A Phil Hall Op-Ed: On Friday late afternoon, the Trump administration abruptly dumped a pair of executive orders online with the headings “Promoting Access to Mortgage Credit” and “Removing Regulatory Barriers to Affordable Home Construction.” Why the White House waited until Friday afternoon for an announcement is peculiar, since that is a time traditionally reserved by previous administrations for releasing bad news in the hopes that most people heading off for the weekend won’t notice.
Equally confusing is why these executive orders came out long after the president’s State of the Union speech (where he barely touched on housing issues) and shortly after the Senate overwhelmingly voted on the 21st Century ROAD to Housing Act.
The White House, however, doesn’t see a problem. “President Trump has been laser-focused on making housing more affordable,” said White House spokesperson Davis Ingle with the release of the executive order.
I have no idea what laser Trump is focusing with, but there is very little in either executive order or previous statements and actions to suggest housing affordability is a Trump priority.
Mortgage Mayhem
The “Promoting Access to Mortgage Credit” executive order concentrates on widening the availability of mortgage credit. This is baffling, since mortgage credit availability is not a problem. Earlier this month, the Mortgage Bankers Association (MBA) reported that its Mortgage Credit Availability Index (MCAI) for February was at a reading of 107.1; the index was benchmarked to 100 in March 2012.
Still, the executive order insists that changes need to be made in the mortgage origination process. These include “simplifying appraiser qualification requirements,” “aligning supervisory expectations to support portfolio mortgage servicing as a core community banking function,” and “ensuring that supervisory evaluations of performing, prudently underwritten portfolio loans do not focus on technical defects or rely on evolving supervisory interpretations.”
In this executive order, the administration seems to be “laser-focused” on everything except “making housing more affordable.” Will dumbed-down appraiser qualification requirements help anyone get a lower-priced home? And how are prospective homebuyers helped by having community banks performing double-duty as mortgage servicers?
Backing Builders
“Removing Regulatory Barriers to Affordable Home Construction” is aimed at builders, under the belief that lightening the regulatory load that builders carry will result in lower-priced homes.
To its credit, the administration has rolled back some of the onerous “Green New Deal” policies that the Biden administration enacted on home construction. And one positive aspect of this executive order involves “re-examining restrictions on the use of manufactured or modular housing on the basis of the construction method rather than objective standards for building and safety, aesthetic requirements, or prohibitions on construction when comparable site-built housing is permitted.”
Still, this executive order seems to view every home construction-related regulation as an obstacle.
The executive order kicks off with a mission statement that seeks to “review and revise requirements related to stormwater, wetlands, lakes, rivers, and other bodies of water to reduce housing construction and ownership costs, streamline regulatory and agency decision-making processes, reduce property tax burdens, and increase insurability, as appropriate and consistent with applicable law.” Really, wetlands-related federal regulations are responsible for elevated property taxes used to fund local school districts, not to mention price gouging on homeowner insurance policies?
Where specific targets elusive, this executive order brings in vague goals. For example, Executive Branch departments are directed to “consider eliminating unduly burdensome rules and reforming programs that constrain residential development and impede housing affordability, especially the construction of affordable single-family homes as well as suburban and exurban neighborhoods.”
Will any of this lower home prices? Probably not. Smart money will bet that lawsuits from blue state and city governments and environmental groups will thwart any attempts by the administration to force its way into local housing markets where NIMBY reigns over YIMBY.
Which Policy Is It?
But what these executive orders and the Trump housing policy ignores is the simple fact that too many people cannot afford to buy a house. It is not because of federal regulations, but because the home prices are too damn high and incomes are mostly inadequate – and they’re becoming more squeezed thanks to the conflict with Iran.
The median price of an existing home sold in February was $398,000, according to the National Association of Realtors (NAR). That is roughly five times the median household income. NAR recently noted the average age of the first-time homebuyer was 40 – most younger people are being shut out of homeownership.
Even the Trump administration’s attempt to artificially jigger mortgage rates by having the government-sponsored enterprises purchase $200 billion in mortgage bonds isn’t working as a spark to ignite homebuying. Instead, it is enabling homeowners stay longer in their residences rather than encourage them to sell.
“Lenders increased mortgage credit supply last month, particularly for refinancing, as mortgage rates moved lower in January and February,” said Joel Kan, MBA’s vice president and deputy chief economist, regarding the aforementioned MCAI data. “Most of last month’s supply growth was in loan programs that allowed for cash-out refinance and on investor homes, although these were still limited to lower LTV borrowers.”
But is affordable homeownership a serious concern of the White House? Trump let slip during a January meeting with his Cabinet that his agenda doesn’t involve lower-prices properties.
“People that own their homes, we’re going to keep them wealthy,” Trump said. “We’re going to keep those prices up. We’re not going to destroy the value of their homes so that somebody that didn’t work very hard can buy a home.”
Clearly, on the subject of affordable homeownership, the administration’s left hand and right hand have yet to become acquainted.
Phil Hall is editor of Weekly Real Estate News. He can be reached at [email protected].
I am a general contractor. 40% of costs for building is the regulatory and permit process. In the coastal zone in CA it takes 3 years to obtain a building permit which entails carrying costs. The cost of housing would go down if the supply is increased and permitting and regulatory rules were changed. I remodeled a SFR and added 100 sq ft to the footprint on a 50X100 flat lot and was required to add 6 containers for the rain runoff due to regulations. That added $25,000 to the costs. I also had to remove a perfectly good driveway to install permeable stones which added another $15,000. I also had to remove and repair the public sidewalk which had been damaged by street tree roots at a cost of $3200 and an additional Bpermit. The public would be better served if you took the time to research the reality of building homes.
Coastal Zone in California, where all affordable housing resides. Nuff said.
I’m a mortgage loan officer and realtor here in the state of Texas – what President Trump is trying to do is unfortunately or fortunately, depending on what side of the fence you’re on – President Trump is going to allow the automated decision engines to take out the appraised values. This is one of the most costly fees that any preexisting home will have. Yes it does fully apply for builders because builders must have all new construction appraised, but for pre-existing homes this saves a huge amount of monies between $850-$1000 in Texas and with no more credit scores and 3 months in reserves- this shall be a win win situation
Yeah, everyone knows that AVM values are 100% on point and consistent. So which one do you use? Well, the one that suits your needs, of course.
I was a CA regional vice president of lending for a very large bank and have also been VP of real estate lending in addition to being a real estate broker for moret han forty years. Auto valation models have been wrong and will continue to be wrong forever. The price of an ocean view property will always be much higher than the property across the street without a view and there is no logarithm that can cover that distinction. Autovals are good for ballpark estimates for HELOCs but not first mortgages. Thank Dodd-Frank and Elizabth Warren for the high cost of appraisals. Instead of paying and hiring appraisers directly lenders have to go through appraisal management companies which doubled the price of appraisals almost overnight. The only solution to affordability is much greater supply. CA has fallen more than 100,000 units short per year for more than thirty years just based on birth/death rates not even including explosive in migration. Supply and demand. What a surprise. Who knew? Oh yeah, anyone who understands econ 101.
Unfortunately that’s how government works. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 had the exact opposite effect as it’s intent. The law was supposed to give appraisers more independence and instead it became a bidding war to see which appraiser could provide the highest value for the lowest fee. I was a State Certified and Designated Appraiser for over 40 years and when this law came into effect I couldn’t play this shady game for long. The mortgage brokers were still calling the shots, it’s just that now there was a middle man taking a big chunk of the pie.