiced skepticism, stating that the move would do "little, if anything, to lower mortgage interest rates over the long term" and highlighted the increased risk. Despite the expanded individual limits, the combined investment portfolios of Fannie Mae and Freddie Mac remain subject to a $450 billion cap by the Treasury.

Analysts speculate that the increased buying power could be a strategic move to boost earnings in anticipation of a potential public offering of Fannie and Freddie shares. However, funding purchases at these new, higher limits would likely require both companies to take on additional debt, thereby increasing their leverage during a period when mortgage markets are sensitive to economic shifts. In March, Fannie Mae notably increased its retained portfolio by approximately $18.3 billion, marking its largest monthly addition since 2009, with its overall retained portfolio reaching nearly $168.74 billion, while Freddie Mac's rose to $139.76 billion. The combined $308.5 billion in retained portfolios was a high not seen since early 2021. This increased risk-weighted asset exposure, while potentially building capital for an IPO, also complicates the process according to analysts.