The White House today ordered federal regulators to roll back or tailor regulations to expand access to mortgages and spur new housing construction.
In a pair of executive orders, President Trump directed regulators to initiate federal efforts to ease regulatory burdens for mortgage lenders, particularly community banks, and to eliminate environmental and energy-efficiency rules and regulations for housing construction. As for lending, the president said community banks have been especially hit hard by agency rulemaking adopted since passage of the Dodd‑Frank Act in 2010.
“The regulatory and rule changes have undermined community banks’ businesses, concentrated credit and liquidity risk outside the banking system, and resulted in reduced access to credit for some creditworthy borrowers, including rural households and low- and moderate-income households,” the order states.
Housing finance
In the first executive order, Trump directed the Consumer Financial Protection Bureau to make a series of changes to how it enforces the Truth in Lending Act and regulates mortgage lending and servicing. Among other things, the CFPB was directed to reduce burdensome rules regarding banks’ compliance with ability-to-pay and qualified mortgage underwriting requirements, and to exempt small-mortgage loans from caps on QM points and fees, or at least modify such caps to support affordability.
The order directs the CFPB to consider raising the asset threshold for exemption from Home Mortgage Disclosure Act data collection and reporting requirements for smaller banks. It also directs the bureau to work with other banking agencies to exclude one-to four-family residential development and construction lending from commercial real estate concentration guidance, to ensure supervisory expectations support “responsible construction lending by community banks,” and to eliminate duplicative and unnecessary licensing requirements.
As far as other changes, the order directs several agencies to revise their supervisory processes to ensure examiners evaluate mortgage lending based on “the effectiveness of the lender’s policies regarding a consumer’s ability to repay and prudent underwriting, rather than the existing focus on process and technical compliance.” It also calls for digital mortgage modernization by eliminating unnecessary wet‑signature requirements for disclosures, applications and closing documents.
Housing construction
In the second executive order, the president blames “unnecessary regulatory barriers, slow permitting processes and onerous mandates at all levels of government” for restricting housing supply. The order directs agencies such as the Department of Housing and Urban Development and the Federal Housing Finance Agency to consider “eliminating unduly burdensome rules and reforming programs that constrain residential development and impede housing affordability.”
The order also calls for the development of best practices for state and local governments to promote housing construction, largely through streamlining permitting processes, curtailing green-energy and other building code requirements, reconsidering restrictions on manufactured housing, and removing limitations on residential housing development beyond urban centers.
In addition, the order directs the Treasury and HUD secretaries to better align programs with Opportunity Zone tax incentives to expand investment in single-family home construction. Opportunity Zones are economically distressed communities where new investments may be eligible for preferential tax treatment.
ABA response to lending regulatory changes
In a statement, American Bankers Association President and CEO Rob Nichols said the proposed changes to lending regulations would help remove significant obstacles preventing many banks, especially community banks, from fully participating in the mortgage market.
“ABA supports policy initiatives that create sustainable and affordable housing opportunities, and we look forward to working with the administration, the regulatory agencies and Congress to implement these ideas and build on other efforts to make homeownership more affordable and accessible for all Americans,” he said.
