Written By: Joel Palmer, Op-Ed Writer
With a new presidential administration, a number of regulatory developments, and a strong housing market, 2017 was an eventful year for the mortgage industry. A number of these developments will carry over into the new year. Here are five things that could impact mortgage processors, mortgage underwriters and the rest of the industry in 2018.
The fate of the CFPB. Some had hoped that the incoming Trump administration would gut, if not completely dissolve, the Consumer Financial Protection Bureau (CFPB). It was an eventful 2017 for the agency, highlighted by the abrupt resignation of its director Richard Cordray and two individuals, one appointed by Cordray and another by President Trump, claiming to be its new leader. There were also multiple hearings regarding the constitutionality of its governing structure. With the president having more influence, the mortgage industry can likely anticipate a reduction in the CFPB’s oversight responsibilities in 2018.
The fate of H.R. 2954. Known as the Home Mortgage Disclosure Adjustment Act, H.R. 2954aims to exempt small banks and credit unions from being forced to comply with the CFPB’s revised Regulation C rule under the HMDA. The bill passed out of the House Financial Services Committee in October. In December, the Congressional Budget Office issued a report on the bill’s projected cost. There’s current no timetable on a vote for the bill, but watch for it and the contentious debate surrounding the bill sometime in the new year.
GSE reform. There’s no guarantee that Congress and the Trump administration will address GSE reform in 2018. Late last year, Treasury secretary Steven Mnuchin said 2018 was the earliest that reform measures would occur, enabling Fannie and Freddie to be transferred out of federal government conservatorship.
Next year is also when the capital buffers of Fannie and Freddie are set to be drawn down to $0, which was part of the government’s Preferred Stock Purchase Agreement (PSPA). But several Democrats and Republicans have advocated for the GSEs to keep some of their capital reserves to prevent another Treasury bailout down the road and to allow dividends to shareholders of Fannie and Freddie.
Interest rates. While higher mortgage rates were anticipated in 2017, rates actually ended the year lower than at the end of 2016, according to Freddie Mac. The average 30-year fixed rate stayed below 4 percent for the entire second half of 2017. At the end of 2016, the rate was at 4.32 percent.
Still, it’s likely rates will rise in 2018. The average 30-year rate ended 2017 at a five-month high and the Federal Reserve raised the federal funds rate three times this past year, including in December. Freddie economists expect the 30-year fixed rate to average about 4.4 percent next year, which is still low historically. This should help maintain some level of housing affordability and encourage strong purchase activity, though the increase will also likely lead to a reduction in refinancing activity.
Overall housing market. Mortgage underwriters and processors should have a fairly busy year in 2018, but not quite as strong as 2017. Economists anticipate an increase in housing construction to deal with the low supply of homes on the market in certain areas. With better supply and higher mortgage rates next year, home values should moderate. And it remains to be seen what impact the recently passed tax reform bill will have on housing and the overall economy.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.