MIT Golub Center for Finance and Policy
Public Policy
The Preferred Stock Purchase Agreements Will Hamper Access to Credit: A Further Modification Is in Order
By
The changes that Trump administration officials made to the preferred Stock Purchase Agreements (PSPAs) – the contracts that govern Fannie Mae and Freddie Mac’s relationship with the US Treasury - would restrict the volume of “high risk” loans they can purchase, as well as the volume of second homes and investor properties. These changes will likely prove binding once the current refinance wave ends and, they will further limit access to mortgage credit and disproportionately affect Black and Hispanic borrowers, as well as the goals of the Biden administration to advance racial equity. In this brief, we review the impact of the changes to the PSPA on credit availability, as well as on future policy actions, and call on the Biden Administration to revisit these contracts to ensure equitable access to the mortgage market.
