Is Trump good for home loans?

Is President Trump good for home loans?

Minneapolis, MN: Its only been two weeks, but clearly the new Trump Administration is driving a different road from the past administration. Only time will tell what this all means for real estate and home mortgage loans, but here are a few observations, most relating to a reduction in regulations.

After the housing collapse, legislators and regulators came down hard on the mortgage industry under the false belief that if you could fog a mirror, you automatically got a loan.  While guidelines were looser, and third party verification of documents supplied by home buyer were lax, NO LENDER ‘knowingly‘ let the french fry guy at McDonald’s buy a million dollar home.

Were there a few bad players? Yes, But think of it more as it was easy to beat the system, as opposed to everyone in the mortgage world was a crook.

The Frank-Dodd financial reform laws, and the creation of the Consumer Financial Protection Bureau (CFPB) put the hammer down on many industries, not just mortgages. Of all the new regulations, only a few actually made a difference and make sense. The rest have cause home buyer costs to rise dramatically, added huge paperwork and delays to closing, and ultimately left many good people unable to buy homes because of unintended consequences.

It is expected that the Trump administration will go after many of the Frank-Dodd financial reform rules, and seek to reign in the CFPB, resulting in fewer rules, regulations, and paperwork. Meaning lower costs for home buyers, quicker closings, and less hassle to get a home mortgage loan.

A prime example is the CFPB designed a new ‘Loan Estimate‘, which replaced the ‘new’ Good Faith Estimate, which replaced the old Good Faith Estimate that existed since 1972. Today my clients are more confused than ever over the document and disclosures.

A second example is Loan Officers themselves. The rules put into place after the crash REQUIRE non-bank Loan Officers to go to school, pass difficult state and federal testing, and have mandatory continuing education. Sounds great, but Loan Officers at depository lenders (banks, credit unions, and lenders owned by banks or credit unions) DO NOT have to pass the same requirements of the S.A.F.E. Act. Don’t they all do the same thing? Why to bank Loan Officers not have to go to school, pass federal testing, or meet the same educational requirements?

Another example is that over the past 10-years, and especially the past 5-years, many lenders have pulled away from writing FHA loans. While not just for first time buyers, those are the people who primary use FHA loans. This was done because the Obama administration went after lenders from every angle under the False Claims Act for any minor error in FHA underwriting. Failing to cross even the most minor T, or dot the smallest I could have, and did,  leave lenders with huge multi-million dollar settlements paid to the government.

I’m all for slapping the hands of people doing blatantly wrong things. But lenders are not stupid. If the government is going to come after you for minor items, why bother.  It isn’t worth it. Those still offering FHA loans charge higher rates than needed to new buyers to offset anticipated government lawsuits. Someone has to pay those lawsuits, and it has simply been pass on to the consumer.

It is expected the Trump administration will have the CFPB and the Justice Department back off of their overzealous pursuit of lenders.

A smart balance of less unnecessary regulation, less paperwork, and a positive attitude towards business should be good for mortgage loans, the financial markets, home owners, and the country in general. It is way too early to tell, but lets all pray the county goes in a good direction.


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