Lowering barriers to building
The first order, “Removing Regulatory Barriers to Affordable Home Construction,” directs agencies to scrutinize various environmental protection laws that may be leading to a reduction in new-home construction and increased homeownership costs, including higher property tax and insurance burdens.
“The American dream of homeownership depends on a dynamic housing market in which a varied inventory of new homes is built and renovated each year,” the order states. “Layers of unnecessary regulatory barriers, slow permitting processes, and onerous mandates at all levels of government have delayed construction, restricted development, and driven up the costs of new housing. These constraints have made housing less affordable for many Americans.”
The president’s directive calls for HUD Secretary Scott Turner and FHFA Director Bill Pulte to eliminate or reform rules that impede new residential development and affordability.
The order specifically mentions HUD’s Pathways to Removing Obstacles to Housing (PRO Housing) program, along with FHFA regulations on chattel loans for manufactured homes and small-balance mortgages.
The order calls for boosting housing affordability through the creation of regulatory best practices at the state and local levels. Within 60 days, HUD was directed to develop a series of practices related to streamlined permitting processes, scaled-back green energy construction requirements, and restrictions on manufactured or modular housing that aren’t related to “objective standards for building and safety.”
Paring back lending requirements
The second order, “Promoting Access to Mortgage Credit,” seeks to address the decline in mortgage lending by banks since the housing crisis of the 2000s. It points to increased compliance costs for originators and servicers that have “distorted the structure of the mortgage market.”
“Community banks, generally institutions with fewer than $30 billion in assets, have been especially affected,” the order stated. “The regulatory and rule changes have undermined community banks’ businesses, concentrated credit and liquidity risk outside the banking system, and resulted in reduced access to credit for some creditworthy borrowers, including rural households and low- and moderate-income households.”
The Trump administration is calling for the CFPB to amend Regulation Z and the Truth in Lending Act to support smaller banks. This could potentially include a “broader safe harbor for portfolio loans.”
The bureau could also look to replace TRID timing rules to speed up the loan closing process, exempt small-balance mortgages from caps on QM points and feeds, and update “reasonable compliance” standards for banks related to Ability-to-Repay and QM underwriting requirements.
The order goes on to direct the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC) and other regulators to consider revised capital regulations that would tailor risk weights for all banks, including community banks. These could apply to portfolio mortgages, servicing rights and warehouse lines of credit.
Another section of the order targets modernized appraisals through the use of automated valuation models and artificial intelligence. The administration also seeks to simplify the appraiser qualification process, reduce appraisal requirements for certain loans like low-leverage refinances, and align appraisal standards for Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) mortgages.
Industry response
Mortgage Bankers Association President and CEO Bob Broeksmit released the following statement. “We agree with the Administration’s focus on addressing costly mortgage regulations that have increased costs and limited access to credit. MBA believes that those benefits should be available to every consumer, no matter which lender they choose.
“America’s housing finance system is the best in the world because it’s competitive. We support efforts to increase bank participation in mortgage lending and servicing, and the goal should be to revise overly burdensome rules for lenders of all sizes and business models. This includes credit unions that support their members and independent mortgage banks (IMBs), who serve most FHA, VA, and Rural Housing borrowers, making homeownership possible for first-time buyers, low- and moderate-income families, veterans, and those living in rural communities.”
David M. Dworkin, president and CEO of the National Housing Conference (NHC), issued a statement Friday in which his organization lauded the orders.
“The Executive Orders signed today by President Trump highlight the importance of addressing both the supply and financing challenges that contribute to the nation’s housing affordability crisis,” the statement read.
“Too often, overly complex permitting processes, duplicative environmental reviews, and costly mandates slow down housing construction and drive up costs for families. Taking a hard look at federal rules that delay development is an important step toward making it easier to build the homes our country needs while still maintaining the safeguards that protect communities.
The Community Home Lenders of America (CHLA) offered more muted comments, saying that “only time will time whether and to what extent these homeownership Executive Orders will translate into transformative action by the federal agencies.
“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.”
Rebecca Romero Rainey, president and CEO of the Independent Community Bankers of America (ICBA), also offered support for the president’s actions.
“ICBA and the nation’s community bankers commend the Trump administration for today’s executive order promoting access to mortgage credit. Directing federal regulators to advance pro-growth regulatory reforms will help community banks support housing affordability in local communities nationwide.
“ICBA and community bankers strongly support reforms to Consumer Financial Protection Bureau mortgage requirements, Home Mortgage Disclosure Act reporting rules, capital and liquidity standards, and more to provide community banks with much-needed regulatory relief that will support mortgage lending.”
