How the Trump Presidency Will Impact Housing in 2017

Trump's Impact on Housing

Donald Trump, the real estate tycoon, will be our nation’s 45th president. That’s good news for the housing industry, right? Well, there’s a lot to consider. Here’s how the Trump presidency may impact housing and homeownership in 2017 via NerdWallet.

A ‘responsibly aggressive’ marketplace

A unified call for less government regulation is coming from the Trump camp as well as Republicans in Congress. On the deregulation radar: the Consumer Financial Protection Bureau and other elements of Dodd-Frank, the Wall Street reform act that President Obama signed into law in 2010.

“Since the elections, there has been much discussion of how expected changes under a Trump administration are likely to reduce the [CFPB’s] impact, particularly in the enforcement arena,” says Rob Chrisman, a senior advisor for the Stratmor Group, a mortgage industry consultancy. “Dodd-Frank will not be eliminated. It will be refined — which is a good thing.”

Jeff Taylor is managing partner of Digital Risk, a mortgage processing company. He also says trimming Dodd-Frank would be a good thing for potential homeowners.

“If Dodd-Frank is streamlined, I think you could have banks be more responsibly aggressive in the marketplace, as far as making mortgages,” he says. “And I think that will open up more product for first-time homebuyers … in the next couple of years.”

Taylor says less stringent regulations on lenders might lower the costs of compliance and allow more small community banks to compete with big banks, “boosting bank profits — all of which are likely to increase credit availability.”

However, critics like Noah Smith, former assistant professor of finance at Stony Brook University, worry that deregulation will dial banking risk back up and, perhaps more importantly, put taxpayers back on the hook to bail out the bad actors. Just as during the housing crisis of 10 years ago, it would be another “race to the bottom,” Smith wrote in a Bloomberg analysis.

But a reduction in federal regulations won’t transform the housing industry, Chrisman says. “Trump may mean less federal enforcement, but the states will remain aggressive. Politicians in California, Illinois and New York, primarily Democratic states, have already mentioned a stepped-up regulatory atmosphere,” he says.

Getting Fannie and Freddie ‘out of government ownership’

Another item on the Republican agenda is to reduce the government footprint in the mortgage industry. That means moving Fannie Mae and Freddie Mac into the private sector.

The two government-sponsored companies back a majority of mortgages and were bailed out with taxpayer dollars during the housing crash. Fannie and Freddie buy home loans from lenders and then package and sell those loans in large bundles of bonds.

The quarterly profits that Fannie and Freddie earn are now funneled to the U.S. Treasury, which has been paid back $60 billion more than it provided in bailout funding to the companies. Investors in Fannie and Freddie want to see that money move back into the private sector.

In November, Trump’s Treasury secretary nominee, Steven Mnuchin, told Fox Business Network, “We gotta get Fannie and Freddie out of government ownership.”

“I think there are models that could work,” Taylor says regarding Fannie and Freddie privatization. “What I don’t think you could see is a model [where] the U.S. government doesn’t stand 100% explicitly behind the bonds that Fannie and Freddie issue.”

He says removing that federal guarantee would reduce the global demand for the mortgage-backed securities that the two quasi-government agencies issue. Those bonds are instrumental in freeing up capital for lenders to make more loans.

Homebuilders and a Trump economy

A lack of skilled labor has been one of the biggest constraints to the housing industry for the past couple of years, and Taylor worries that the Trump administration may not help matters in that regard.

“Mr. Trump’s plan to spend money on infrastructure projects around the country could result in more laborers taking those jobs and leaving homebuilders short-handed,” Taylor says. “Also, his immigration stance is likely to keep immigrants out of the country and out of the workforce — a blow to homebuilders who rely on immigrants for many construction jobs.”

Labor shortages also contribute to rising wages for construction workers, which in turn keep new home prices high, he adds.

However, Robert Dietz, chief economist for the National Association of Home Builders, says he expects the Trump administration to take action on some labor rules that could benefit the homebuilding industry. That will almost certainly include the Obama overtime rule “that would’ve affected a lot of construction site managers,” Dietz says.

That rule, blocked by a federal judge on Nov. 22, aimed to double the maximum income a worker could earn and still be eligible for mandatory overtime pay. The new limit of $47,500 would have given 4.2 million more Americans the opportunity to earn overtime, according to the Obama administration.

Dietz also is looking for a Trump administration to help lower building costs. “Just under 25% of the cost of a newly built home is due to regulatory burdens,” he says. “I think it’s reasonable that the new administration can address a lot of them.”

How Trump might affect home affordability

Mortgage rates have soared since Trump won the election. That’s part of a good news/bad news scenario.

“One could argue that the Trump victory has driven up interest rates due to the fear of future inflation, given his tax and infrastructure build proposals,” Chrisman says. “This increase in rates certainly negatively impacts homeownership for first-time buyers. Increasing interest rates, however, often signal a strengthening economy, and if that is the case, more first-time borrowers will qualify.”

Taylor also says home affordability could suffer but offers another factor in the equation. “On the positive side, [higher mortgage rates] could also slow price appreciation, which would help buyers. The housing market has lacked first-time buyers and move-up buyers. Slower price appreciation could benefit move-up buyers who have regained value in their home and want to move up before prices rise again,” he says.

“I’ll tell you, if I’m looking to buy a house for the first time or to sell my house and move into a different house, I really am looking at this next year as probably a moving year because rates still in the 4s are very, very attractive,” Taylor adds.

Will Trump eliminate the mortgage interest deduction?

And then there’s the most sacred cow of all: the mortgage interest deduction. It is frequently mentioned as an important factor in the “buy or rent?” conversation.

The Trump administration and Republicans have floated the idea of putting a cap on the amount of allowed interest that you could deduct from your tax bill.

The thing is, an analysis by the Tax Policy Center of the Urban Institute and Brookings Institution says only about one-fifth of households actually use the deduction. And of those that do, most are way above middle-class taxpayers.

“The Tax Policy Center finds that in 2017, Trump’s cap would affect only about 160,000 singles, a tiny fraction of the 89 million single taxpayers, and about 230,000 couples out of 59 million joint filers,” Howard Gleckman, senior fellow with the Tax Policy Center, writes on Forbes.com. “The vast majority of the taxpayers who would face the cap are high-income.”

Homeownership rates under a Trump presidency

Chrisman is looking for little change in the rate of homeownership in the coming years. From a percentage perspective, homeownership in the U.S. reached its peak during the Clinton/Bush presidential terms, he says. But that’s when banks relaxed underwriting guidelines to such an extent that “people who shouldn’t have been buying houses were.”

The housing crash changed everything. Underwriting, loan documentation and appraisal requirements have strengthened since then. “Marginal borrowers are not borrowing money, and investors feel more secure with investing in mortgage-backed securities,” Chrisman says.

He says that America’s need for housing is just as great as ever and that Trump’s policies won’t move the dial on homeownership rates one way or the other.

“Internal population growth hasn’t stopped, nor has immigration. Nor has the desire for a new generation to want a home for their children,” he says. “I think that from what we know so far, the Trump presidency will have little or no direct impact on homeownership rates.”

A positive outlook for the New Year

All in all, the experts we spoke with are optimistic about 2017. Lenders are using better technology to streamline the mortgage process, and the housing market is “healthy” and “robust,” in their words.

“Builders are excited,” Dietz says. He says reductions in regulatory costs could help homebuilders provide housing to the tightest segment of the market, the entry-level buyer.

“If we do get an administration that’s taking a look at various kinds of regulatory policies — where they’ve grown too large or too expensive — that will certainly be a help [to] the supply side of the market. And I think that’s good news, not just for builders, but it’s good news for renters and prospective homebuyers because adding supply is the way that you address housing affordability issues.”

via Hal Bundrick, a staff writer at NerdWallet, a personal finance website.

New Rules, New Forms, New Closing and Disclosure Procedures

Terrific Synopsis of the New Mortgage Disclosure Rules by Margy Grant, Florida Association of Realtors vice president and general counsel,  as she reviews the changes and their direct impact on your role in the transaction.

This is something All Realtors, lenders and real estate professionals need to get their arms around.

If you wish any training or further information, I suggest you contact Barbi Bozich at Title Security… she has been out in front of these changes for the past 9 months — 727-866-6600.

You May Be Ready for TRID, But Are Your Clients?

Source: Inman – Amy Swinderman

Takeaways:

  • Are your clients aware of how the TRID regulation affects the closing process?
  • If this is not their first rodeo, you will need to explain the new process and consumer disclosure forms and establish expectations.
  • Encourage your clients to think through mortgage choices, apply for loan estimates through multiple lenders and indicate intent to proceed; you’ll need to find out who’s responsible for the Closing Disclosure and be the source of accurate information.

So you’ve spent the last 23 months preparing to comply with the Consumer Financial Protection Bureau’s new TILA-RESPA Integrated Disclosures rule, or TRID, which takes effect Oct. 3.

Or you’ve spent at least a few months on it, anyway — for your sake, let’s hope so.

TRIDBut what about your clients? Are they aware of how the regulation affects the closing process? If they are purchasing their first home, the changes will be new only to you. But if this is not their first rodeo, you will need to explain the new process and consumer disclosure forms and establish expectations for how the mortgage transaction will proceed.

Here are the CFPB’s five recommendations for what to focus on to facilitate the best experience for your clients:

1. Encourage your clients to think through mortgage choices first.

Engaged homebuyers are more likely to select a mortgage loan that meets their needs and presents few surprises during underwriting, the CFPB says. The preapplication time frame is critical, and gives clients a chance to decide on a loan type and down payment amount before they are focused on a closing date.

Agents should make their clients feel comfortable that they can afford the home and receive a mortgage loan approval. They should encourage prospective homebuyers to review their credit reports early in the process so they can find and correct errors to potentially raise their credit score and reduce their cost of borrowing, the CFPB advises.

2. Once a property has been identified, encourage your clients to apply for Loan Estimates from multiple lenders.

Loan Estimates no longer require written documentation, so agents should encourage clients to compare offers from several lenders to avoid second-guessing whether they got the best deal. Loan Estimates show rates and loan terms in an easy-to-compare format, customized based on clients’ credit and the details of their request. Loan Estimates are most useful when your clients define the requested mortgage type and compare “apples-to-apples” Loan Estimates, according to the CFPB.

3. Make sure your clients indicate their intent to proceed.

Clients may request a Loan Estimate and then feel like they’re done — but Loan Estimates expire after 10 business days. If clients do not complete the steps required by the lender to express their intent to proceed, their applications could be closed as incomplete. If this happens, your clients will likely need to start over with a new application.

Lenders will have different policies about what your clients need to do to successfully move an application forward from the Loan Estimate stage into active processing, when the appraisal and other verifications typically begin. Talk to your lender partners to learn about those policies and discuss lender requirements with your clients to be confident that your clients have an active mortgage application underway, the CFPB advises.

4. Be the source of accurate and timely information about the property and transaction.

Because TRID makes lenders responsible for overseeing compliance from everyone involved in the closing, lenders are now at the center of all transactions. But real estate agents will still play an important part in making sure that clients have all the information they need to experience a smooth closing.

The CFPB advises agents to make sure clients have detailed information they can share with their lender about property taxes, homeowners association (HOA) fees, condominium association fees and the estimated cost for homeowners insurance; communicate any transaction changes to everyone involved and confirm that any revised information has been received; and confirm that the lender and closing agent have the buyer’s and the seller’s broker information so it appears correctly on the Closing Disclosure.

5. Find out who provides the Closing Disclosure.

Who will prepare the Closing Disclosure? Some lenders have already said they will be the only party with access to it. Other lenders may allow title insurance or settlement agents to do it.

When and how your client receives this form will vary from lender to lender and state to state — so communication, early and often, with your partners will be key.

Method of delivery may vary, too. Closing Disclosures may be sent via mail, delivered in person or electronically.

Keep in mind that no matter who prepares or provides the Closing Disclosure, the lender is still accountable for its accuracy and approves the final version, the CFPB says.

For more information and guidance on how to handle mortgage transactions after Oct. 3, visit the CFPB’s resource page.

Source: Inman – Amy Swinderman

Florida Realtor’s Legislature 2012 Positives

Here are some highlights from the 2012 legislative session, which adjurned midnight Friday.  The Realtor’s primary focus was on initiatives that could strengthen the real estate market and improve the business environment.

Real estate sales associates and broker associates exempt from local business taxes. HB 7125, a bill by the House Economic Affairs Committee and Rep. Ken Roberson (R-Port Charlotte) exempts real estate sales associates and broker associates from paying local business taxes (formerly known as occupational license fees) if required in their city or county. Under Florida law, these individuals must affiliate with a real estate broker who already pays local business taxes. Brokers will continue to pay the tax. Repeal of the tax will save real estate licensees $3.8 million annually. Effective date if signed by governor: Oct. 1, 2012.

Mandatory septic tank inspections out, optional inspections in. HB 1263 , an omnibus health care bill by Rep. Matt Hudson (R-Naples), was amended yesterday with Realtor-supported language originally provided in HB 999 by Rep. Chris Dorworth (R-Heathrow) and SB 820 by Sen. Charlie Dean (R-Inverness) to repeal the mandatory septic tank inspection law passed in 2010. It establishes an optional inspection program for the 19 counties with the 33 largest springs. However, other cities and counties may opt into the program as well. Also, septic tank inspections cannot be required as a condition of sale. Effective date if signed by governor: March 9, 2012.

A major step toward creating a competitive property insurance market. HB 1127 by Rep. Ben Albritton (R-Bartow) reduces the amount of money private insurers must give Citizens Property Insurance Corp. if the state insurer goes broke after a catastrophic storm. The first check a private insurer writes after a catastrophic storm should be to their policyholders, not Citizens. However, current law requires insurers to pay Citizens up to 18 percent of their premiums within 30 days of being assessed. They can later recoup these monies from their policyholders. It’s hoped that HB 1127 will attract new insurers to Florida and keep existing insurers here. Effective date if signed by governor: July 1, 2012.

Tax boost for businesses. HJR 1003 by Rep. Eric Eisnaugle (R-Orlando) creates a proposed constitutional amendment to increase the exemption for tangible personal property taxes. Under current law, an exemption applies to the first $25,000 in property taxes such as business equipment. If approved by 60 percent of voters in the November election, the exemption would expand to include the value of tangible personal property between $25,000 and $50,000.

Options for challenging Citizens replacement cost estimates. In January, following discussions with Florida Realtors and policyholders concerned about unreasonably high replacement cost estimates, Citizens Property Insurance Corp. agreed to consider valuation sources other than 360Value software. HB 1101 codifies three options into law, including valuations prepared by real estate appraisers licensed under Chapter 475, F.S. Effective date if signed by governor: July 1, 2012.

Broad range of economic development incentives. HB 7087 is a large omnibus tax bill that’s part of the budget deal agreed to between the House and Senate. Of particular interest to real estate companies is an increase in the corporate income tax exemption from $25,000 to $50,000. Effective date if signed by governor: July 1, 2012.

Reducing condo inventory and protecting an appraiser’s interests.
The Department of Business and Professional Regulation (DBPR) pushed two bills this session that contain items of interest to the real estate industry. You may recall that the 2010 Legislature wanted to encourage investors to purchase blocks of condo units to reduce inventory levels. This was accomplished in part by amending condo laws to protect bulk buyers from some of the liabilities faced by condo developers. These protections were set to expire on July 1, 2012. HB 517 by Rep. James Grant (R-Tampa) extends the “bulk buyer” provision to July 1, 2015. Effective date if signed by governor: July 1, 2012.

The other DBPR bill, HB 887 by Rep. Clay Ingram (R-Pensacola), prohibits Appraisal Management Companies from requiring appraisers to sign hold harmless agreements as a condition of business. Effective date if signed by governor: Oct. 1, 2012.

Budget appropriations. Though the Legislature swept all monies collected for the Sadowski Affordable Housing Trust Fund into general revenue, it appropriated funds for economic development initiatives and tourism that could ultimately benefit the real estate market:

  • $61 million for the State Economic Enhancement and Development (SEED) Fund and other economic development funds. These monies may be used to fund affordable housing programs and projects.
  • $27.5 million for Visit Florida, the state’s marketing agency.
  • $8.6 million for Enterprise Florida, a state economic development agency.

In addition, the Legislature set aside $285,000 to combat unlicensed activity, $30 million for Everglades restoration, $8.4 million for the Florida Forever land acquisition program and $1.5 million to study nitrogen reduction and develop possible new technology for passive septic systems.

via  Florida Realtors® News

www.McAuliffeMcCormick.com

Some Good News for Veterans!

Effective  November 17, 2011, the costs associated with getting a VA mortgage are going DOWN!

KCM Blog:  An overview… VA mortgages are bundled, securitized and sold in the secondary market with the backing of the Federal Government. In order to insure these mortgages, the government charges a type of insurance premium, called a VA Funding Fee, which is typically added to the loan amount (thereby financed).

Remember, too, that the VA (subject to some restrictions) will insure loans up to 100% of the purchase price for the home.

What is happening next week? On loans that close effective November 17, that Funding Fee is being reduced. Because it is typical that the fee is financed into the loan, the VA is effectively lowering the monthly cost (because the loan amount is lower) AND the amount that will be paid back when the home is sold (again, because the loan amount is lower). It’s a win/win for the veteran.


If you have any questions about purchasing a home with a VA loan or if you already have one and are considering a refinance of it because of the low interest rates, reach out to your favorite mortgage professional and explore the possibilities. There has never been a better time!

by Dean Hartman for KCM Blog

NAHB Urges Congress to Extend Conforming Loan Limits

On Oct.1, 2011, conforming loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) will be lowered. The disruption that would occur with the lowering of the current loan limits would further damage the already fragile housing market and impede the economic recovery of our nation.

The National Association of Home Builders sent out a Legislative Alert on Sept. 15 asking members of our association leadership to contact their members of Congress and urge their support for immediate efforts to extend the current loan limits. Please join in this effort by telling your elected representatives that a drop in Fannie Mae, Freddie Mac and FHA loan limits would reduce home prices in major markets all across the country and that this is NOT the time to implement measures that would negatively impact the housing market.

Members of Congress can be contacted in two ways – by calling (866) 924-NAHB (6242); or by writing them via NAHB’s Builderlink web page. Contact: Scott Meyer (800-368-5242, x8144)