Bill Ackman Proposes Prepayment Penalties To Lower Mortgage Rates

Billionaire investor Bill Ackman is floating a proposal that suggests mortgage rates could be lowered by limiting borrowers’ ability to refinance or prepay mortgages.

Ackman said on Jan. 10 on social media platform X that adding prepayment penalties to new mortgages could reduce interest rates by roughly 65 basis points (bps). The post addressed President Donald Trump, U.S. Department of the Treasury Secretary Scott Bessent and Federal Housing Finance Agency (FHFA) Director Bill Pulte.

“One of the unique features of U.S. conventional mortgages is that they are prepayable at any time without a penalty,” Ackman wrote. “While this feature is attractive for homeowners, it comes at a significant cost as buyers of mortgage-backed securities (‘MBS’) require a significant increase in spread to compensate them for giving the borrower the option to prepay at anytime.”

Ackman’s post specifically calls for the government-sponsored enterprises Fannie Mae and Freddie Mac to offer non-prepayable mortgages, where, if the borrower wishes to prepay the loan, they would have to cough up a prepayment penalty.

Ackman pitched two potential options: borrowers would choose between a standard 30-year mortgage at about 6% with no restrictions, or a lower-rate loan around 5.35% that includes penalties for refinancing early. Ackman proposed that the discounted loan could be portable, allowing it to be assumed by a new buyer if the home is sold, avoiding a penalty on sale.

“While the ability to prepay is a valuable option, locking in the 65 bps savings upfront over the life of the mortgage may be the difference between the borrower being able to afford the home and not being able to,” he continued. “As you know, commercial mortgages work this way. Why couldn’t the same approach be used for home loans?”

Ackman’s proposal comes at a time when housing affordability is front and center for the Trump administration as home prices and borrowing costs remain elevated. In recent weeks, Trump has directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities (MBS), a move he said is intended to bring mortgage rates down.

Bloomberg reported that Ackman, who is the founder and chief executive of Pershing Square Capital Management, claims he has discussed policy ideas with the White House, including proposals involving Fannie Mae and Freddie Mac, companies in which he invests in. Ackman has said that those talks have included Trump, Bessent, Commerce Secretary Howard Lutnick and Pulte.