How Will Donald Trump’s Second Term Affect Mortgage Lenders?
Written By: Joel Palmer, Op-Ed Writer
Later this month, Donald Trump will be inaugurated into his second term as President of the United States. Since his election victory two months ago, many have speculated what impact his administration will have on housing and the mortgage industry the next four years.
Already, the transition to a second Trump administration has impacted a key federal agency. Sandra Thompson, director of the Federal Housing Finance Agency (FHFA), is planning to step down on the day before Inauguration Day, according to Bloomberg, though it’s likely Trump would have replaced her anyway. FHFA is a key agency in many housing and mortgage initiatives as it oversees Fannie Mae, Freddie Mac and the Federal Home Loan Bank system.
The incoming administration is also expected to hasten the end of the conservatorship arrangement between the U.S. Treasury and the two GSEs. This was discussed during Trump’s first term, but never came to full fruition. The biggest step taken during that period was the 2019 decision by Treasury to allow the GSEs to retain more of their earnings to rebuild their capital reserves.
The last four years have seen little movement toward ending conservatorship, as the Biden Administration emphasized housing affordability, especially for lower income buyers. As recently as April 2024, FHFA Director Thompson’s testimony to Congress indicated that Fannie and Freddie were far from ready to exit conservatorship.
The conservatorship has also seemingly become less of a focus since the pandemic, a period that helped create widespread affordability issues.
A household making the $83,782 median U.S. income in 2024 would’ve had to spend 41.8 percent of their earnings on monthly housing costs if they bought the $429,734 median-priced U.S. home, according to a report from Redfin. In the previous decade, the typical share was 30 percent or lower, according to Redfin.
During the 2024 presidential campaign the Republican National Committee platform proposed increasing housing supply by making public lands available for building. They further addressed affordability by reducing mortgage rates by reducing inflation, promote homeownership through tax incentives and support for first-time buyers, and cut “unnecessary regulations that raise housing costs.”
In a CNN interview earlier this month, a Trump transition team spokesperson reiterated some of these points as well as banning housing for “illegal immigrants who drive up the price of housing,” claiming “the cost of new homes will be cut in half,” with these initiatives.
Some experts warn, however, that Trump’s proposals could have the opposite effect. Specifically, his push for tariffs and mass deportation will increase building costs, thus negating the potential positive impact of increasing housing inventory. There is also concern that Trump’s proposals will lead to inflation, which could lead to higher mortgage rates.
For mortgage underwriters and processors, the immediate future may hinge on what, if any, impact the second Trump administration can have on the overall housing sentiment. The combination of a higher home values, mortgage rates, property taxes and property insurance have left a majority of potential buyers pessimistic about getting into the market.
“For many Americans, buying a home remains more out of reach than ever and that’s unlikely to change anytime soon,” said Redfin Senior Economist Elijah de la Campa.
In the latest monthly Fannie Mae survey on home buying sentiment, only 22 percent of respondents believe it’s a good time to buy a home.
Even if sentiment improves, one survey indicates that housing supply, at least for existing properties, may not get better anytime soon.
According to another Redfin survey, 34 percent of U.S. homeowners say they’ll never sell their home, and another 27 percent say they wouldn’t consider selling for at least 10 years. This is understandable, given that many of those homeowners purchased homes before the escalation in values, plus many bought or refinanced at rates at or even below 3 percent.
For many, selling their homes would mean taking on a much higher mortgage payment when they buy a replacement. This trend has largely limited sellers to those who have to relocate for career, family or financial reasons.
About the Author
As an NAMU® 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.
