President Trump’s Housing Agenda?

President-elect Trump’s housing agenda is likely to involve changes to the new rules and policies on mortgages imposed following the 2008 financial crisis, details that emerged during Dr. Ben Carson’s confirmation hearing to lead the Department of Housing and Urban Development.

Trump’s views on housing remained mostly a mystery throughout the campaign. Only once did he refer to any of the concerns facing home buyers, renters, builders, real estate agents and lenders. In an appearance at a homebuilders’ trade group meeting in August, the Republican said that new Obama administration rules made it “impossible for your people to go get mortgages.”

In his appearance before the Senate Banking Committee, Carson lent a little more context to that industry-friendly but vague statement.

In his prepared testimony, Carson wrote that banks are “loath” to lend to homebuyers through programs that involve insurance through the Federal Housing Administration, part of HUD, because of the “fear of getting sued if the borrowers default.”

Carson expressed the view that lenders have pleaded to the federal government over the past half-decade-plus because the regulatory and legal actions taken in response to the crisis have left banks and other lenders scared to extend credit for fear of being penalized or sued by the government later.

“His comments there were helpful,” said David Stevens, head of the Mortgage Bankers Association.

Most significant are the major settlements that the government has reached with big banks over bubble-era mortgages that were sold to the FHA, along with other agencies. For example, in April the Department of Justice announced a $1.2 billion settlement with Wells Fargo for claiming that home loans met the terms for FHA insurance, when they did not.

While populist critics have said that the Obama Justice Department should have gone further in prosecuting big banks for potential mortgage fraud, the industry has its own complaints about the way that the lawsuits have been handled. Because the suits turn on specific terms in long loan contracts, they say, it is difficult to be certain that they won’t be on the hook for inevitable defaults in the future.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -7 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways from the prior week.

We had very strong 3 year and 10 year Treasury note auctions but just a luke-warm 30 year Treasury bond auction.  Overall, the data from overseas (China, Japan and Germany) showed inflation and growth.  Domestically, we had another round of reports that showed growth at a slow pace, but growth nonetheless.

Retail Sales:  The Headline December reading showed a nice monthly growth of 0.6% which was just a tick off of forecasts calling for 0.7%.  But November was revised upward from 0.1% to 0.2%. When you strip out Autos, Retail Sales gained 0.2% but that was less than expectations of 0.5%.  But partially offsetting that was November being revised upward to 0.3%

Inflation?:  The Producer Price Index MOM showed and increase of 0.3% which matched estimates.  The more closely watched Core (ex food and energy) YOY reading grew to 1.6% vs est of 1.5%.

Consumer Sentiment: The UofM Index (preliminary) for January came in close to estimates of 98.5 with a 98.1 reading.  This will be re-released at the end of January.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

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Taff Weinstein


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