What Impact Will Biden’s Presidency Have on the Mortgage Industry?
Written By: Joel Palmer, Op-Ed Writer
Unless President Donald Trump is successful in a recount or legal challenge to the election, former Vice President Joe Biden will be the 46th President of the United States.
Starting on Inauguration Day, January 20, 2021, people can expect a much different approach to issues from pandemic mitigation to the economy. That includes the housing and mortgage industries.
So what can mortgage processors and mortgage underwriters expect from the new administration? You can start with the The Biden Plan for Investing in Our Communities Through Housing that the president-elect posted online during the campaign.
Biden pledged to allocate $640 billion over 10 years “so every American has access to housing that is affordable, stable, safe and healthy, accessible, energy efficient and resilient, and located near good schools and with a reasonable commute to their jobs.”
These proposals include:
• Legislation modeled after the California Homeowner Bill of Rights to protect homeowners facing foreclosures.
• Expanding the Community Reinvestment Act to include non-bank mortgage lenders.
• Creating a $15,000 tax credit to help first-time homebuyers with a downpayment and other costs for buying a home.
• Rolling back Trump administration policies and/or reinstating Obama administration policies aimed at minimizing discriminatory housing and lending practices.
• Establishing a Public Credit Reporting Agency. The Biden plan states the agency will work within the Consumer Financial Protection Bureau to provide consumers with a government option for reporting credit data.
• Establishing a $100 billion Affordable Housing Fund to construct and upgrade affordable housing.
• Providing tax incentives for the construction of more affordable housing in communities that need it most.
• Eliminating local and state housing regulations that limit affordable housing options.
Biden’s housing plan does not address the U.S. government conservatorship of Fannie Mae and Freddie Mac.
Biden was Vice President when the federal government took over ownership of the GSEs as part of the bailout needed following the 2008 financial crisis. Under the original conservatorship arrangement, Fannie’s and Freddie’s profits were paid to the U.S. Treasury in the form of dividends. The agreements with Treasury also limited how much of their net worth the GSEs can retain.
The Trump administration was working toward releasing the GSEs from government control. Last year, the Federal Housing Finance Agency along with the Trump administration released a reform plan for the GSEs and the housing finance system. The plan included allowing Fannie and Freddie to retain more profits in preparation for an eventual return to shareholder ownership. The current agreement with Treasury allows the GSEs to retain quarterly earnings until their net worth reach $25 billion.
As of September 30, Fannie Mae’s net worth stood at $20.7 billion. Freddie Mac’s net worth was $13.9 billion.
Most industry observers expect that Fannie and Freddie will remain in conservatorship longer under a Biden administration than they would have had Trump won reelection.
In addition, Biden’s housing plan is aimed at making homeownership easier for minorities, low-income and other demographics. Therefore, it’s expected that Biden’s administration will want the GSEs to make more capital available in the mortgage market rather than retaining those earnings as the Trump administration emphasized.
While Biden’s housing plan does not mention the future of Fannie and Freddie, the GSEs will play a role if the President-Elect gets all of his initiative passed.
The plan includes increasing funding for the Housing Trust Fund by $20 billion. Biden plans to pay for the increased funding through an increase in the assessments charged by Fannie Mae and Freddie Mac. The plan states the additional funding will support the construction and rehabilitation of affordable housing units.
One analysis of the Biden plan states that such a large increase in the trust fund, based on the average volume of single-family mortgages purchased, would require an assessment of $6,000 per mortgage.
“In practical terms, Biden plans to charge single-family borrowers thousands of dollars to support public housing.”
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
