Mortgage

What the Biden administration can do within the housing sector

Mortgage experts see wider access to government sources of credit, but possibly tighter regulation under the new Biden administration.

Changes won't come quickly, however, especially if Republicans take control of the Senate after Georgia’s two runoff elections on Jan. 5.

And don't expect every move President Trump has taken over the past four years to be reversed, industry experts say.

Some of the Trump administration's ongoing initiatives, such as government-sponsored corporate reform, could move quickly, noted Bob Broeksmit, president and CEO of the Mortgage Bankers Association.

"The open question is whether [Mark Calabria, director of the Federal Housing Finance Agency] would put in place some sort of consent order that would allow him to get the GSEs out of the conservatory by Jan. 20," Broeksmit said.

Calabria's term of office is technically the next three years. A pending lawsuit dealing with the constitutionality of the FHFA's structure may allow Biden, depending on the outcome, to dismiss Calabria at will. This court case may take some time to clear, but it is expected to follow the same course as a similar case filed through the Consumer Financial Protection Bureau, noted Broeksmit.

In any case, the Biden administration will likely want to appoint a new director at some point.

"I would think a Biden FHFA director would want to focus more on the GSE's mission for affordable housing and find ways to implement those mandates," said Broeksmit.

This could potentially include more leeway for the GSEs to buy loans that are lenient before buying, said Brian Chappelle, partner at Potomac Partners.

"Hopefully, the 500 to 700 basis points paid for New Origins that are forgiven before loans are sold to Fannie Mae and Freddie Mac will be on the table," he said.

Chappelle also hoped for the elimination of a 20% partial compensation fee on Federal Housing Administration insured loans that are in forbearance before insurance.

While few loans fall into this category, "because of these two guidelines, lenders have introduced overlays so these price changes have definitely negated access to credit," he said.

"It is harder for potentially eligible borrowers to get mortgages today and I think these two guidelines help," he said, hoping the new administration could also improve access to credit by removing the refinancing fee and the associated costs Associated refinancing restrictions will be removed for your indulgence.

While policies that bolster affordable housing and credit expansion would help the industry, tightened regulations, often favored by Democrats, could hurt lenders and service providers.

"We're going to have a hell of a lot more regulations than we have in the last four years," said Peter Norden, CEO of HomeBridge Financial Services. "I hope we don't go back to the regulatory environment we were in when Obama and Biden were, because that would certainly be very negative for the industry … [regulation] takes time to put in place, but it's not happening over night."

Biden could try to create a Bill of Rights for homeowners and renters that would include penalties aimed at preventing predatory loans, DavisPolk noted in a report on Monday.

"In general, a democratic government will prefer more regulation than less," said Jennifer Keys, vice president of compliance strategy solutions at Covius. "I think with a Biden government, whatever happened to the pandemic and other problems will be given." I would expect a focus on fair living and fair lending. It could be a government more similar to that of the Obama era under CFPB leader Richard Cordray, with the rules set by enforcement. "

For servicers, one aspect of this regulation could include longer credit processing times.

"Obviously, with a Biden government, I would expect regulations and policies that are more borrower-friendly and more borrower-friendly. And that could potentially mean an extension of the foreclosure and eviction moratorium," Keys said.

However, some advisors believe that the relative health of the mortgage market will limit the level of Washington regulation. A wave of loose underwriting preceded the wave of regulation introduced during the Obama administration.

"It's very different now. We have a strong credit environment. Lenders have adapted to all applicable rules and the vast majority do so with an exceptional focus on making sure they are compliant," said David Stevens, CEO of Mountain Lake Consulting and former state housing officer in the Obama Department of Housing and Urban Development, "I don't think there is any unusual risk for lenders when it comes to maintenance or oversight."

A Biden government is unlikely to change the outlook for mortgage risk, said Rick Thornberry, CEO of mortgage insurer Radian.

“I think Calabria has a mission to consolidate and approve the GSEs. You could see Biden slowing that down a bit. At some point they have to be resolved. But I would say we are really comfortable in both scenarios. "

Awaiting the outcome of the Georgian Senate runoff election, a fairly tightly-knit mix of Republicans and Democrats in Congress could also limit the Biden administration's ability to incentivize housing and regulation, Stevens said. This includes the first-time homebuyer tax credit that Biden has endorsed.

One of the most immediate mortgage measures the Biden government could take indirectly is to restore the ability of so-called dreamers to obtain FHA loans.

Biden said one of his first steps would be to put in place an executive order to restore the program of delayed action on the arrival of children to give undocumented children the right to live in the US without being deported.

Since residency is the yardstick these potential borrowers need to set in order to include these loans in the FHA handbook, there is speculation that depending on the wording, restoring the DACA could make them back-eligible.

"If there is a Dreamer Executive Order, it could have an immediate impact on DACA policy at the FHA," said Chappelle.

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