Up to 177,000 low- and moderate-income families will lose access to mortgages backed by Fannie Mae and Freddie Mac over the next 3 years under housing goals proposed by the Trump administration, a coalition of housing, consumer and civil rights organizations warns.
Industry groups like the National Association of Realtors are also weighing in with concerns about the Federal Housing Finance Agency’s 2026-2028 housing goals, which aim to push more business to the “private label securitization” (PLS) market — which has yet to recover from the 2008 subprime mortgage crisis.
The FHFA’s proposed goals “will reduce mortgage access in communities of color nationwide and deepen racial and socioeconomic disparities in homeownership,” 28 groups, including the Consumer Federation of America, National Consumer Law Center and National Urban League, said in a Nov. 3 joint letter.
Combining previously separate goals for lending in low-income and minority census tracts will lead to Fannie and Freddie purchasing up to 88,000 fewer loans in those tracts over the next three years, the groups estimate.
As the Trump administration moves forward with plans to monetize Fannie and Freddie through a public offering, scaling back its housing goals for underserved communities gives the mortgage giants “free rein to abandon these borrowers in pursuit of purchasing the most profitable loans” to investors and second-home buyers, consumer and civil rights groups allege.
“Purchasing more loans for vacation homes rather than first-time homebuyers might boost Fannie Mae’s and Freddie Mac’s profits, but will only make our housing crisis worse,” the groups said.
The Trump administration acknowledges that it’s out to shift some of Fannie and Freddie’s business to private lenders, but says FHA and VA loans will still be available to borrowers who are less well off. The goal, the FHFA said in publishing Fannie and Freddie’s housing goals in the Federal Register, is to improve the health of the overall housing finance system.
“Unduly elevated housing goals may continue to inhibit the PLS [private label securitization] market,” regulators said. “The PLS market, which includes mortgage-backed securities not guaranteed by [Fannie Mae and Freddie Mac] or the federal government, is a critical component of a diversified and resilient housing finance system.”
Mortgage loan funding by source
Source: Inside Mortgage Finance / Urban Institute
Fannie Mae and Freddie Mac don’t make loans themselves, but guarantee payments to investors in mortgage-backed securities (MBS) that fund most home loans.
During the second quarter of 2025, MBS backed by Fannie and Freddie (“the GSEs,” or government-sponsored enterprises) provided about a third (34.5 percent) of all funding for first-lien mortgages. FHA and VA loans guaranteed by Ginnie Mae funded another 25.2 percent.
With portfolio loans held as investments by banks and other lenders accounting for another 34.5 percent of loans, private label securitizations funded just 5.8 percent of lending, down from 40 percent during the subprime mortgage lending boom.
“The PLS market has not robustly returned following the 2008 financial crisis,” the FHFA said of its plan to scale back Fannie and Freddie’s housing goals. “A diminished PLS market can stifle innovation in private-sector underwriting, product development, and risk management.”
A small PLS market “also limits the financing options for low-income borrowers who do not have the necessary credit for government-backed loans,” regulators said.
Fannie and Freddie’s proposed affordable housing goals are aimed at helping borrowers making less than 80 percent of the median income in their area.
Consumer and civil rights groups said cutting back on those goals will limit mortgage credit to carpenters, construction workers, firefighters, pharmacy technicians — and even real estate agents — in hundreds of cities.
Number of cities affected by reduced housing goals
Number of cities affected by reduced housing goals, by occupation. Source: National Housing Conference’s Paycheck to Paycheck database
At $56,300, for example, the median income of real estate agents qualifies them as borrowers who count toward Fannie and Freddie’s housing goals in 231 U.S. cities.
“By withdrawing affordable mortgage access for working families, FHFA abandons the country during this housing crisis,” the groups said. “This proposed change will leave many families with only less competitive and pricier mortgage alternatives, while some of them will be priced out of homeownership altogether.”
The Trump administration sees FHA and VA-backed loans as a better solution for many borrowers who take out loans guaranteed by Fannie and Freddie.
“It is neither efficient nor necessary for the [Fannie and Freddie] to serve the entire of the low- and moderate-income market,” the FHFA’s proposed rule said. “The market serving low- and moderate-income households is a distinct segment of the housing market, offering tailored mortgage products and programs to serve the credit needs of these borrowers.”
The FHFA claims that FHA loans are cheaper — an “inaccurate and deceptive” analysis, consumer and civil rights groups said.
“FHFA’s analysis only compares average interest rates across loan products, which tend to be lower given the explicit government guarantee of Ginnie Mae-products,” the groups said. “This incomplete comparison misses that FHA mortgages require borrowers to pay upfront (1.75 percent of the loan amount) and annual Mortgage Insurance Premiums (MIP) of 55-basis points (0.55 percent) for the life of the loan. This means that for almost all borrowers who can qualify for a conventional mortgage, FHA mortgages are a more expensive alternative.”
While FHA loans can be a helpful tool for borrowers who haven’t saved much for a down payment, Fannie and Freddie will also approve loans to borrowers making down payments of less than 20 percent, requiring them to take out private mortgage insurance (PMI).
For borrowers putting down less than 20 percent, a mortgage backed by Fannie and Freddie can be a better deal for borrowers, even after factoring in PMI. But borrowers with credit scores below 760 and putting down less than 5 percent are better off taking out an FHA loan, according to an analysis by the Urban Institute.
Setting Fannie and Freddie’s housing goals too low threatens to repeat a mistake made from 2012 to 2014, when “the FHFA set goals unrealistically low,” the National Association of Realtors warned in its Nov. 3 comments.
“That period resulted in sharp growth of the FHA, and reduced private capital participation from PMIs, as the FHA and VA expanded,” NAR noted.
When the subprime mortgage boom gave way to the Great Recession of 2007-2009, portfolio lending shrank and private-label securitizations all but disappeared, U.S. Mortgage Insurers (USMI), a trade group representing private mortgage insurers, warned.
“Middle- and working-class borrowers deserve markets that work for them in all economic environments, and arbitrarily shifting broad swaths of borrowers to the PLS and portfolio markets will not ensure that those borrowers have adequate credit availability and affordability across the full geographic and economic cycle,” the USMI said in its comments to regulators.
All told, the FHFA received 19 comment letters from groups and individuals representing more than 40 companies and organizations. A final rule is expected in January.
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