Overseas investors hold about $1.36 trillion in U.S. mortgage debt, with Japan, China, Taiwan and Canada accounting for 61 percent of that total.
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The Trump administration is looking to bring mortgage rates down by encouraging South Korean investors to step up purchases of mortgage-backed securities (MBS) guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.
The U.S. Department of Housing and Urban Development (HUD), Ginnie Mae and the Korea Housing Finance Corporation (KHFC) signed a memorandum of understanding this week aimed at strengthening the relationship between the U.S. housing finance system and South Korean institutional investors.
HUD Secretary Scott Turner met with Kyung-Hwan Kim, president and CEO of the KHFC — Korea’s version of Fannie Mae and Freddie Mac — for the June 10 signing.
“Working strategically with our South Korean allies, we are expanding the global understanding of American housing finance, while increasing capital flows in the United States, strengthening our domestic capital markets, and unlocking strategies to benefit American borrowers,” Turner said in a statement. “This agreement signals that, under President Trump’s leadership, our allies are ready and willing to do business in America again.”
Overseas investors hold about $1.36 trillion in so-called “agency” debt, with Japan, China, Taiwan and Canada accounting for 60 percent of that total.
U.S. agency debt overseas holdings
U.S. agency debt overseas holdings as of March 1, 2025. Source: Ginnie Mae Global Markets Analysis Report, May 2025.
With $35.5 billion in U.S. agency debt holdings (MBS, notes and bonds), South Korea ranks 10th, behind banking strongholds like Luxembourg, the United Kingdom, the Cayman Islands, the British Virgin Islands and Ireland.
Ginnie Mae President Alanna McCargo led a delegation to Asia in April 2023, meeting with MBS investors, financial institutions, and regulators in Taiwan and South Korea.
On that trip, Ginnie Mae officials “assured investors that the structure of Ginnie MBS will help to protect them from any potential issues tied to a possible U.S. debt default,” Inside Mortgage Finance reported at the time.
“Formalizing our partnership with KHFC through this MOU is a meaningful step in addressing housing challenges that extend across borders,” Ginnie Mae executive Joseph Gormley said in a statement Friday. “Korean institutions continue to play a significant role in our capital markets, and we look forward to working together to advance a shared understanding of global capital markets and to ensure the strength of our mortgage-backed securities.”
Although President Trump has berated Federal Reserve Chair Jerome Powell for not cutting short-term interest rates this year, mortgage rates are largely determined by investor demand for MBS.
MBS are seen as a comparable, if slightly riskier investment, than 10-year Treasury notes. Overseas investors own about 15 percent of the nearly $9 trillion in outstanding Fannie Mae, Freddie Mac and Ginnie Mae MBS.
Fannie Mae and Freddie Mac guarantee payments to MBS investors even if borrowers default on their loans. Ginnie Mae securities are backed by single-family mortgages originated through the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture’s Rural Development (RD), and Public and Indian Housing (PIH) insurance programs.
Mortgage rates surged in May after Moody’s Ratings became the last credit agency to strip the U.S. of its most favorable debt rating over concerns that Congress and “successive U.S. administrations” have failed to tackle annual budget deficits.
Fears that tax cuts Trump is attempting to push through Congress will lead to even more borrowing have investors demanding higher yields on 10-year Treasurys and MBS.
Trump adviser Peter Navarro has said investors believe the tax cuts aren’t paid for, and “are pricing in a future where the government borrows trillions more with no offsetting revenues.”
But Navarro and other Trump administration officials maintain that tax cuts will help the economy grow and generate more tax revenue than critics expect.
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