During its initial three years, the Trump administration took steps to deregulate the mortgage industry as well as to interpret and apply various consumer-focused laws in a more industry-friendly way. While the White House last year formed a council to look at reducing state and local regulatory barriers to affordable housing, it also called for eliminating government-sponsored contributions to affordable housing trust funds and cutting community development block grants. One of President Trump’s campaign trail talking points focuses on rescinding an Obama-era fair housing rule meant to combat housing discrimination. Some see this as a signal that fair housing policy is under assault. For example, David Dworkin, president and CEO of the National Housing Conference, has commented that a second Trump term could “peel back the entire regulatory framework of enacted fair housing legislation.”
And, according to American Banker, the biggest difference between a Biden and a Trump administration could be in the area of fair lending enforcement. For instance, Trump’s Department of Housing and Urban Development (HUD) is easing the “disparate impact” standard in fair lending rules, which is an important tool for enforcing Fair Housing Act (FHA) regulations. The Trump administration also is offering relief to some lenders from reporting Home Mortgage Disclosure Act (HMDA) data and is proposing a new category of qualified mortgages that would protect lenders from legal action if they originate risky loans.
Longer-term tenets of fair lending, like the Equal Credit Opportunity Act (ECOA), remain viable. Trump’s White House appears to be taking steps to encourage lending and to remove red tape, while at the same time eliminating protections for designated consumer groups. A Biden-Harris administration would likely reverse actions taken by Trump which appeared to reduce consumer protections.
Certain actions taken under the Obama administration serve as a good indicator of the approach a Biden administration would take. In the aftermath of the 2008 financial crisis, the Obama administration toughened regulatory standards for the mortgage sector. Similar approaches may be on the horizon. A task force recently established by Joe Biden and Bernie Sanders has proposed some fair lending provisions that are making mortgage lenders and servicers take notice. The Biden-Sanders unity plan calls for reinstating the Affirmatively Furthering Fair Housing rule and for creating a new homeowner and renter “Bill of Rights,” among other measures.
One of the specific goals of the task force is: “Enforcing the Fair Housing Act and the Home Mortgage Disclosure Act and hold lenders accountable for discriminatory practices.”
“This new Bill of Rights will prevent mortgage brokers from leading borrowers into loans that cost more than their credit history demands, prevent mortgage servicers from advancing a foreclosure when a homeowner is in the process of receiving a loan modification, and give homeowners opportunities to seek financial redress from mortgage lenders and servicers that violate these protections.”The Biden Plan for Investing in Our Communities through Housing
Consequently, a Biden-Harris administration is expected to be much more focused on affordable housing—an issue that is becoming more critical as home values rise and homeownership is more out of reach today for many low- to moderate-income families. Increasing housing affordability might involve “supercharging” investment in the Housing Trust Fund to expand the supply of affordable housing units. A Biden White House would likely also stop the current administration’s plans to release Fannie Mae and Freddie Mac from conservatorship into regulated utilities.
Industry insiders have specific expectations for a new administration. Lisa Rice, president and CEO of the National Fair Housing Alliance, said in a recent Housing Wire web conference that she would like to see the HEROES Act passed with its important provisions and funding for outreach to borrowers. She’d also like to see rules put back in place for fair lending, enforcement powers returned, and minds changed about disparate impact discrimination. Mike Calhoun, president of the Center for Responsible Lending, wants to see a commitment to address structural and racial barriers, particularly among prudential regulators and the CFPB.
At Asurity, we believe there’s a balance for borrowers and lenders. Certainly, lenders can be profitable, while at the same time, standing for fair access to housing and consumer protection. We offer lenders and servicers the tools to get this equation right with software and services designed to improve access to homeownership and to help lending institutions avoid bias.
The future of compliance and consumer protection is uncertain, but it won’t get any less important. In a post-pandemic, post-CARES Act world, and with the 2020 Census report to come, no matter who is in office, there will be population movements and demographic shifts, different levels of service, forbearance issues, debt-to-income ratio and creditworthiness issues, and possibly banks closing in minority areas. How will lenders and loan servicers respond and work to improve fairness and compliance with regulation?
Count on Asurity to help lenders and servicers navigate the challenges ahead.