Mortgage industry professionals have raised some concerns amid the broader praise for President Trump's executive order signed Friday, which aims to loosen mortgage lending regulations.
Many of
Consumer groups fear the worst will happen
The National Consumer Law Center predicts that the deregulation will recreate the perilous conditions that led to the Great Financial Crisis.
"President
Beyond undoing Dodd-Frank reforms, the rule would allow regulators to gut statutes passed in the 1960s, 1970s and 1980s, the NCLC argued.
"For decades, we have worked to ensure that all borrowers, including Black, Latino and Native American borrowers who have historically been discriminated against, get the credit they have earned," said Odette Williamson, NCLC director of racial justice advocacy. "This order reverses those efforts and opens the door to rampant racial discrimination in mortgage lending."
Looking for these reforms for over a year
The Mortgage Bankers Association's statement supports the increased focus on affordability from both the Trump Administration as well as Congress, with
The executive order "covers a lot of the right issues that we've been talking about for the past year, about the opportunity to reform some of the Cordray- and Chopra-era rules," said Pete Mills, the MBA's senior vice president, residential policy and member engagement, in an interview. Some of the rules passed when Rohit Chopra was CFPB director might have been outside the scope of Dodd-Frank.
The order addresses a lot of those areas, including appraisal and non-qualified mortgage lending.
"What it's missing is the fact that those reforms ought to apply equally to all consumers and lenders, regardless of charter types," he said. Regulators should streamline things like the TILA-RESPA Integrated Disclosures for everybody, not just community banks.
But don't expect them anytime soon
Mortgage lenders should not anticipate any major regulatory changes to happen very soon, said Richard Horn, co-managing partner at Garris Horn, in a blog post.
The Consumer Financial Protection Bureau could make a "substantial number" of proposed rule changes in the coming year. "But keep in mind, rulemakings, especially substantial changes to a marketplace, can take a long time," Horn said.
Ironically, the order may keep the CFPB from completely shutting down as
"This order, because it directs the CFPB to consider many amendments to its rules and supervisory policies, may place pressure on the CFPB to at least keep some staff to work on the regulatory and supervisory parts of this order," Horn said.
He doesn't think the CFPB will restart doing examinations and investigations, and much of the order seeks a relaxed enforcement posture for mortgage rules anyhow.
Among Horn's other points is that the industry could have substantial implementation costs for absorbing any new rules into their processes and technology.
"The CFPB should consider these potential implementation and increased costs in a thorough cost-benefit analysis before promulgating any such final amendments," he said.
Having different rules for banks and non-banks is also likely to increase compliance costs for all, he said in a follow up comment.
The order addresses a scheme that puts disproportionate compliance costs on lenders while not adding consumer protection benefits, said Peter Idziak, senior associate at Polunsky Beitel Green.
"The order's emphasis on QM/ATR reform, TRID timing rules, HMDA modernization, and digital closing standardization directly addresses several operational friction points that have directly resulted in increased costs to borrowers," Idziak said.
"Notably, the order signals a substantial rulemaking agenda ahead for the CFPB, suggesting that the Bureau will remain an active regulatory presence, albeit one redirected toward eliminating barriers to credit rather than erecting them," Idziak said.
Horn,
If anything, consumer groups are likely to file legal challenges if revisions are made, especially without any of CFPB's own analysis in the mix.
So the Bureau should do its own analysis especially because the last five-year look back at the rule seemed like a rushed, superficial effort, Horn said.
Will the ROAD to Housing be affected?
The executive orders could also affect the future of
The Senate version of the bill contained some compromises, trimming a bit of the red tape, but keeping environmental and building rules in place, Paul Hindman, an industry consultant, wrote on LinkedIn.
Even though the Senate version did codify the President's institutional investor executive order, some have speculated whether he would have signed the final version.
"However, by dropping two executive orders, Trump essentially said, 'I'm not waiting for Congress to talk; I'm fixing it now," Hindman wrote. "It turns a 'team effort' into a 'Trump win.'"
Trump is stepping on the bill with his executive orders, and he signaled he did not want across the spectrum collaboration.
"The housing bill is still a slow-moving collaboration that requires everyone to participate and agree," Hindman said. "Trump's EOs are simply a done deal."
Samuel Royer, the founder and mortgage loan officer at Salute Home Loans had authored and received some Congressional support for an amendment to the ROAD to Housing Act designed to assist first responders into properties.
The amendment, also known as the HELPER Act, was introduced by Sen. Ashley Moody, R-Florida, with Sen. Jon Ossoff as one of the co-sponsors, but failed to get included in the legislation.
The act is still a stand-alone bill so it could be included in other packages, Royer said.
Regarding the executive orders, Royer is thankful the president is taking a stance on what needs to change in housing.
"Although I did not fully agree with the limited scope of the 21st Century ROAD to Housing bill passed in Congress, now President Trump's EOs do put some action behind the mission," said Royer. "But I think we are still missing many of the objectives facing American citizens trying to obtain homeownership today."
He pointed to comments from Department of Housing and Urban Development Secretary Scott Turner about the $16 billion increase in Federal Housing Administration reserves."
"Something needs to change because the federal government should not be making money on the backs of the Americans it was set to serve, especially when the reserve fund that is there to protect has a 500%-plus overabundance of resources at its hands," Royer said.
Good for all if it works as intended
If the executive order succeeds in its intent, this would be good news for both mortgage bankers and borrowers, said Melissa Cohn, regional vice president for William Raveis Mortgage.
"The real question is how it will get implemented and how long it will take," said Cohn. "As we know, change in the mortgage world comes slowly."
Meanwhile, the CEO of real estate franchisor Century 21 commented on both the Senate bill and the executive orders, calling the former "a meaningful step forward.
"This bill gets a lot right: expanding supply, opening doors for first‑time buyers and modernizing the programs that make homeownership possible for working families," Mike Miedler said.
"And now, with the administration also directing federal agencies to streamline permitting, expand access to qualified mortgage lending, and modernize appraisals through new technologies, we're seeing real momentum toward tackling the structural barriers that have held housing back."
But the provisions in the Senate bill about FHA multifamily loan limits and the restrictions on build-to-rent create "real friction" for homebuyers, Miedler said. So what needs to come is a clean bill.
Mortgage trade groups comment positively
Industry trade group comments were generally positive.
"We appreciate the President's recognition of the
"The executive order reinforces the important work already underway by FHFA, HUD and the banking agencies to expand the availability of housing and make it easier for Americans to become homeowners."
The Community Home Lenders of America statement issued Friday referenced comments it made following the Senate's vote on Thursday.
"Only time will time whether and to what extent these homeownership executive orders will translate into transformative action by the federal agencies," the CHLA statement said.
"However, yesterday CHLA issued a call for a moon shot landing type of commitment to solving our homeownership crisis — and today's executive orders look like the first retro rockets in that type of commitment."
Taken together, both executive orders show the importance of addressing the supply and financing challenges together in today's housing market, said David Dworkin, president and CEO of the National Housing Conference.
"Modernizing mortgage regulations, updating appraisal requirements, streamlining reporting rules and expanding digital mortgage tools can help community banks and smaller lenders better serve their communities," Dworkin said in a statement. "Reducing unnecessary compliance burdens can expand access to responsible mortgage credit, particularly for first-time buyers, rural communities and small residential builders."
During the Biden Administration,
In the executive order, President Trump ordered regulators to modernize appraisal regulations.
"As policymakers consider potential regulatory changes, it is essential that reliable collateral valuation remain a cornerstone of safe and sound mortgage lending," said Michael Acquaro-Mignogna, president of the Appraisal Institute in a statement.
"Independent appraisals provide critical protections for borrowers, lenders, and taxpayers by ensuring mortgage lending decisions are grounded in credible, market-based property valuations."
