What matters most to mortgage lenders in the 2020 election

Mark Calabria, appointed as director of the Federal Housing Finance Agency by President Trump in 2019, was, like many Trump appointees, a critic of the organization he was subsequently assigned to lead. Calabria made it his mission to privatize Fannie Mae and Freddie Mac, or at least get them on track to do so before his term expires in 2024. To exit the conservatorship that began in 2008, Calabria calls fora capital framework in which the two agencies combined hold five times the funds they do now — an estimated an estimated $234 billion, based on a September 2019 valuation.

Some lenders worry GSEs won’t be able to provide stability to the mortgage market in a crisis if Trump wins and the process of exiting conservatorship continues, said Bill Cosgrove, president and CEO of Union Home Mortgage.

“It took 10 years for the non-QM and private-label market to build itself back up with moderate success, but once the pandemic hit, it took only a few days for it to freeze up,” Cosgrove added, noting that when it did, the bulk of the market received government-related support that sustained home lending. “That should scare the hell out of people. We need to be very careful about how we transition Fannie and Freddie out of conservatorship.”

A complex issue like exiting conservatorship can bring unintended consequences, like heightened GSE lending costs, said David Battany, executive vice president of capital markets at Guild Mortgage.

Biden hasn’t explicitly stated his plan on GSE reform, but the presumption is that he’ll stay the course on ending conservatorship, as no evidence to the contrary exists.

“I know there's been some news cycles lately [in which sources claim] that if Biden gets in, he's going to halt it all. I don't buy that for a second,” Rob Zimmer, principal at TVDC and registered lobbyist for both the Community Mortgage Lenders of America and Veterans United, said in an interview.

“I look for indications that the Senate Banking Committee is signaling to Mark Calabria that he needs to change direction or stop, and that's not happening. It's been astonishingly quiet which signals to me there's a consensus,” Zimmer added. “Small lenders generally want it to continue moving forward. The last thing they want is another 10 years of stasis and uncertainty.”

Perhaps no subject divides people on party lines more than regulatory parameters set by the FHFA, the CFPB, HUD and other government agencies.

Typically, Democrats embrace stricter regulations while Republicans eschew them, so lending looks quite different under each party. For example, the Trump administration dialed back the heavy-handed enforcement of the False Claims Act for Federal Housing Administration-insured loans the Obama administration started.

"I think this administration has actually made it much easier for us to operate," said Homebridge CEO Peter Norden."At the same time, the fears we have with the Democratic side [is that it could] go back to a regulatory stranglehold."

A potential Biden administration is likely to put more emphasis on fair-lending enforcement — something Trump has publicly derided. This issue divided Democrats and Republicans in the 2016 election as well. A Biden appointee at the Consumer Financial Protection Bureau is more likely to return that agency to fair housing activism — including rulemaking via enforcement — common under former CFPB Director Richard Cordray.

The future of Federal Reserve Chairman Jerome Powell also hangs in the balance. Presidents have the power to appoint the position and past precedent suggests Powell could stick around through a party change.

When the coronavirus halted the economy in March, the Fed intervened, pledging to provide liquidity to the market. The Federal Open Market Committee bought $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities. While this intervention caused lenders short-term pain in the form of margin calls and squeezed liquidity, it stabilized the market and most of their pipelines settled by May. The Fed’s lowering of rates, too, led to a massive refinancing boom.

“Powell’s viewed by both sides of the aisle to be effective in his role and tries to stay above the politics,” Battany of Guild Mortgage said. “There was a shock moment when he came in," but he "has since recognized the importance of MBS price stability. The margin calls back in March definitely did more good than bad.”