Prominent investor Bill Ackman has presented a novel approach to significantly lower U.S. mortgage rates: implementing penalties for early loan repayments on government-backed housing finance. Addressing former President Donald Trump and Treasury Secretary Scott Bessent, Ackman's Saturday announcement on X detailed a strategy where government-sponsored entities, Fannie Mae and Freddie Mac, would introduce non-prepayable mortgage options. This means borrowers would face a charge if they chose to pay off their loans ahead of schedule, a move designed to stabilize the mortgage market and reduce borrowing costs.
This innovative concept, originating from the head of Pershing Square Holdings—a major stakeholder in both Fannie Mae and Freddie Mac—aims to provide substantial savings for homeowners. Ackman estimates that such a change could trim about 65 basis points off a 30-year mortgage rate. He emphasized that for many potential homebuyers, this reduction could be the deciding factor in affording a home, enabling them to secure lower rates from the outset rather than relying on future interest rate drops. The proposal also suggests exploring various product structures with different lockout periods and corresponding savings levels.
The timing of Ackman's suggestion aligns with ongoing efforts to address concerns about high mortgage rates in the U.S. Recently, former President Trump directed Fannie Mae and Freddie Mac to purchase an additional $200 billion in mortgage-backed securities, successfully pushing the average 30-year fixed mortgage rate below 6% for the first time since 2022. Ackman's latest plan follows his earlier 2025 proposal to merge Fannie Mae and Freddie Mac to mitigate mortgage spread risks and unlock value, an idea that drew criticism from venture capitalist Peter Schiff, who labeled it "fake privatization" benefiting hedge funds while exposing taxpayers to undue risk.
Innovation and strategic thinking are crucial for navigating complex economic landscapes. By fostering open discussion and considering diverse proposals, policymakers can explore new avenues to enhance market stability and improve financial accessibility for the public. It is through continuous evaluation and adaptation that economic systems can evolve to better serve the needs of all citizens, promoting fairness and opportunity in the housing market and beyond.