President Trump recently asked the Treasury Department to review and recommend amendments to certain provisions of the Dodd-Frank regulations that he says will help promote more lending to businesses and will ease rules on investment firms in terms of relationships with their clients. The President called the potential moves an effort to promote more lending to small businesses and individuals.
As far as residential real estate, these moves could be a plus. Obviously, anything that loosened the rules governing mortgage lending will directly benefit the housing market, particularly those families with lower credit scores. How much of an impact this could have will be determined by how far the loosening might go. Certainly, any loosening will help housing sales.
Separately, should the administration improve small business lending, this could lead to job growth, help small- and medium-sized builders to bring inventory online and generally improve economic growth. Again, we will have to wait and see what loosening may occur after the Treasury issues its new rules. Again, any loosening should improve prospects for the housing market.
Lastly, the President has made known his desire to reign in the Consumer Finance Protection Bureau (CFPB) and while this may not directly affect housing, ending the uncertainty about Director Cordray’s activities in pursuing residential lenders and brokerage firms for alleged violations of RESPA may help brokerage firms to a great extent.
The uncertainty over what is legal and illegal under the CFPB has forced hundreds of brokerage firms to abandon their Market Service Agreements which has significantly reduced their earnings from such activities. Not only that, but the new mortgage regulations have added substantial compliance costs to those operating joint ventures and mortgage banking operations. The President’s actions clarify how brokerage firms can operate will be of great assistance to the financial health of many brokerage firms.