How would a second Trump presidency change the mortgage industry?

June 17, 2024 5:30 AM

Would Donald Trump's return to the White House be good for the mortgage industry? Experts aren't so sure.

The majority of mortgage professionals voted Republican in 2020 and say they'll do the same this November, according to a recent Arizent survey. Many housing finance players still support President Biden, but the business is about the most Republican-leaning group among their financial services peers also surveyed.

No matter who's in the Oval Office over the following four years, stakeholders suggest neither leader will directly help lenders and origination activity.

"We're not assuming the election changes anything significantly for the mortgage industry," said Bose George, managing director at Keefe, Bruyette and Woods.

Lenders are most worried about interest rates, a number the president, despite any past criticisms, has no control over. Experts who spoke to National Mortgage News about a possible Trump second term pointed to the small impacts his potential second term could deliver.

Business-friendly policies

The Biden Administration has sought to address the current housing crisis, although the President's calls to action this year have been met with skepticism. Biden's Department of Housing and Urban Development delivered a victory for the industry last year when it slashed the mortgage insurance premium for Federal Housing Administration loans.

"A lot of the stuff they've done to help on the affordability front is only on the margins," said George. "It hasn't really changed things very much."

Trump's appointees at housing agencies could be his most important moves. MBA CEO Bob Broeksmit recently took aim at Washington, calling for a housing czar to corral oversight from numerous regulators.

George suggested Trump would fire Consumer Financial Protection Bureau Director Rohit Chopra on the first day of his administration, a move that could kill the Bureau's title insurance pilot and lessen scrutiny on so-called "junk fees" in the home loan closing process.

"I think you'd see a very different approach in the Trump Administration that would be more akin to the (former directors) Kathy Kraninger or Mick Mulvaney models," said Bill Killmer, the MBA's senior vice president for legislative and political affairs. "Which was, meeting the statutory mandates, but not playing in the gray areas as much as the Democratic administrations or directors have."

Realtor commissions

The government is still reacting to changes brought on by the Realtor commissions settlements. The Department of Justice is diving back into its investigation into the National Association of Realtors, after a U.S. Circuit Court of Appeals paved the way for its probe reopening last month.

KBW's George said he doesn't see the new Realtor commissions structure, or the DOJ's probe, changing much under a different incoming administration. The feds' agreement with NAR, which it later undid, came during the final months of the Trump Administration in 2020.

"We're feeling a Trump administration wouldn't reverse this," he said.

Marty Green, a mortgage industry attorney and principal with Polunsky Beitel Green, said he anticipates the DOJ to project caution regarding its probe ahead of November.

"If you saw a change of administration, going back into a Republican regime, I do think that you would see a less active DOJ in this space," he said. "So that might change how they move things going forward."

Fannie and Freddie’s future

President Trump in his first term called the conservatorship of Fannie Mae and Freddie Mac an "urgent problem" but his administration didn't end the over 15-year government oversight. The increasing likelihood of a second Trump administration, however, has renewed that prospect, and KBW recently upgraded its stock ratings on the government-sponsored enterprises to outperform, George said.

Despite the outlook, KBW acknowledged privatization would be challenging, and a concerted effort could take until the end of the next term. Former Federal Housing Finance Agency director Mark Calabria said as much in March; and Killmer agreed.

"I do think there'll be more of an emphasis on taxpayer protection, and trying to revive elements of the private mortgage securities marketplace," said Killmer of a second Trump administration.

Experts suggested momentum could revive should former Treasury secretary Steven Mnuchin, a veteran of the housing finance sector, return to his post. Otherwise, lenders under another Biden term would see the GSE continue to pursue policies regarding easing home buyer affordability.

Tax impacts

Tax policy will be a priority for either incoming administration, experts said. The Tax Cuts and Jobs Act, the landmark bill Trump signed in his first year in office, is set to expire in 2025. President Biden has pledged to let the cuts expire, while Trump has suggested letting them lapse would harm the economy.

Killmer said the MBA wants to ensure "appropriate incentives" for both consumers and businesses stay in place to promote investment in real estate production.

"No matter whether it's Biden or Trump for a second term, with whatever combination in Congress, there's gonna have to be some action," he said. "You can't have the economic impact of the individual provisions expiring without taking some kind of action."

Extending the Trump tax cuts would add $4.6 trillion to the federal deficit, the nonpartisan Congressional Budget Office reported earlier this month.

The MBA and a coalition of real estate trade groups have also called on lawmakers to support a bevy of bills to promote affordable housing development. Many of those bills, such as the Neighborhood Homes Investment Act, a single-family alternative to the Low Income Housing Tax Credit, have bipartisan support in Congress.

Interest rate fervor

Trump held a slight edge in polling as of late May. Experts agreed a second Trump term would generally remove regulatory impediments.

Christopher Thomas, a broker in Michigan, also feels indifferent about November's results. His company, Iris Mortgage in the Grosse Pointe Park suburb of Detroit, has just four employees. The shop's size makes health care costs difficult – Thomas said Iris' health insurance deductible is over $9,000 for the year.

"The changes that I want to see, I don't think either candidate is going to produce for me," he said.

Still, Thomas and his peers are laser-focused on interest rates. The Federal Open Market Committee left rates unchanged at its most recent meeting, and predictions for the next interest rate cut have varied as central bank leaders often recast their messaging.

"Are these gonna hit right before the election, or are they gonna hit after?" said Thomas. "Is somebody going to be the hero, or the villain, based on the timing?"