By Jeff Lazerson | jlazerson@mortgagegrader.com | MortgageGrader.com | January 19, 2026
Article originally posted in Orange County Register on January 15, 2026
President Donald Trump and his administration have been throwing out all kinds of ideas to make housing more affordable.
With affordability in the U.S. a key issue heading into mid-term elections, the pro-business president has proposed a litany of cost-cutting measures, while at the same time leaving business executives grappling with foreseeable revenue losses.
Let’s explore his ideas and others and what I think about them …
Out of all of Trumps’ ideas, requiring mortgage giants Fannie Mae and Freddie Mac to purchase $200 billion of mortgage-backed securities or MBSs is his best step in the right direction. This moved mortgage rates down a good quarter-percent. Locally, rates are now hovering at 5.5%, whereas last week they were at 5.75%.
Here is a quick explanation of how buying MBSs brings mortgage rates down: There is an inverse relationship between bond prices and interest rates or yields. Higher demand for MBSs drives bond prices up. As prices rise, interest rates or yields fall.
Trump’s worst idea was his pressure campaign and now criminal investigation of Federal Reserve Chairman Jerome Powell, a tactic to bully Powell into lowering short-term rates.
Fed independence matters to best tame inflation by raising short-term rates, and making money cheaper by lowering short-term rates when the economy softens.
President Richard Nixon pressured his Fed chair (Arthur Burns) to keep rates low, heading into the 1972 election. Inflation averaged over 7% from 1970-1978 and came to be known as the Great Inflation of the 1970s.
Taking steps to ban large institutional investors from buying more single-family homes also was an excellent idea. (Gov. Gavin Newsom announced a similar plan for California.) Large institutional investors (those owning more than 100 properties) own 3% of the single-family rental stock nationwide, according to the Brookings Institute. If these big boys aren’t stopped, eventually they may own 5%-10% of single-family homes.
The U.S. has about 85 million single family homes. Of those, about 15 million are single-family rentals. Three percent is 450,000 single-family homes owned by large investors. I saw another estimate of large institutional investors owning 500,000 to 700,000 from Attom Data Solutions (using a 2022-2024 timeline).
Trump should go further by pushing legislation to incentivize these large institutional investors to sell what they have by heavily taxing them on each home retained but also giving them a carrot like a tax credit for each home they sell.
The 50-year mortgage is another excellent Trump idea that I wrote about last November.
The key to the 50-year mortgage would be adding a 10-year, interest-only component. There is almost a $600 monthly payment savings on a $600,000 interest-only loan compared with an amortizing mortgage. Your income grows over time whereas you can eventually flip that to a 30-year amortizing mortgage.
I’m neutral on capping credit card interest rates for one year at 10%, another proposal by Trump that big national banks panned. Consumers drowning in credit card debt might be able to get ahead of them if their credit card rates dropped from say 25% to 10%. Obviously, that would bring down monthly payments, making it easier to mortgage qualify.
The negatives are big, though.
Capping interest rates at 10% would likely cost banks around $100 billion in lost annual revenue, according to researchers at Vanderbilt University.
Another downside: Credit card companies might not want to take on the risk of borrowers with low credit scores for a 10% return, for fear of payment default. So, access to credit card credit might be difficult for marginal borrowers.
The portable mortgage is a great idea, especially for those not wanting to give up their 2% or 3% mortgage interest rates. The late Angelo Mozillo of Countrywide infamy came up with this same idea some 30 years ago.
As a practical matter, it will never happen. Not just because it will mess up MBS valuation models, requiring hard-wiring changes. But because the mortgage industry and its lobbyists won’t stand for this. It will drastically restrict the need for newly originated mortgages and the trailing profits new mortgages generate.
Trump’s idea of a penalty free and tax free early 401(k) withdrawal (and other forms of retirement funds) for first-time buyers is an excellent idea. This would be accomplished either by executive order or by the “Nest Act.”
Currently, if you take money from your 401(k) and you are not of retirement age (at least 59 ½) you will incur a 10% penalty, and you’ll have to pay income tax on the funds. You may also be able to borrow against the 401(k) without penalty or tax so long as you pay yourself back over a period — with interest.
Other affordability ideas from others
One idea getting circulation but not much movement is “No Tax on Home Sales Act” (H.R. 4327). This bill was introduced in July 2025 by Marjorie Taylor Greene.
If that passed it would be a jackpot for homeowners sitting on lots of appreciation. Expect to see more for sale signs across the country than you would have realty agents.
Another idea is to double the capital gains tax exemption on the sale of a primary residence if held for at least two years. Currently, there is a $250,000 exemption for singles and a $500,000 exemption for married couples. Respectively, that means $500,000 and $1 million tax free should a law like this be introduced.
Vanderbilt Law professor Beverly Moran points out that about 90% of U.S. home sales generate less than $500,000 in gains, meaning such tax exemptions would mostly benefit the wealthiest households.
In high appreciation communities here in Southern California, I often hear from potential home sellers that they don’t want to pay the capital gains tax (beyond the current exemptions) so they just won’t sell.
Either having no tax or doubling the exemption would sure put a lot more homes on the market.
Up until 2014, Fannie Mae and Freddie Mac would buy 30-year adjustable-rate mortgages with an interest-only component in the first five or seven years of the note’s term. It’s time to bring that affordable instrument back.
On an $800,000 mortgage at 5.5%, the principal and interest payment is $4,542. Interest-only offers a payment of $3,667 which saves $875 per month, roughly a 20% cheaper payment.
Lastly, Trump should task Congress with changing the law about bundled settlement charges, Costco style.
It’s illegal to bundle escrow or settlement agent, title insurance, mortgage origination, notary, etc., because the discounts could tilt the advantage to certain providers.
If the likes of Costco or Amazon or some similarly situated company could legally do this, it would save both home sellers and home buyers a small fortune.
Freddie Mac rate news: The 30-year fixed rate averaged 6.06%, 10 basis points lower than last week. The 15-year fixed rate averaged 5.38%, 8 basis points lower than last week.
The Mortgage Bankers Association reported a 28.5% mortgage application increase compared with one week ago.
Bottom line: Assuming a borrower gets an average 30-year fixed rate on a conforming $832,750 loan, last year’s payment was $538 more than this week’s payment of $5,025.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.375%, a 15-year conventional at 4.99%, a 30-year conventional at 5.5%, a 15-year high-balance conventional at 5.5% ($832,751 to $1,249,125 in LA and OC and $832,751 to $1,104,000 in San Diego), a 30-year high-balance conventional at 5.99% and a jumbo 30-year fixed at 5.875%.
Eye-catcher loan program of the week: A 30-year mortgage, fixed for the first five years at 5.375%, with 30% down payment and 1 point cost.
Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.
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