Carson Conundrum

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December 6, 2016
Carson Conundrum 

Reaction flooding in to President Elect Donald Trump’s choice, tapping Ben Carson as his nominee for Housing Secretary.

Collingwood Group Chairman Tim Rood on Fox Business’s Cavuto said, “Dr Carson is an intelligent, impassioned, and empathetic individual.”

tim carson.jpg

As for his lack of experience in the housing arena that may be a positive, Collingwood’s Rood says, “Sometimes the very best policy makers are those who listen; and sometimes, good leaders who are not steeped in the subject matter are better listeners than those who believe they have all the answers.”

>Click Here for Collingwood Chairman Tim Rood’s full interview on FBN’s Cavuto

B.Montgomery_-_Head_Shot.jpgCollingwood Group Deputy Chairman Brian Montgomery tells Westwood One’s First Light radio show, “There is little doubt President-elect Trump greatly admires and respects Dr. Ben Carson and felt strongly about him joining his Cabinet.

Having spent almost eight years in the Executive Office of the President, I speak from experience in saying a Cabinet Secretary who has the ear of the President is a positive for that agency and individual.  In this instance, I think Dr. Carson will be able to “elevate” the issue of Housing within the Trump Administration.  The fact Dr. Carson is a household name I believe will provide him a larger platform to articulate his vision for how best to help tackle any number of issues within the housing arena: shortage of affordable rental housing, the impact of new regulations which have constricted the mortgage market, and the growing senior population and how best to address their housing need.,”

sharga tv.jpg“Dr. Carson’s nomination is an indication of the tremendous respect that President-Elect Trump has developed for his former rival,” says Ten-X EVP Rick Sharga.Sharga adds “Dr. Carson has spoken out in the past about the need to revitalize many of the country’s urban areas, so it wouldn’t be a surprise if he focuses on doing that, and trying to find solutions to the growing problem of affordable housing. Since Dr. Carson has also discussed the unintended consequences of over-reaching government regulations, it’s possible we may also see some streamlining, or regulatory relief as well.”

By the way, Fannies’ stock price ended the day down 5 percent, Freddie’s is down 6 percent, and both were going even lower in after-hours trading

Carson Is New Sign Trump Plans to Govern From the Right

President-elect Donald J. Trump is moving to repudiate vast parts of President Obama’s domestic agenda as he fills his cabinet with conservatives who have long records opposing the current administration on social programs, wages, public lands, veterans and the environment.

Mr. Trump’s selections to lead the Departments of Education, Commerce, Justice, and Health and Human Services, and the names under consideration for other federal agencies with broad authority over the lives of Americans, have cheered Republicans in Washington, who have spent eight years battling Mr. Obama’s administration.

“It’s a recognition that elections have consequences,” said Thomas M. Davis, a former congressman from Virginia, who said he was impressed by the ideological philosophy of Mr. Trump’s domestic agency appointments. “Republican philosophy says markets can do a better job. It’s a huge clash with Obama.”

Early Monday morning, Mr. Trump announced that he intended to nominate Ben Carson, a retired neurosurgeon, to be the secretary of housing and urban development. In that post, Mr. Carson, who enthusiastically backed Mr. Trump’s candidacy after dropping his own, will oversee the federal agency that fights urban blight, provides rental assistance and helps homeowners battle foreclosures.

If he is confirmed, Mr. Carson will embrace a starkly different approach to those problems, compared with housing secretaries during Mr. Obama’s tenure. He opposes government programs that he says encourage “dependency,” and he has been fiercely critical of housing programs intended to end segregation.

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Trump Effect: That House You Want got $16,000 More Expensive

The sharp jump in mortgage interest rates following the November election is not only holding on but gaining. Add that to an already uneven housing recovery, and the resulting numbers are staggering.

Housing affordability was already weakening, thanks to fast-rising home prices, which has made it the least affordable time to buy a house since the Great Recession.

The average interest rate on the 30-year fixed mortgage moved from around 3.5 percent to as high as 4.25 percent in the weeks following Donald Trump’s election, thanks to a huge sell-off in the bond market. That pushed the average cost of a home higher by more than $16,400 “almost overnight,” according to researchers at Black Knight Financial Services. It now takes 21.6 percent of the median income to buy the median priced home, the highest share since June 2010.

“The last time affordability ratios came close to this point (back in 2013 after a sharp rise in rates), there was an immediate reaction in terms of home price appreciation,” said Ben Graboske, vice president of Black Knight Data & Analytics. “They didn’t fall, but the rate at which they had been rising was basically cut in half, from 9 percent annually to less than 5 percent in a matter of months.”

The difference today, however, is that the supply of homes for sale is so low that fierce competition is keeping high pressure on prices. The supply problem may even be exacerbated by rising rates because homeowners who might have wanted to move will be dissuaded by the fact that they’ll have to give up the record-low rates they locked in during the refinance boom of the last few years.

“This will be an interesting balancing act in the market over the coming months, even more so given our recent research which showed that borrowers with low fixed interest rates are less likely to list their homes for sale,” Graboske said.

Housing affordability is still below the historical norm, which is when the cost of total monthly payments is about 24 percent of income, but that percentage is likely to rise more quickly in the next year, as prices are already now higher than they were during the peak of the last housing boom in 2006.

Interest rates are expected to move even higher in the next few months, but even if they were to stay exactly where they are today, and home prices rise at the rate they have been, income levels would have to rise by about 5 percent annually, which is possible but unlikely, just to maintain the current level of affordability throughout 2017, according to Black Knight.

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More on The Trump Transition Below

Mortgages Going Mobile

Fannie Mae’s Economic & Strategic Research Group says consumers experiences with online leaders such as Amazon are reshaping their day-to-day expectations, including how they conduct their financial and mortgage activities.

Fannie concludes:

  • Mobile mortgage usage and demand have approximately doubled in the last year.faniie mobil.jpg
  • The demand for mobile mortgage quote comparison seems to present the greatest opportunity as it shows the largest gap between current usage and future interest.
  • The potential for mobile growth is widespread across a variety of mortgage activities – each one shows a large increase in future mobile interest over the last year.
  • Many mortgage lenders have started to respond to interest in mobile resources by developing mobile apps, and half reported expectations that they would offer a mobile app by the third quarter of 2016.
  • Mobile usage and demand for home buying activities is most prevalent among younger, college-educated, and first-time homebuyers.
  • As sources of mortgage advice, online websites and mortgage lenders have the same level of influence on low-and moderate-income recent homebuyers.

Credit Restrictions Cost Home Buyers ‘Deal of a Lifetime’

Sean Dobson wanted to start a mortgage bank four years ago to serve borrowers with middling credit or irregular income. He eventually decided that growing regulatory hurdles and other costs would erase his returns.

Instead, he purchased thousands of homes in states from Texas to Indiana and now rents them to people who might have been his borrowers.

U.S. consumers and businesses have enjoyed ultralow borrowing costs since the financial crisis because the Federal Reserve pinned interest rates near zero. At the same time, regulators and lenders intent on fortifying the financial system have clamped down on risk-taking, making it harder for many borrowers to get loans.

The result is that lending for housing, a pillar of the U.S. economy, has bifurcated. Well-off households and home builders have their choice of loans, while many others without solid credit or stable incomes are locked out.

That dynamic is one reason the U.S. has seen such anemic economic growth despite aggressive efforts to encourage investment. Money has been cheaper and more abundant than ever, but—for some—much harder to get.

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Bigger and Better Deep in the Heart of Texas

The Texas real estate market might be unstoppable. According the Texas Annual Housing Report just released by the Texas Association of Realtors, the market is on track to surpass 2015’s record-breaking sales.

“Despite slowing job growth throughout the year and a downturn in the state’s energy sector, Texas home sales volume continues to outpace 2015 levels,” notes the report, which includes insights from studies released throughout the year. “The Texas Quarterly Housing Reports released this year show that the Texas housing market is currently on pace to surpass 2015 as the highest home sales volume in the state’s history.”

And who’s buying all these homes? A diverse group, including first-time homebuyers, single women, and international buyers. Thirty percent of home purchases were from first-time buyers, and single women bought homes at twice the rate of single men. And, as we noted earlier this year, Texas raked in billions from international sales.

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The Trump Transition

-“The Trump Effect” on Housing, The Collingwood Group Chairman Tim Rood on Fox Business’s Cavuto: chicago.jpg?v=TqPcoYyJuo

-Rood on the National Business Report  >CLICK HERE TO WATCH: Group’ Chairm

-Collingwood’s Rood on Business First AM >CLICK HERE TO WATCH:

-Rood with the trifecta, a third television interview from the Chicago Board of Trade >CLICK HERE:

Will Trump Tackle Housing Finance Reform?

Housing was the talk of the campaign two presidential elections ago, but it stayed under the radar in the 2016 race, leaving plenty of room to speculate about President-elect Donald Trump’s likely mortgage policy for the next four years.

On the one hand, without a crisis, observers said there is little incentive for him to move quickly on the issue.

But the unresolved question of what to do with Fannie Mae and Freddie Mac – both in conservatorship since before Barack Obama’s election – will loom large over the future Trump administration.

Exactly how Trump would address the issue is a complete mystery. The issue was never raised on the campaign trail.

“If you read the republican party platform, it is pretty obvious the Republicans are for less government in housing,” said Brian Montgomery, vice chairman of The Collingwood Group and a former Federal Housing Administration commissioner.

But no one expects sweeping action because other issues are higher priority, such as health care reform.

“If you ask most lenders, the market works today,” says Patrick Sinks, the chief executive of MGIC Investment Corp. and the chairman of U.S. Mortgage Insurers, a trade group for the private mortgage insurance industry.”A lender wants to originate a loan, insure that loan and turn around and sell that loan to the GSEs and replenish their capital and start the process over again. That works. And it keeps humming along.”

As long as that remains true, the incentive to make big chances won’t be there.

“The bigger issue is what the right role for government in housing is,” Sinks said. “That’s going to take legislative action and [lawmakers in either party] just don’t seem to be in a hurry to resolve it.”

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Industry Insight: The Opportunity for Change in Housing Policy

DS News covered what the future of loss mitigation will look like after the expiration of HAMP on December 31, 2016. To explore the topic further, DS News sat down with Meg Burns, Managing Director of The Collingwood Group, to discuss the opportunities that come from pairing a new administration with housing policies such as loss mitigation, regulatory compliance, and more.


Burns joined The Collingwood Group in 2014, and as Managing Director, supports the firm’s Business Advisory and Business Development practices. Prior to Collingwood, Burns served as the Senior Associate Director of the Office of Housing and Regulatory Policy at the Federal Housing Finance Agency (FHFA). There, she managed various policy and regulatory initiatives involving single-family and multifamily finance and loss mitigation strategies, as well as insurance-related activities of the government-sponsored enterprises. As such, she was actively involved in industry-wide discussions regarding the role of the federal government in addressing the mortgage crisis.

With the end of HAMP drawing close, what is to come for loss mitigation?

The fact that the sunset of HAMP coincides with the arrival of a new leadership team in Washington is a great opportunity because there is a chance for a really fresh policy dialogue. The good news is that the industry has a lot of work that has been underway for quite sometime now to put forward a good plan for a new set of loss mitigation strategies including a particular set of modifications. It is a very cool time for HAMP to be expiring in some respects and I think that what we will see are some programs that really do reflect the lessons that have been learned. I also think that the reason a new leadership team in Washington is so helpful is because we can have really honest discussions and assessment of what those lessons learned are. It is often a lot easier for a new group of policy leaders to embrace the policy achievement of the team before them but also to acknowledge program flaws without feeling defensive or like they were integrally associated with them. At its core, what was reaffirmed through the HAMP experience was something that most good policymakers know very well which is that complicated program rules generally translate into fewer program beneficiaries. In the HAMP space there was an extended period where they were really striving for perfection and precision both in the data collection aspect and some of the calculations to determine who was eligible. One of the lessons learned in HAMP is that striving for that perfection and precision really rendered  fewer distressed borrowers eligible. I think that what we will see are the modifications that replace HAMP will be modifications that follow some basic rules rather than complex calculations.

Aside from HAMP, what other policy changes might be impacted by the entrance of a new administration?

I think there is tremendous opportunity across the board and I think that the new leadership team has certainly publicly acknowledged a concern with the heavy-handed nature of the regulatory framework in Washington D.C. today. If the new team begins their policy discussion from that perspective, there is a chance that we will see some of the very aggressive enforcement activity move into a space where those who are responsible for monitoring the leading communities activities will start to identify problems and issues but more for the purpose of addressing them and resolving them as opposed to taking very stringent enforcement actions. That type of enforcement outcome clearly has resulting in less lending activity and stifled access to credit. There is a huge opportunity for the Trump Administration to revisit the way rules have been enforced and to take a more relaxed approach not to identifying problems, but to how those problems get resolved. That should make a big difference for lending activity in the country and help more consumers.

Do you think that taking a relaxed approach will possibly improve homeownership?

I do. I think that the nature of the regulatory expansion over the past eight years has affected home sales. The cost in certain parts of this country to build homes has increased so substantially that it’s almost impossible in certain communities to construct starter and affordable homes. I think there is certainly a good opportunity for this new administration to take a look at ways to reduce some of that regulatory activity to the extent that the federal government has a role. This will also impact the lending space where there have been a lot of new regulations put in place as a result of Dodd-Frank in part. They have had a suffocating effect on the ability of lenders to reach the population of borrowers who are most in need of affordable financing options.

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Housing’sTrump Card

What might housing policy look like under the new Trump administration, and how will Trump work with Congress on housing policy?

In the limited moments that Trump has shared his thoughts on what he would do with the housing market, he stated that one of the big issues facing the housing industry is regulation.

In his speech at the National Association of Home Builders’ 2016 Midyear Board of Directors Meeting in Miami, Florida, Trump said, in particular, there is no group regulated harder than the housing industry. Trump said these regulations kill not just the small businesses but jobs in general. Trump shared that he plans to eliminate these regulations and instead implement a method of creating jobs without regulation.

Likewise, in an interview with Reuters in May, Trump said he plans to overhaul the controversial Dodd-Frank Wall Street Reform and Consumer Protection Act that was passed in 2010 in response to the crisis.

“Dodd-Frank has made it impossible for bankers to function,” said Trump. “It makes it very hard for bankers to loan money for people to create jobs, for people with businesses to create jobs. And that has to stop.”

A lack of priority for housing in Congress is something those in the industry hope to see change with this newly elected house.

“It’s amazing that something so vital as housing to the overall health of the American economy and the average American – is something Congress still can’t rally in support of resolving – especially when the risks associated with continued failure to do so are potentially so serious,” says Brian O’Reilly, The Collingwood Group President. “The facts are that housing is a critical component of overall economic health in the US. Thus, continued failure by Congress to address housing reform is reckless and irresponsible.”

Collingwood’s Montgomery adds that he hopes both sides will heed the words of Franklin Roosevelt, who on the eve of his re-election in 1936 while citing the amount of work to be done said, “we will keep our sleeves rolled up.”

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Have a productive day and a great week ahead!

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