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President-elect Donald Trump's win in November, combined with a Republican majority in Congress, has led to some optimism in the mortgage industry regarding beneficial policy changes.
Republicans in the House soared to victory in November, with Reps. French Hill of Arkansas and Andy Barr of Kentucky each winning their races due in part to their positions on finance issues. Both are contenders for the top Republican spot on the House Financial Services Committee with the retirement of Rep. Patrick McHenry, R-N.C.
Trump had little to say about housing on the campaign trail, but some observers expect his administration to resume work on ending the government-sponsored enterprise conservatorships. Whether or not they complete that process remains an open question.
Eric Hagen, an analyst at BTIG, commented on the future of the GSEs in his Nov. 5 mortgage finance roundup report.
"In a Trump victory, we still see better near-term upside for the preferred stock, which have collectively built [approximately] $25 billion of capital from retained earnings over the last year," Hagen wrote. "We're marginally more constructive on the opportunity for credit risk transfer transactions to proliferate in a Trump administration given the potential read-thru it creates for accelerating a release from conservatorship, although it could depend on the leadership development at Treasury and FHFA."
Housing was a key issue in local elections, with residents in some locations voting on property tax changes.
Florida voters easily passed Amendment 5, which provides an annual inflation adjustment for one of the state's $25,000 homestead tax exemptions. The change will take effect every Jan. 1, based on any positive percentage change the U.S. Department Department of Labor records in its Consumer Price Index.
Georgia voters passed Amendment 1, which will also tie annual property tax increases at the rate of inflation for existing homeowners. The assessment will reset to current market value if a home is sold.
Arizona voters passed a measure that in some cases could wipe out their relatively low tax burden entirely. Proposition 312 allows property owners to apply for a property tax refund if their locality isn't enforcing public nuisance laws, and they incur documented expenses to mitigate related damage to their property.
The quality-of-life laws include illegal camping, loitering, panhandling, public urination or defecation, public consumption of alcohol or possession and/or use of illegal substances. Homeowners who meet the criteria can apply for the property tax annually.
Read more about how Trump's win and other election outcomes are impacting the mortgage industry.
Elon Musk.
Andrew Harrer/Bloomberg
Elon Musk and CFPB elimination
Elon Musk said the Consumer Financial Protection Bureau should be eliminated, calling the organization an example of "too many duplicative regulatory agencies," after Marc Andreeson, the Silicon Valley venture capitalist, said on a Joe Rogan podcast that the bureau was "terrorizing financial institutions."
The ability of Musk, co-head of a new entity called the "Department of Government Efficiency," and of the Trump administration to shutter the CFPB, however, is limited and would take an act of Congress.
"However fortunate or unfortunate, the CFPB was established by an act of Congress — requiring an act of Congress to 'delete,'" Aaron J.B. Kofsky, Vice President-elect JD Vance's former financial policy advisor, told Claire Williams. "And I just don't think the votes are there. While I take issue with much of the CFPB's work, conservatives should instead focus on weaponizing the bureau to charter an America First course."
What the end of GSE conservatorship will mean for mortgage rates
While the election results improve the chances for the Fannie Mae and Freddie Mac conservatorships to end, the immediate impact on mortgage rate activity will be minimal, BTIG analyst Eric Hagen wrote in his Nov. 13 Mortgage Finance Roundup.
"The likelihood improves for the GSEs to get pushed toward a recapitalization and release from conservatorship under Trump's administration… but over the near term we see mortgage rates and MBS spreads having low sensitivity to the developing conversation surrounding a recap-and-release scenario," he wrote.
Rate and volume-driven "macro headlines," and projections for Treasury bond supply remain the near-term drivers for how MBS spreads will move. A stronger catalyst for spread movement would be the Federal Reserve ending the quantitative tightening program early in 2025, Hagen added.
In recent local elections, voters in two southern states passed measures tying their property tax burden to the pace of inflation, while voters in another red state failed to pass a more controversial measure that will allow them to get property tax refunds if public nuisance laws aren't enforced. Veterans will also see greater property tax savings in three more states.
"Every movement towards a little bit more affordability is a good move," Eddie Blanco, a realtor with Stratwell and chairman of the board-elect for the Miami Association of Realtors, told National Mortgage News' Andrew Martinez. "It just hedges the concern that people have about inflation, and the impact that has on taxes."
Other Americans this election cycle opened the door for their state legislatures to debate property taxes. A more extreme move to completely erase property taxes in another state meanwhile was defeated.
Donald Trump's election win will likely bring changes to the Federal Reserve Board of Governors, but the range of potential shake-ups varies widely.
At a minimum, Trump will have the opportunity to appoint two governors to the board during the coming four years and determine the leadership of the body. He also suggested he would attempt to exert more influence over monetary policy and advisors in his orbit have called for more substantial changes to the central bank.
And, in the waning weeks of the campaign, reports surfaced that Trump could try to demote the Fed board's top regulatory official, Vice Chair for Supervision Michael Barr.
"It's an outcome that is very unpredictable," Angelo Manolatos, an analyst with Wells Fargo told Kyle Campbell. "What we do know is that there will be a lot of changes. However, the timing and whether or not there's noise along the way is hard to know."
Reactions to Trump's election win in the mortgage industry
After President-elect Donald Trump's election victory, Treasurys rose the following day after the Republican sweep of the White House and U.S. Senate. The market is anticipating a Federal Reserve interest rate cut, but is also wary of a Trump Administration's prospective tax cuts and adding to the federal deficit, the Mortgage Bankers Association said on November 6.
Lending CEOs, capital markets experts and industry watchers told National Mortgage News to anticipate a pullback in regulatory action, and general efforts by Capitol Hill to aid home buyers.
"The next few years should provide our industry with some positive momentum and less regulations," Glenn Stearns, CEO of Kind Lending told National Mortgage News' Andrew Martinez. "We may be able to get legislation through that promotes homeownership."
Known as a pragmatic moderate before arriving at the Fed, Vice Chair for Supervision Michael Barr is now synonymous with an aggressive and divisive approach to bank regulation. Can he still accomplish his goals under President Trump?
