The Long- and Short-term Impacts of Trump’s Housing Market Policies
Each time a new administration comes into office--whether the same political party or not--there will always be changes. Political leaders are not elected because they support the status quo, but generally because they want to shake things up. Their policy changes can often shift an entire economic sector, such as the housing market. President Trump’s new policies are already changing the borrowing and lending of mortgage funds.
As with political processes and policymaking in any country, some people will benefit and some will lose. There will never exist a one-size-fits-all policy. Here is what U.S. residents can expect going forward with Trump administration's changes/policies regarding housing.
Upholding the FHA's Annual Mortgage Insurance Premium
Lowering the mortgage insurance premiums is part of what Obama had been focusing on toward the end of his administration. Some low-income citizens, looking to purchase a home, were hoping to benefit from the enactment of that policy. However, the Trump administration has decided to suspend the mortgage premium fee reduction. What does this mean?
- When the Obama administration announced its plan to decrease the annual mortgage rate in early January, many lower-income individuals signed up, which caused a spike in FHA applications. With the premiums no longer being offered at a lower rate, many of these requests will either be withdrawn or rejected.
- There will be fewer new FHA order applications as well as fewer FHA refinance applications.
- The fee reduction, for FHA-backed loans, would have cut 0.25 percentage points of the total amount borrowed. Savings for Americans with a $100,00 mortgage would have been about $250, and for a $200,000 mortgage it would have equated to about $500 in savings each year. With the suspension of this fee cut, new homeowners will have to find other ways to save.
- The overall cost of owning a home will increase.
- After a pullback of the housing market rates during Obama’s presidential terms, mortgage rates are expected to rise.
- Affordability for low- to mid-income individuals and couples will decrease over time as the housing costs rise alongside housing demand.
- Suspension of the rate cut of the FHA is indefinite, which may eventually help the FHA due to higher premiums and higher demand for housing.
Controlling the Consumer Financial Protection Bureau (CFPB)
Reformation of Wall Street practices is part of the reason the Consumer Financial Protection Bureau was created. The aspect of independence of this agency begs many ongoing questions. With the CFPB under the control of the new administration, its agenda will be determined by the decisions of current policy makers.
- Currently, there are claims that the body is unconstitutional. Even so, the president exercises control over the agency. The CFPB will not be used in the same way it was during the Obama administration, and as such, it may not act as an independent regulatory body.
- The issue of legality of the CFPB remains a court case at the moment, even as Trump's administration exercises power to control the housing sector through this body.