Key policy implications from election for real estate and mortgage industry

We are on the other side of the election and all of us are immersed in understanding what the election means to us in the real estate and mortgage industry. Here is our take:

GSE Reform

This is bound to slow down. Key changes in policy to expect:

• Slow down on efforts to end conservatorship

• Slow down on GSE capital rule pending a quantitative impact study

• Shift to reforms that configure GSEs as tightly regulated market utilities

• Expansion of GSE credit box, increased use of cross subsidies

• Renewed support for Housing Trust Funds, Affordability Goals, and Duty to Serve

• Potential change in approach to expanding FHLB membership

• Changes in FHFA view of GSE roles in multifamily lending

Apart from the new administration, GSE Reform would depend significantly on the outcome of the Supreme Court’s ruling in the Collins v. Mnuchin case, which addresses the constitutionality of FHFA as an independent agency.

Fair Lending laws

Over the last four years, the fair lending laws have been relaxed either in policy or in enforcement. Expect this to change in Biden administration.

Key changes here could include:

• Increased enforcement actions

• Reversal of HUD Disparate Impact (DI) rule

• Increased scrutiny of patterns and underlying causing of housing segregation.

• Increased prosecution of redlining claims against mortgage lenders

• Restoring the 25 loan threshold for HMDA reporting

Tax Policy

Biden campaign promised major overhaul of the 2017 Tax Cuts and Jobs Act to raise more revenue and address tax fairness & income inequality. However the scope of actual changes will depend on whether Democrats will gain control of Senate. If they do, then some of the changes to expect are:

• First time homebuyer credit of up to $15,000

• Expand tax exempt bond usage

• Reform 1031 like kind exchanges

• Limit business interest deduction for real estate

Apart from these the administration may increase corporate tax rate to 28%, phase out Section 199A deduction and raise rates for top tax brackets all of which will have indirect bearing on housing demand.

Affordable Housing

Going by the campaign promises, this would be a major priority for the Biden administration. While it is difficult to predict the exact policy changes, expect changes in the areas of:

• New programs to provide direct assistance to households -down payment assistance, tax credits, etc.

• Expanded credit box for federal housing programs

• Legislation to expand CRA to cover nonbank lenders

• Incentives for energy efficiency (PACE

• Targeted programs to assist teachers, firefighters, nurses, etc.

• Expanded role for state HFAs in financing affordable housing

Consumer Protection

Rather than new rules, expect more enforcement of existing rules in the area of consumer protection. This would mean

• Resurgent power of inspectors general

• Higher bar to persuade the CFPB on rule changes like LO Comp, MSAs

• Heightened enforcement scrutiny of servicers, particularly in case of foreclosures

• Possible rollback of False Claims Act reforms, slowdown on FHA servicing reforms

• Aggressive oversight hearings on any reports of consumer abuses

• Expanded consumer control of personal and financial information

Now thats a lot of changes - some to cheer about and some to worry about. But right now, let us just be thankful for what we have and thank those in our lives that made us what we are.

Happy Thanksgiving!