News of Pres. Trump's upcoming remarks on housing at the World Economic Forum in Davos, Switzerland have stirred fresh speculation about the future of Fannie Mae and Freddie Mac, even as analysts say major policy shifts remain uncertain.  

An exit from conservatorship for the government-sponsored enterprises is not expected to be part of President Trump's affordable housing agenda at Davos, according to Keefe, Bruyette & Woods analyst Bose George, though several initiatives would involve the GSEs.

The KBW report does not cover the escalating situation between the U.S. and Europe over Greenland, which is now expected to dominate the Davos conversation.

The dustup has pushed the 10-year Treasury yield to close on Tuesday at just under 4.3%, up nearly 14 basis points from Jan. 15, when it was 4.16%.

Lender Price data posted on the National Mortgage News website has the 30-year fixed rate mortgage at 6.44%, up from 6.07% on Jan. 15.

Trump could look to cut loan fees

The most impactful of potential changes from the Trump Administration would be a reduction in both Federal Housing Administration mortgage insurance premiums, as well as GSE guarantee fees. The effect "would be immediate and could be quite material depending on the magnitude of the cuts," George wrote in a research report.

But such actions would be a shift in policy from Pres. Trump's first term.

As he was exiting office, Pres. Obama instituted a 25 basis point reduction in the FHA premium, which was suspended almost immediately when Trump took office in 2017.

But in February 2023, HUD reduced the premium by 30 basis points, a move many had thought would have been a Day 1 item in the Biden Administration.

In September 2020, then-Federal Housing Finance Agency director Mark Calabria implemented an adverse market fee of 50 basis points on most refinanced mortgages due to economic uncertainty.

While those reductions are possible, George said the administration's actions so far, like ordering the purchase of $200 billion of agency mortgage-backed securities, are "very traditional responses to a weak housing market.

"Meaningful cuts in FHA premiums or GSE guarantee fees are more radical since they would have a materially negative capital impact on the respective institutions, so it remains unclear to us if this is actually going to happen," he continued.

George goes on to say the FHA cut could be a reduction in the upfront premium, the annual fee or both. On the GSE side, it could involve the previously discussed drop in the loan level pricing adjustments.

A 10 basis point reduction in the g-fee would reduce Fannie Mae's after-tax earnings by $3 billion; KBW estimates its after-tax earnings for 2025 would be $14.5 billion.

"So a g-fee cut of up to 30 basis points is possible without Fannie Mae losing money," George said. "However, at that level, returns would be well below their targets, and because the GSEs remain undercapitalized, it would slow down and potentially derail any privatization effort."

Upsizing the size of the agency MBS purchase

Another possibility is upsizing the $200 billion MBS target with an amendment to the Preferred Stock Purchase Agreements. Those agreements limit the size of the retained portfolios at both Fannie Mae and Freddie Mac.

An earlier KBW report pointed out the large growth in both companies' holdings, although they are below the PSPA $250 billion individual cap, as well as under a $225 billion cap imposed by Calabria with the agreement revisions at the end of the first Trump administration.

But, any benefit from the recent spread tightening already has largely played out, George wrote in the report. Even with the PSPA revision, any larger buys would need Fannie Mae and Freddie Mac to issue debt because the retained portfolios could not support the additional purchases.

Other possible actions to enhance affordability

Another possibility George raised which impacts the GSEs is raising the conforming loans limits.

However, the conforming limits are set by a formula included in the Housing and Economic Recovery Act of 2008. Some observers already consider the current conforming loan limits too high.

The final item when it comes to the GSEs is for rate buy-downs to finance new construction.

Other things on George's list:

• Potentially "persuade" mortgage and title insurers to temporarily reduce premiums to support the housing emergency.
• 401(k) withdrawals to be used for down payments; and
• A reduction in the capital gains tax on primary residences sold when the proceeds are rolled into another U.S. home.

The last two are likely to need Congressional support, George noted.George noted the nonbank stocks he tracks, Rocket, UWM Holdings and Pennymac Financial Services, have prices 20% to 40% higher year-to-date on anticipation that future policy changes will materially reduce mortgage rates.

With the 30-year fixed at 6.06%, as measured by the most recent Freddie Mac Primary Mortgage Market Survey, between 12% and 13% of outstanding mortgages have a 50 basis point incentive to refinance. If rates were to decline 100 basis points from current levels, it would bring borrowers with rates between 5.51% and 6.51% into the money, adding nearly 16% more of the outstanding mortgages, George calculated.

Revisiting assumable and portable mortgages

Pointing to another possible idea the Davos speech might hit upon, the Bipartisan Policy Center put out an explainer on assumable and portable mortgages, both of which, like the 401(k), have been floated by sources.

These products are a way to ease the lock-in effect (potential sellers unwilling to list because they will lose their current lower rate mortgages) and create more inventory for buyers, the BPC noted in its report.

But in the conclusion, BPC noted that such terms could only be offered for future conventional mortgages (government-guaranteed mortgages are already assumable), plus the appeal changes with how interest rates move.

"While expanding assumable mortgages and introducing new portable mortgages can help reduce the mortgage lock-in effect and improve mobility, much more housing development will be needed to adequately address the supply shortage that has fueled today's high housing costs," the BPC said.

Housing affordability one year into Trump II

In a message to its members and partners, the National Association of Affordable Housing Lenders recapped the first year of the administration, saying the demand from Americans for homeownership and having affordable rental housing are dominating the national conversation like never before.

Even with the affordable housing provisions in the One Big Beautiful Bill Act, "when pieces of the capital stack are in jeopardy, like Jenga, the whole pipeline is at risk of collapse," Sarah Brundage, NAAHL president and CEO, wrote.

The association added that bipartisan momentum for housing is growing, even though the year-end defense bill did not contain any legislation in this area; affordability is the word of the moment; but the sector needs to adapt to a shrinking federal government.

"It is vital for this Administration and Congress to convey a strong commitment to affordability, recognizing that housing remains a top expense for many households," said Brundage. "The coming year offers numerous opportunities to reinforce this message, whether through executive actions, a bipartisan housing package, a potential second reconciliation bill, or FY26 and FY27 funding."

Affordability drives unfavorable outlook for builders

The North American and European homebuilder sector has an unfavorable outlook as affordability issues persist, a Morningstar DBRS report declared.

"We may see demand for new homes modestly improve over the course of 2026 because of decreasing mortgage rates and expectations of stabilizing conditions for home buyers," said Margaret Rabba, vice president of corporate ratings, in a press release. "We expect the credit profiles of homebuilders with sizable operational scale and geographic diversification to remain supportive of their current credit ratings and trends in 2026."

But the long-term fundamentals, including the lack of supply, are positive for the sector.

In the U.S., consumers' "inability to afford a down payment was the primary reason households continued to rent, while increases in both home insurance premiums and property taxes have heightened financial stress on homeowners and landlords," Rabba said

Rabba expects builders will address buyer affordability challenges by offering rates buy downs and incentives. But some regions might need more incentives than others.

Government action might not be enough, looking not just at what is happening in the U.S., but the United Kingdom with its Social and Affordable Homes Programme as well as with Build Canada Homes.

Pres. Trump is promising aggressive housing reform in the U.S., but heretofore has not provided the specifics, although officials mention regulatory changes which could speed up home construction and reduce barriers to building.

Still Morningstar DBRS believes high home prices and elevated mortgage rates will reduce demand for newly constructed homes.