Two major lending organizations, the Community Home Lenders of America and the Independent Community Bankers of America, have urged federal housing officials to take immediate action to help lower mortgage rates and improve homeownership affordability. In a letter addressed to Treasury Secretary Bessent and FHFA Director Pulte, the groups propose targeted steps to reduce the historically high spread between 30-year fixed mortgage rates and 10-year Treasury bond yields.
The letter notes that housing represents nearly one-fifth of the U.S. economy and directly impacts homeowners, renters, and communities nationwide, especially underserved and rural areas. “Action is critical,” the letter states, to improve affordability, ease lending challenges, and support loss mitigation efforts for struggling borrowers.
The organizations focus on the “30/10 spread” (the difference between mortgage rates and long-term Treasury yields), which they say has remained abnormally wide since 2022. As of October 17, the spread stood at 222 basis points, well above the traditional range of 140 to 170 basis points. This gap, they argue, has sharply reduced buying power for families, particularly first-time homebuyers, and contributed to some of the weakest home sales in three decades.
To address this, the letter recommends allowing Fannie Mae and Freddie Mac to purchase their own mortgage-backed securities (MBS), or Ginnie Mae MBS, in greater volumes. Specifically, the groups propose that each government-sponsored enterprise (GSE) be authorized to buy up to $300 billion in MBS when the spread exceeds 170 basis points.
The groups note that, based on current financial reports, the GSEs are a combined $246 billion below their current MBS purchase caps and could act immediately to help narrow the spread. They emphasize that this authority would be temporary and limited, unlike the broader MBS purchasing powers Fannie and Freddie once held. According to the letter, diminished MBS demand from traditional investors, such as U.S. banks, foreign central banks, and insurance companies, has left a liquidity gap that the GSEs could help fill.
“Reasonable limits on the GSEs’ portfolios are appropriate and necessary,” the organizations write, but restoring some purchasing flexibility would help stabilize the market and improve affordability nationwide.
