Written By: Joel Palmer, Op-Ed Writer
What impact will President Donald Trump have on mortgage processors and underwriters over the next four years or more? The answers may be as unpredictable as his campaign and as surprising as his victory on Election Day.
For starters, it’s difficult to gauge the impact of a President Trump, who had no political experience prior to running for president. Unlike with past presidents, one cannot glean insights from a Congressional voting record or time spent governing a state. Nor are there much in the way of policy statements from Trump that directly mention his ideas for housing and mortgages.
Further clouding the picture is the fact that housing was not a major campaign issue. Both candidates said very little about this critical sector of the economy or how their administrations could improve upon historically low homeownership rates.
Based on what he said during the campaign and some of the actions taken during his transition into the Oval Office, here are a few ways President Trump can shape the housing market and the jobs of mortgage underwriters and processors.
On the one hand…
President-Elect Trump campaigned on many economic promises aimed at the working class, such as minimizing the negative impact of international trade deals on employment. If he maintains this focus on the working class, it’s conceivable he’ll also support policies that better enable home ownership.
….But on the other hand
His tax plan stated that “mortgage interest deductions will remain unchanged for all taxpayers.” Since the current deduction generally favors wealthy homeowners, leaving the status quo won’t do much to encourage homeownership among the middle class.
On the one hand…
The President-elect’s plan for increasing home ownership seems to center on making it easier for lenders. He has publicly stated a desire to overhaul the 2009 Dodd Frank Act, which he claims makes it more difficult for small banks to make mortgage loans. This could potentially lead to a reduction in compliance costs, especially for smaller banks, and the lessening of the regulatory burden could open the door for more home construction loans as well.
There may also be changes to the Consumer Financial Protection Bureau (CFPB), put into place in the wake of the housing crisis to protect consumers from predatory lenders. Trump and his supporter have argued that the CFPB also makes it more difficult for certain lenders to do business. So, look for anything from reducing its oversight responsibilities to completely dissolving the agency.
It’s also widely speculated that the Trump administration will pursue far fewer cases against lenders for False Claims Act (FCA) violations than the Obama administration. The FCA imposes liability on those who defraud the government.
In the case of mortgages, many in the industry believe the current administration was overly punitive toward FHA lenders for minor violations, which forced banks to become overly conservative in their lending practices. Without the threat of government lawsuits under the Trump administration, mortgage underwriting won’t have to be as stringent.
…But on the other hand
He has stated in the past a desire to eliminate the U.S. Department of Housing and Urban Development. Though he probably won’t or perhaps couldn’t follow through on that idea, his appointment of Dr. Ben Carson, a retired neurosurgeon, to head the agency has many critics who point to Carson’s public criticisms of fair-housing policies.
And don’t forget about interest rates
On December 14, the Federal Reserve raised the federal funds rate for only the second time in the past decade. The Fed projects three rates increases annually for the next three years, partly because of signs of a strengthening economy and partly due to Trump’s promises of tax cuts and significant infrastructure spending. Higher rates will slow refinancing activity.
But don’t count on those interest rate hikes just yet. Trump has been a vocal critic of Federal Reserve Chair Janet Yellen and will likely replace her when her term expires in 2018. His appointment might keep rates downs at Trump’s behest to make lending cheaper.
The bottom line for those in mortgage processing and mortgage underwriting? Be prepared for just about anything to occur following Inauguration Day and for the next several years to come.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.