When the Trump Administration floated the idea of merging Fannie Mae and Freddie Mac into a single “Great American Mortgage Corporation” and taking it public, the announcement didn’t come through a press conference or news release. Instead, the president himself shared it via social media, sparking intense speculation.
It’s one of many examples emerging from the administration in which ambitious, headline-grabbing housing proposals are heralded with much fanfare but little detail, leaving industry professionals scrambling to keep up.
One thing’s for sure: People are talking about housing affordability like never before.
But will this patchwork of proposals help address affordability—or other systemic issues—in a meaningful way for most Americans? That’s the question many housing experts and professionals want answers to.
“The problem is absolutely true,” said Mark McArdle, senior vice president of regulatory affairs and public policy for Newrez. “It is very hard for an ordinary American to afford a home right now, and I’m not sure if (the government) has any of the levers that would actually affect that.”
According to Redfin, nearly two-thirds (70.4%) of American homeowners have mortgages with rates below 5%, creating what economists call the “lock-in effect.” The median existing-home price hit $422,600 in August, up nearly 84% in the last 10 years, according to the National Association of Realtors® (NAR).
Meanwhile, the average cost to originate a mortgage is about $11,600, up 35% over three years, according to Freddie Mac’s 2024 Cost to Originate Study (looking at 2023 data). The higher loan costs are being driven partly by ballooning fees from credit reporting agencies and higher compliance expenses.
Will regulatory rollback make loans riskier, or is it overdue reform?
The Trump administration has made it clear it’s looking to run a leaner government, including massive staffing reductions and streamlining functions it sees as duplicative. It’s also shown a friendlier stance toward deregulation.
Banks currently hold about a quarter of the mortgages they originate each year, Mortgage Bankers Association’s (MBA) Chief Economist Mike Fratantoni said, adding that “the way the bank capital regulation has evolved over the past 15 years, it has increasingly pushed banks further and further out of the mortgage market, particularly larger banks.”
Reforming these rules could increase lending capacity and help lower costs, he noted.
The Consumer Financial Protection Bureau (CFPB), which is responsible for enforcing consumer protection laws (including those concerning mortgages), has been ground zero for the administration’s move toward deregulation. Not only has the CFPB workforce been reduced to about 200 employees from its previous staffing levels, but its enforcement scope has been narrowed significantly to focus on mortgage fraud.
McArdle, who worked at the CFPB for several years before joining Newrez, acknowledged the bureau “often overreached” and was “often not transparent.” But he argued it also did good work and that current rules, such as ability-to-repay requirements and servicing requirements, have all helped “sort of create a floor that the industry has adapted to.”
“You need something like the bureau,” McArdle said. “Most companies welcome that, because we don’t want to compete with people who are not following the rules. If we’re going to spend millions on compliance, that should be the barrier of entry to be a mortgage company today.”
Without federal oversight, he warned, the mortgage market could face a “chaotic regulatory landscape” with 50 different state processes, increased litigation and greater long-term compliance costs for lenders. “That’s a crazy way to run a business,” he added.
Rick Porras, chief financial officer for Neology Group, a Florida-based real estate development company, agrees that the pendulum may have swung too far.
“You’re promoting housing, but then you’re gutting the CFPB,” he said. “So what’s your plan? You’re doing one thing to benefit, and then on the other hand, you’re destroying another part. So come up with a game plan.”
The big GSE gamble
The proposed Fannie Mae and Freddie Mac restructuring is the most consequential of the ideas the Trump administration has put forward so far. That’s because experts are wary about any plan to privatize the GSEs without an explicit government guarantee for the loans Fannie and Freddie buy and sell.
“The big sticking point is, will the government still fully back the loans that Fannie Mae sells to the investor community?” asked Porras.
“If those guarantees go away, then the shift is not going to work, because what’s going to happen is that now the investors that were buying these packaged mortgages at a lower rate, because the risk wasn’t there; now the risk is there.”
The MBA has emphasized that any restructuring plan must preserve the explicit government backstop that has kept mortgage markets liquid since the Great Recession in 2008. Without it, mortgage spreads would likely widen, potentially raising borrowing costs for consumers at a time when affordability is already stretched.
Fratantoni said Treasury Secretary Scott Bessent has stated that mortgage rate spreads will serve as the measuring stick for success. But if policy actions widen those spreads, “a mistake was made.”
However, the administration seems intent on merging the two entities, which the MBA opposes, arguing that competition between Fannie and Freddie benefits homeowners through innovation and better service.
“We think that’s a terrible idea,” Fratantoni said of a potential merger. “Fannie Mae and Freddie Mac compete on a number of fronts today in a really healthy way. They compete on service, they compete on some different product offerings, and it really accrues ultimately to the benefit of that homeowner.”
Federal lands proposal gets local reality check
Another of the administration’s proposals is opening up federal lands for housing development. This idea, though, has been met with skepticism from many housing experts due to practical roadblocks.
“I don’t think it’s that vast of a supply that they have,” Porras said of available federal lands. “Federal programs are good talking points and they’re more symbolic than anything. You need to look at the cities and the states.”
Jonathan Ernest, assistant professor of economics at Case Western Reserve University, noted that much federal land lies far from job centers and existing infrastructure, mostly in the West.
It’s mostly a local issue dealing with overly restrictive building and zoning codes that prevent high-density, multifamily construction and create red-tape headaches for builders. Then there’s the vocal opposition from existing homeowners (aka NIMBYs) who worry about excess development (and all that comes with it) in their neighborhoods.
Florida offers an interesting case study. The state’s Live Local Act, passed two years ago, changed zoning laws at the state level, preventing cities and counties from blocking development projects. One property that qualified for the program saved $800,000 in property taxes, demonstrating the impact of targeted state-level intervention.
“It’s more at a city and local level than it is federal,” Porras explained. “Those are the kind of shifts that really make a difference.”
Immigration, trade policies having counterproductive effect
Even as the administration champions its ideas to boost housing affordability, other controversial policies work against that goal. The administration just imposed a new 10% tariff on all lumber and wood imports that goes into effect Oct. 14.
According to the National Association of Home Builders, the Commerce Department has more than doubled tariffs on Canadian lumber, which accounts for about one-third of U.S. construction lumber, from 14.5% to 35%. With the additional tariff in play, that could hike duties an additional 10% to 45%.
“These new tariffs will create additional headwinds for an already challenged housing market by further raising construction and renovation costs,” said NAHB Chairman Buddy Hughes in a news release.
President Trump’s hardline stance on illegal immigration and mass deportations is having a direct impact on construction labor. With Immigration and Customs Enforcement (ICE) raids targeting undocumented workers at construction companies, fewer of those workers are showing up to work, particularly in Florida and Texas. Immigrants make up over 30% of the country’s nearly 11 million construction workers.
“There’s been a definite shortage of workers available,” Porras noted. “It’s going to drive up labor costs, which drives up the end cost for the consumer. So while I understand the program, and I can opine whether it’s good or bad, it’s going to increase your costs and it’s going to affect affordability.”
Looking at tariffs, Budge Stratton Huskey, CEO of Premier Sotheby’s International Realty in Naples, Florida, observed that the administration “came in with a broad consensus among those who supported that anything that would help to lower taxes would be perceived as positive, as well as provide additional deregulation.”
However, he added that the president’s trade wars seem more “punitive” than anything.
“What has been levied is not based in any sound macroeconomic theory and it is incredibly widespread,” Huskey said.
Ernest echoed these sentiments, noting that these policies won’t help boost housing supply or make it cost-effective. And, ultimately, homebuyers will pay the price.
“If you’re paying double for lumber than you used to be, or if you’re paying double for labor because there are fewer workers in that industry, that’s just making supply even more restricted.”
New credit scoring model, crypto add wrinkles to mortgage finance
The Federal Housing Finance Agency (FHFA) earlier this year directed the GSEs to adopt two initiatives that aim to expand credit access in different ways.
New credit scoring model
The first is allowing mortgage lenders to use VantageScore alongside FICO credit scores to qualify mortgage applicants. VantageScore incorporates alternative data such as rent payments, utility bills and cellphone payments; FICO does not. This could enable millions more borrowers (especially first-time homebuyers) to qualify for conventional mortgages.
“That’s a big help to the consumers, because now they’re going to take other factors into your credit score, which will help the borrowers get a higher credit score and then get a lower rate,” Porras said. “That’s definitely a good change.”
However, McArdle raised concerns about implementation. Credit report costs have soared, with the tri-merge credit report now costing over $100 per loan, compared to just $15 for the FICO scores themselves, he said.
“The vast majority of the cost is somewhere else along the process,” McArdle said, noting that the three bureaus (Experian, Equifax and Transunion) that own VantageScore may not introduce meaningful price competition.
Crypto in mortgage
Another proposal in the mix is using cryptocurrency in mortgage financing. The administration directed Fannie Mae and Freddie Mac to develop proposals allowing borrowers to use digital assets without liquidating them for down payments.
However, industry observers note this primarily means treating Bitcoin like stocks or bonds, recognizing it as an asset that can be liquidated before closing rather than requiring seasoning periods.
Josip Rupena, founder and CEO of Milo, a company offering crypto-backed mortgages, explained his firm’s approach: borrowers post Bitcoin as collateral (typically equal to the loan amount) while making regular dollar-denominated payments.
Still, Rupena acknowledged that GSE acceptance of crypto primarily helps with down payments and doesn’t solve broader qualification issues. But he pushes back against the criticism that allowing crypto as part of the mortgage process introduces undue risk.
“The (executive) order is really a recommendation to put these assets at parity with other forms of assets like stocks and bonds,” Rupena said. “Anything that goes above and beyond that is probably outside of normal guidelines of how they think about underwriting loans, which would require a much broader mandate.”
Porras was skeptical about crypto’s practical impact: “It’s not really understood by most of the public. I think for it to be a meaningful way to pay your mortgage or anything like that—how’s it going to be regulated? I don’t see it being a big player anytime soon.”
Still, only 14% of Americans report owning cryptocurrency, according to a recent Gallup Poll. If lenders were to adopt new guidelines to allow crypto as an asset, it likely won’t move the needle on expanding affordable homeownership to most borrowers.
Where the industry goes from here
There’s no silver bullet to solve the housing affordability crisis, experts say.
Despite the flurry of proposals from the administration, experts largely agree on what would meaningfully improve affordability: increase housing supply through streamlined local zoning, reduce building costs by avoiding tariffs on construction materials, maintain a stable labor force and preserve regulatory certainty while cutting unnecessary red tape.
State and local governments have more direct leverage than federal policymakers on many housing issues. Zoning reform, permitting process streamlining and targeted tax incentives have proven effective where implemented.
“You have to get involved with your local government, your commissioners, your mayors,” Porras advised real estate professionals. “You need to be involved with the building departments, the ones that issue the permits. That’s where you’re going to make a huge difference.”
Ernest said policymakers should focus on targeting supply increases where they’re most needed and where most people want to live. This involves creating more supply near urban centers where jobs and amenities already are.
Huskey said that while he wants to be more optimistic about the effect some of these proposals would have on long-term housing affordability, it’s unlikely they’ll move the needle in a meaningful way.
“Real estate is ultimately about market forces,” he added, noting that it would take a significant economic downturn to bring home prices down, however, that would also result in job losses or stagnation in wages that would sabotage buyer demand.
“The reality is that the best friend of housing is essentially the direction of the U.S. economy and private enterprise with strong government backing and support from a foundation standpoint,” he said.
