United Wholesale Mortgage on the NYSE, January 22, 2021.
Source: The New York Stock Exchange
Mortgage company stocks jumped on Friday after President Donald Trump ordered “representatives” to buy mortgage bonds to lower interest rates for homebuyers.
Trump said in a social media post on Thursday that he was asking unnamed buyers – it was not clear whether they were the Treasury, Fannie Mae, Freddie Mac or another agency – to buy $200 billion in mortgage bonds. This should lower both interest rates and monthly payments and make homeownership more affordable, Trump said.
Bill Pulte, director of the Federal Housing Finance Agency, later said, “We’re in.” Trump said he was making the push because Fannie and Freddie — the government-sponsored companies that buy mortgages from banks, credit unions and other originating lenders — are sitting on a pile of cash.
Mortgage lender Rocket companies rose more than 9% to hit a new intraday high dating back to 2021. UWM holdings rose more than 13% on its best day since 2023. Lender PennyMac rose by more than 6%.
Lender focused on artificial intelligence Better home and better finances added more than 6%. Opendoor technologies — a real estate e-commerce platform that has become a meme stock — rose more than 13%.
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Rocket and UWM, 1 day
White House pressure
Wall Street has long expected the Trump administration to take action to put pressure on mortgage rates. But now analysts are wondering what the real impact will be on consumers and what it means for equity lending.
“We read this as the President’s order to FHFA Director Bill Pulte to force Fannie Mae and Freddie Mac to buy $200 billion of their own MBS to lower interest rates,” Jaret Seiberg of TD Cowen wrote to clients, referring to mortgage-backed securities. “That’s no surprise.”
TD Cowen expects that 10-year US Treasury bonds The yield is expected to be 3.5% at the end of 2026, up from about 4.17% on Friday. This would put pressure on interest rates on 30-year fixed-rate mortgages, potentially reducing them to around 5.25% from the current 6.2%. The interest rate on a 30-year mortgage fell to its lowest level in nearly three years on Friday, according to Mortgage News Daily.
If the $200 billion in purchases happened quickly, mortgage rates could be closer to 5% at the end of the year, according to TD Cowen.
Smaller than expected
However, Tobin Marcus, an analyst at Wolfe Research, said a $200 billion purchase program was smaller than the company had previously expected. The impact on the real estate market is likely to be “positive, but rather modest,” he said.
Bank of America analyst Rafe Jadrosich said lower mortgage rates would provide some relief to homebuyers struggling with high interest rates. For every quarter-point drop in mortgage rates, he estimated that the monthly payment on a $400,000, 30-year fixed loan would drop by as much as $70.
At Morgan Stanley, analyst Jeffrey Adelson now sees UWM and Rocket moving closer to its bull market as mortgage rates fall. Barclays analyst Terry Ma said PennyMac and UWM offer the best risk-reward ratio for investors in the sector, highlighting Rocket’s relatively high multiple as a hurdle.
“Volume-leveraged companies are the clear beneficiaries from a revenue perspective, provided these initiatives stimulate refinancing and purchase origination activity in a meaningful way,” Ma wrote to clients.
Impact of the IPO
Analysts are also wondering whether Trump’s plan will disrupt potential IPOs by Freddie Mac and Fannie May. Pulte told CNBC on Thursday that Trump could make a decision on initial public offerings in the next month or two – both government-sponsored enterprises (GSEs) are listed and controlled by the federal government.
“We always thought the path to a transaction would be slower and more chaotic than some investors seemed to assume in the euphoria after last year’s election,” said Marcus von Wolfe.
Buying mortgage bonds is “the largest and most obvious demand-side tool in the world.” [White House’s] “Given that the initial market response was not overwhelming, it still looks to us as if the White House does not have a panacea for housing or the ‘affordability problem’ in general.”