01/19/2026
With midterm elections approaching, cost of living is front and center for both voters and policymakers. In today’s newsletter, we rank 4 recent government proposals designed to combat housing expenses.
Walling Off Wall Street
President Trump announced last week his administration would look to ban institutions from buying single family homes. Such an attack on free market capitalism is similar to that we would expect from the newly sworn in mayor of New York City, not a former real estate developer. That aside, would this provide relief to American families? Looking back to the depths of the Great Recession, a time when homes were losing a third of their value, it was institutions who stepped in as the buyer of last resort. Without this backstop on prices, the number of households foreclosed on would have likely been significantly higher.
While fluctuating yearly, investors make up roughly 25% of all single family home purchases. The vast majority of those transactions however are perpetrated by mom and pop investors, not Wall Street. A 2023 study by The Urban Institute found institutional investors (defined as holding 100+ homes) owned 574,000 single family residences, which equates to just 3.8% of available rental properties and only 0.67% of all single residence housing.
Whatever win there would be for buyers is likely a loss for renters, as fewer housing options and higher rents should be expected. Builders, who we desperately need to be successful would also suffer. Large scale buyers often pick up unsold builder inventory at a discount, allowing them to move on to the next project.
Steve’s Score: ⭐ (out of 5)
Quantitative Easing…Adjacent
President Trump has ordered Fannie Mae and Freddie Mac to purchase $200 billion in mortgage backed securities. Increased buying puts downward pressure on yields, lowering borrowing costs for homebuyers. Government spending in bond markets may have the trappings of quantitative easing, however this scenario takes a slightly different path. In traditional QE central banks create new reserves, and credits these into the banking system in exchange for securities. In today's case however, Fannie and Freddie would be using their own existing cash on hand, meaning no additional growth to the monetary supply.
Lower rates are great. Redfin economist Chen Zhoa anticipates a 0.10-0.25% reduction in the 30 year mortgage once in effect. Unfortunately, the GSE coffers eventually run dry and investor appetite for mortgage debt will return to previous levels. $200 billion sounds significant, but pales in comparison to the approximately $9.1 trillion in total single family MBS.
Perhaps we should be asking why Freddie and Fannie are so flush with cash. The primary revenue stream for each is charging lenders fees for guaranteeing loan payments. Rather than supporting rates by purchasing loans on the secondary market after securitization, could more be done to reduce costs at the origination stage? Demand that is both temporary and artificial, this gives vibes of treating the symptom and not the cause.
Steve’s Score: ⭐⭐
New House, Same Rate
While a new concept in America, portable mortgages are well established in countries like England and Canada. Instead of a mortgage being tied to a property, think of it as being attached more to the borrower.
Let's review an example. Suppose you bought a home in 2021 with a $300,000 mortgage at 3.0%. In 2026, mortgage rates have risen to 6.0%, and you decide to buy a new home for $500,000. Instead of paying off your existing loan when selling your home, the remaining balance is carried over (ported) to the new property. You then have the option to cover the price difference with a down payment or by taking out new additional financing.
Home sale transactions are at multi decade lows, in large part due to owners’ reluctance to give up their ultra low rates. Portable mortgages in large part solve this dilemma, while also creating new ones. Primarily, how are buyers to make up the gap between a rolled over mortgage and new purchase price? Sale proceeds from the previous home may do the trick. If not they will likely need financing that would be treated as a 2nd position lien, with a rate commensurate with the risk lenders take when not the primary lender. Additionally, implementing such terms into a loan can almost certainly not be done retroactively to exsisting mortgages. Yes it could help lubricate future housing markets, but the benefit to current owners is likely minimal.
Steve’s Score: ⭐⭐
Pay Early, Pay More
While not a government official, hedge fund manager Bill Ackman is a supporter of the current administration, so for purposes of this article we will include his suggestion from Saturday that GSE loans start including a prepayment penalty.
Prepayment penalties are frequently seen on the commercial/investment side of real estate, but very rare for the common homeowner. For example, the last property I acquired was financed using a mortgage with a step down pre-pay penalty for the first five years. Essentially banned on owner occupied Freddie/Fannie products, charging borrowers a fee for paying down the loan ahead of schedule is occasionally seen on portfolio loans held by banks.
When a lender issues a mortgage, they’re counting on interest payments over the life of that loan. Should the borrower pay early (refinances or sells), the lender loses future interest they expected to earn. A prepayment penalty compensates the lender for that lost income. While this may sound like a negative, the assurance actually works in the borrower’s favor. A more defined payback schedule derisks the loan, allowing lenders to charge the borrower less.
Ackman believes including such a clause would see rates drop 0.65% on a 30 year term. Details would need to be flushed out, including the severity of the penalty and the length of time it would apply, but this could be an attractive option for those who anticipate staying in their home for the foreseeable future.
Where this gets messy is with low down payment mortgage products. Imagine a borrower purchases a home using the traditional FHA 3.5% downpayment. He is underwater on the property if eight months later he needs to sell but faces a 5% prepayment fee. Whereas portable mortgages encourage flexibility, an argument could be made that the threat of additional charges may actually stunt economic growth by punishing mobility. While not a perfect fit for all, receiving a discounted rate in exchange for an early exit fee could be a great bargain for some.
Steve’s Score: ⭐⭐⭐
Reducing the cost of housing will not be solved with a single policy idea. While some concepts covered today are viewed more favorably than others, there is significant value in simply having the conversation. Let's keep talking.
