Fannie Mae to Deploy $200B in Mortgage Bonds as Ackman Seeks Prepayment Penalties
Bill Ackman proposed imposing prepayment penalties on U.S. mortgages to reduce rates, potentially reshaping Fannie Mae’s MBS prepayment risk and yield dynamics. The Treasury has authorized Fannie Mae and Freddie Mac to invest $200 billion in mortgage bonds, targeting lower borrowing costs and expanding agency mortgage holdings.
1. Bill Ackman Proposes Prepayment Penalties to Lower FNMA-Backed Mortgage Rates
Billionaire investor Bill Ackman has submitted a formal proposal to the Trump administration and Treasury Department recommending the introduction of structured prepayment penalties on Fannie Mae (FNMA)–guaranteed loans. Under the plan, borrowers would incur a 3% prepayment fee on any principal paid within the first year, tapering by 0.75 percentage points each subsequent year and dropping to zero after four years. Ackman’s analysis suggests this structure could reduce average 30-year mortgage rates by as much as 40 basis points, lowering rates from roughly 4.50% to near 4.10%. He projects that the additional fee income—estimated at $2.5 billion annually based on FNMA’s current $5 trillion single-family guarantee portfolio—would strengthen the GSE’s balance sheet and allow for tighter spreads on new issuances. Ackman’s memo cites Moody’s Analytics data indicating that similar programs in other markets have cut refinancing risk by 25% and improved loan retention.