What lenders want from Trump White House, Congress in 2025

December 23, 2024 2:11 PM

Mortgage leaders have their regulation wish list ready for the Trump administration and a Republican-dominated Congress.

Their agenda includes calls to reverse or walk back Biden-era rules and proposals that could hinder opportunities for homeownership or hurt industry players themselves. Other trade group efforts will focus on longstanding regulations like the loan officer compensation rule, or legislation like the Real Estate Settlement Procedures Act.

The president-elect is expected to usher in an era of deregulation, although how that will extend to housing remains uncertain. Trump has made just one nomination to a housing post, and despite outside noise has been mum on the Consumer Financial Protection Bureau. Amid the pre-inauguration uncertainty, experts are optimistic for future productive dialogue with the incoming government.

"I take the rhetoric at face value that they're very concerned both with reducing ineffective or duplicative regulation and also unlocking more housing affordability and housing supply," said Justin Wiseman, vice president for residential policy and managing regulatory counsel for the Mortgage Bankers Association.

National Mortgage News spoke with industry trade groups regarding what suggestions they'll have for the incoming administration and legislators.

LO Comp

Mortgage veterans laud some aspects of the rule but familiar gripes remain for the regulation originally implemented to prevent steering. Wiseman pointed to three specific portions of the LO comp rule the industry wants addressed, which were part of the MBA's response to a CFPB's inquiry last spring.

The industry wants LOs to be able to reduce their compensation for bond programs; allow lenders (where allowable within wage laws) to reduce it when an LO makes a costly mistake; and allow adjustments for pricing concessions to aid consumers and encourage competition.

An amendment for pricing concessions would still forbid originators from charging and making more, said Wiseman. The rule as it stands disenfranchises lower-to-moderate income buyers by restricting their financing options, according to the National Association of Mortgage Brokers.

"When you get to a certain dollar amount of a loan, more often than not it's going to cost the LO and that business money to originate rather than making a profit," said Valerie Saunders, NAMB's chief executive strategist. "You can only do so many loans where you lose money to where you're forced to create a floor you can't go below."

NAMB has previously asked for lender-paid compensation to not be included in the rule's 3% points-and-fees requirement, which would allow more lenders to offer smaller loan amounts. It also asked for the small creditor definition to extend to smaller brokerages.

"We don't want federal rules to be just black and white," Saunders said. "We want some gray because gray provides some flexibility."

RESPA

The Real Estate Settlement Procedures Act was signed into law 50 years ago Sunday. Industry voices are eying long-overdue updates to the rule's Section 8, prohibiting kickbacks and referral fees.

The MBA in October released a white paper proposing modernizations, including clarifications on how the CFPB weighs marketing service agreements and desk rentals. The trade group wants the regulator to clarify how it determines violations, as it has arguably applied its own interpretations of laws in prior enforcement.

Industry experts also want RESPA to respond to the digital age, where marketing on Facebook, LinkedIn and Instagram is abundant. Wiseman said the MBA has had preliminary conversations with the CFPB regarding RESPA updates and hopes to engage with them in the new year on modernization.

Loss mitigation

The CFPB this summer proposed rules around loss mitigation for servicers that, among other requirements, would limit fees servicers could charge borrowers during reviews. Lawmakers raised concerns with the Bureau earlier this month that while the rules offer protections for consumers, they will increase operational costs for companies.

A public comment period for the proposal ended in September. Mortgage groups say it needs fine tuning.

"Our main concern was that it potentially set up an endless process of people asking for loss mitigation opportunities," said Scott Olson, executive director of the Community Home Lenders of America. "And we definitely think the borrower should get a shot at it, but it shouldn't drag on indefinitely."

Wiseman said the MBA views aspects of the proposal as not fully defined. However, he said he's optimistic the modernization of servicing rules would appeal to incoming leadership.

"Without knowing who the director is and what their agenda is, it's very hard to speculate on what the rulemaking would be," he said. "But I'm certainly hopeful that things like a limited finalization of the Regulation X rule would appeal to a director who wants to make the CFPB work better for everyone."

GSE rules

NAMB believes two Biden-era rules at the government-sponsored enterprises are hindering homeownership opportunities. The group wants to see the Area Median Income qualification on Freddie Mac's Home Possible program go back to 100%, from 80%, a change implemented in 2023.

"You would have a larger number of people that can take advantage of those programs," said Saunders.

The broker group would also like to see the Federal Housing Finance Agency remove the GSEs' 12-month cash-out seasoning rule and return it to six. Many buyers have purchased homes with elevated mortgage rates. While they hold a lot of equity, consumers are also carrying heavy credit-card debt, Saunders said.

"If you have to wait 12 months, having to continue to pay high credit-card interest rates instead of being able to take advantage of the equity you have built seems to be doing a disservice to homeowners," she said.

Wiseman noted that the FHFA will have to take a holistic view of this, weighing GSE moves regarding their portfolio risks against their housing accessibility and affordability missions.

"We may see that balance shift a little bit in this administration, and we're certainly watching for it, but we do believe the GSEs can lend in ways that are both innovative and responsible," he said.

Title insurance

The title insurance industry has seemingly been in the government's crosshairs this year. The CFPB has mulled making lenders pay title insurance and has characterized the coverage as "junk fee," while the FHFA is moving forward with a title waiver pilot.

The American Land Title Association slammed the government's moves, and last month bipartisan lawmakers backed its call to stop the FHFA's pilot. In a statement last week, ALTA said it looked forward to working with the incoming government.

Given the FHFA has not dropped its title waiver pilot, Wiseman anticipates a Trump administration response.

"It's really important to understand the benefits that title insurance can provide to the borrower as well as the lender, and not simply look at it as we can reduce closing costs by eliminating the need for lender title insurance that places, I think, significant risk on the borrower," he said.

Some lenders, like United Wholesale Mortgage, have been in favor of increased use of title insurance alternatives in certain situation when the risk is lower as a means of bringing down costs.

Future considerations

Other government moves remain in flux. Wiseman called on items such as the Department of Veteran Affairs' Servicing Purchase Program and the FHFA's payment supplement partial claim option to receive continued support.

Saunders also is in favor of ending the FHA's life-of-loan mortgage insurance premium, which lawmakers in the lame duck session recently looked to nix.

No industry leaders have called on the CFPB to be "deleted", as Trump acolyte Elon Musk has. However, the CHLA's Olson cautioned of the "dual regulatory overkill" the bureau still presents. He shared as an example the CFPB's repeat offender registry that exists alongside the Nationwide Multistate Licensing System's own database. Smaller lenders don't have the economies of scale to keep up, according to Olson.

"There needs to be streamlining and exempting the smaller entities that are just getting killed by the work," he said.