Housing affordability remains in the spotlight on Capitol Hill
Housing affordability challenges are nothing new, but they are receiving extra attention in Washington right now as both political parties work to implement solutions.
The House and Senate have both passed their own housing bills, although it is unclear which, if either, will ultimately pass both chambers in reconciled form and end up on the president’s desk
Meanwhile, President Donald Trump last week signed a new executive order to try to combat some of the affordability challenges in the housing industry.
But what does all this mean for mortgage brokers? One mortgage attorney said the executive order was one piece in the puzzle currently being assembled on Capitol Hill.
Peter Idziak (pictured top), a senior associate and mortgage attorney at Polunsky Beitel Green, said the first thing brokers need to understand is what an executive order does, and what the changes might mean for a resurgent Consumer Financial Protection Bureau (CFPB).
“A lot of people think an executive order changes the law or changes regulations,” Idziak told Mortgage Professional America. “But it's really an order to heads of executive agencies to do things, to undertake studies, revise rules, that sort of thing. There was a recent court decision that requires the CFPB to still be funded, some indication that you've got to operate it at a level that actually can accomplish the statutorily required functions of the CFPB.
“The CFPB will have work, and it may even require hiring additional personnel, hiring back the personnel that may have left the bureau, to undertake this work. The executive order requires a significant amount of study and rule writing, which the current level of staffing may struggle to get through in a short amount of time.”
All about affordability
Idziak said the executive order serves several functions in the overall scope of housing affordability and helping the House and Senate get one housing bill passed. The first thing it does is the root of most political action: to earn points for upcoming elections.
“I think you have to look at it sort of in the larger context of everything else that's going on in Washington right now concerning home affordability,” he said. “The House and the Senate have both passed their versions of housing reform. There are significant differences. The real question is, what are we actually going to get out of this? Within that environment, you have this executive order that comes out, and I think there are two main reasons for it.
“One, midterm elections are coming up. Affordability is a big topic. The Trump administration wants to be seen as driving policy in this space. That’s one reason for it: being able to claim credit for anything that does pass.”
The other main reason for the order revolves around a major point in the House version of the bill that isn’t in the Senate version, which revolves around loosening regulations for small banks.
“There's a heavy focus in this EO on community banks and small banks,” Idziak said. “One of the big differences between the House and Senate bills is that the House version includes a lot of provisions to loosen regulations and reduce costs for community banks in the mortgage space. The Senate bill does not.
“The thinking is that this executive order is intended to sort of give House Republicans, who may be wary of voting for the Senate version, some comfort that, through executive action, some of the provisions that would have been included in the House bill will still be accomplished.”
How brokers may benefit
Idziak has received many calls from clients wondering if there would be any immediate changes based on the executive order.
“When clients call me asking about what's going on, first words out of my mouth are ‘Well, nothing's actually changed yet,’” he said. “’So, keep doing business the way you've been doing it, especially from the compliance and risk management side.’”
He expects that Congress will eventually get a reconciled housing bill passed, but nobody is really sure what will be in that final bill. Another issue Idziak is keeping an eye on for potential addition to the housing bill is the president’s proposed institutional buyer ban.
“You’ll get something passed through Congress, but what the final form is can be somewhat different from what's been proposed so far,” Idziak said. “The big issue on that would be the build-to-rent ban for institutional investors, which will be a main sticking point. That has been a significant driver of marginal home sales over the last few years.
“If that ban remains in place, what you'll see, at least initially, is you have a lot of homes that are already under construction that maybe now don't have that institutional buyer demand. So hopefully, from a borrower-buyer standpoint, you will see increased affordability.”
Not only could this improve affordability for customers, but Idziak thinks that mortgage brokers may also benefit by getting more construction loans that might have gone to institutional buyers in the past.
“For brokers, it might be a chance to capture more builder business that might have been planned to go to an institutional investor that has now recalibrated their plans because the landscape changed on the regulatory side,” Idziak said.
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