DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1531277
MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 22 January 2025 C O V E R S T O R Y suggested (like the notion that he'll be able to unilaterally lower mortgage rates as president) doesn't have much basis in reality—at least not with the way laws are currently written. Some local-level changes, like reworking zoning laws to make it easier for multifamily units to be built, could help lower prices and bring more homes to the market. Unfortunately, these changes often face a lot of political pushback from homeowners concerned about their property values or "the character of their neighborhoods." On top of that, if the Federal government's policies are as inflationary as they might be under Trump, then states probably won't be able to do all that much to reduce home prices even if they wanted to (unless they decide to do things like totally ignore the Federal government and refuse to go along with things like mass deportations). Q: What steps can policymak- ers take to improve access to affordable housing while main- taining a stable housing market? One of the best things for policy- makers at the Federal level to do under a Trump presidency would be to refuse to allow mass deportations and blanket tariffs. That's easier said than done, of course, given that the president has a lot of independent authority over things like trade and immigration. Outside of that, lawmakers should focus on building more homes by re- working outdated zoning laws that make construction prohibitively difficult, and by further incentivizing businesses to in- vest in multifamily housing. This might include offering targeted tax breaks or grants to homebuilders. Q: Do you expect demand for rental properties to rise or fall in 2025, and how might this affect housing developers' strat- egies? If home prices and mortgage rates stay high next year, or rise even higher than they are now, more people likely will turn to renting. This will drive demand for rental properties higher and may push some housing developers to allocate their resources toward multi- family construction. However, even if they want to build more rental/multifamily units, mass deportations and tariffs could make doing so very expensive and difficult. Depending on how Trump's policies are implemented, we could easily find ourselves in a situation where develop- ers are forced to scale back construction projects regardless of how much con- sumer demand for them there is. Q: Do you think the GSEs will leave conservatorship under President Trump's new administration? If so, what are the potential upsides and potential risks? I think Trump will try to end GSE conservatorship. It's something he's talked about in the past and it seems like something Republicans in Congress could get on board for. On the whole, I think that this would be a mistake. It'll probably make mortgage lending riskier and result in higher mortgage rates and stricter lending standards. Less advantaged groups of people and lower-income borrowers—many of whom are people of color—will probably have a tougher time getting approved for a mortgage. Ending the conservatorship could open opportunities for more people to invest in Fannie and Freddie, it could also give both organizations more room to experiment with new and innovative business practices as well as to partner and/or merge with other players in the industry. This could make some people very rich, while potentially resulting in some innovations that make it easier for qualified borrowers to get a mortgage. For the most part, I am skeptical that these benefits will outweigh the negatives. I said it before, and I'll say it again, the last time we deregulated the mortgage industry, we ended up with a major financial downturn. I'm not saying that ending GSE conservatorship will in and of itself result in an imme- diate crash, but I think peeling back mortgage industry regulations without any new guardrails being put in place is a recipe for disaster. Michael Fratantoni Chief Economist; SVP, Research and Business Development, MBA Q: What economic policies or changes likely to be pro- posed or introduced by the Trump administration in 2025 will have the most significant impact on the housing market, and why? The most important debate that could impact the housing market in 2025 concerns the TCJA (the Tax Cuts and Jobs Act of 2017). Any changes to the tax code have the potential to significantly impact the housing market, and the potential expiration of all the individual provisions of the TCJA at the end of 2025 could have an enormous impact. Beyond that, with the transition following the election, there will be new leadership at the agencies that regulate the mortgage industry, and these chang- es could also have a noticeable impact on the lending environment. Q: How do you expect interest rate policies from the Fed- eral Reserve to influence mort- gage rates, housing affordability, and demand in the coming year? We expect that the Federal Reserve will cut short-term interest rates a few more times in 2025, as inflation con- tinues to drop towards the Fed's target and the job market softens somewhat. However, we don't expect that mortgage rates will move too far away from where they are today, ending 2025 at 6.4%, not much below what we have seen in re- cent weeks. We expect that mortgage to Treasury spreads will tighten somewhat from where they are now but will stay