November 15th, 2016 11:28 AM by Gregg Mower
This election was shocking to just about every American after being spoon fed from the media that the results were a foregone conclusion. Newsweek had to recall its welcome Madame President issue as they went to press with a certainty of the winner. The stock market had to make adjustments and now entire households are adjusting the new norm. The social issues that this election has brought about has forced changes and probably changes in the way we get our news and who we trust to deliver it. All that aside we now have to ask what will Donald Trump do with Real Estate and what were his campaign promises with regards to change. Myself, being the Real Estate and Lending industry for the last 32 years and seeing more changes to the industry over the last 8 years then the last 32 combined. I have to say with this new administration there will be an abundances of new changes. Mr. Trump spoke of repealing then soften to fixing the Dodd Frank regulations imposed on consumers in 2010. The Dodd Frank Act basically made mandatory waiting periods for consumers when they apply for a loan, put caps on interest rates that could be charged on primary residences, and put such restrictions on lenders that if they were to make a mistake they could be fined millions of dollars. The Act made loan officers take a test or tests depending on the State to become licensed before being able to originate Qualified Mortgage Loans. The Act made it so lenders had to disclose fees a minimum of 3 times during a transaction on a person’s primary residence. The Act made it law that the a person’s debt to income ratio could not exceed 43% of their income. The act limited the amount of money a Mortgage Broker could make, and It basically took away the ability of a person that has less than perfect credit to obtain a loan on a primary residence. The act has become so restrictive that real growth in the real estate field has only come from the lack of housing and new construction and the demand for existing housing has pushed up real estate values.
There is a lot here to forecast the future with and I am optimistic as Mr. Trump been in the Real Estate game all his life and has seen firsthand what has happened to the Real Estate Industry with the new laws. With that said and his promises to re-visit the new laws and make changes should be beneficial to consumers. Here is what I see as some logical changes our new President can accomplish with a controlling House and Senate. Mr. Trump will have to start with the mutli-Trillion-dollar Agency created to oversee and fine lenders, the CFPB or the Consumer Finance Protection Bureau. The CFPB has been tasked with interpreting the laws the way they chose fit, without due process of law. All the while imposing regulations above and beyond the law that they can also enforce as they see fit. This Agency is supposed to help consumers from big bad lenders. In fact, they do the opposite by scaring lenders to the point of not lending to those that should be able to attain financing. I would argue that the whole Agency is discriminatory by nature. I can say this by the fact that current lending laws and regulations enacted by the very agency designed to help consumers have severely hindered consumers in the limitation of credit to certain groups of people. I know this as I have been in this industry for over 30 years and before this Agency’s existence and before the whole mortgage debacle there was common sense in the lending industry and with the new laws this common sense has gone away. It would appear that only those that have had generations of ability to attain credit in the U.S. would have had more experience and education with regards to attaining credit. It was not until 1968 that the civil rights act became law that allowed all races, religions, sexes, obtain credit under an equal set of credit standards. Until then the ability to obtain credit was pretty mush only white men. After the Civil Rights Act all of a sudden all groups were allowed the same opportunity. However, without education of how credit works people did not know how to handle credit so when it was offered to them they could not handle it, simply because they were never educated on how the system works. So only a generation later we are still faced with entire groups of people that their parents were not afforded the same opportunities as them so they could not have taught their children how to handle credit. Before all of the laws designed to protect these very people from lenders we had a system that could take this into consideration and give people a chance with credit. In today’s world those groups of people are discriminated against more than ever by the very laws designed to protect them. So our new President has to address this issue, and the only way I see to do this is to give the lenders back the power to make decisions based on merit not on law.
The next thing Mr. Trump will have to do, is to allow those institutions to fail that make bad credit decisions and get rid of the too big to fail attitude. Mr. Trump should employ people that are in the business of Real estate and Finance to assist in the fixes and changes. Mr. Trump should tone down the powers of the CFPB to give lenders a chance to lend to more people. This will be a daunting task as the CFPB should be overhauled from top to bottom, which by the way, would be a long time coming. We also should remember that in the history of government there has never been agency shut down, they have been re-assigned or re-named so don’t expect the CFPB to go away. Not to mention the jobs that agency employs, however, if it were me I would get those people back to private industry now that they have been armed with compliance techniques. Other changes that should be made to the CFPB are giving the loan officers back the ability to negotiate interest rates and the ability to give to their clients a portion of their pay if they need to make a deal work. This is a simple economic fact that consumers have a choice where they can get their mortgages and generally will gravitate to the lowest interest rates and lowest fees. Currently a Loan Officer has a compensation plan with their employer and this cannot change even if the Loan Officer wished to contribute a portion his or her commission to make the deal work. A prime example would be if a Loan Officer’s compensation is set at 1.2% for all loans the close they cannot lower their commission to those who wish a high loan amount. That 1.2% commission might be good for Loans up to $500,000 but after that they should be able to lower their commission and thus lower the costs to the consumers. This kind of common sense needs to come back to lending. Mortgage Broker Compensation should not be limited to 3% on Qualified mortgages. The argument for this change is not so Mortgage Brokers can make more money but so they can make more on the smaller loan amounts to entice them do them, and be able adjust to a smaller commission on the larger loan amounts as the work is the same for small loan as it is for a large loan amount. These are just some common-sense adjustments that need to be made. I would keep the Loan Officer Licensing as that keeps the riff raff out the business.
These are some common-sense changes that I feel are necessary to insure a healthy Real estate industry. Mr. Trump soon to be President Trump will have a big agenda when he gets sworn into office in January. The media has put so much attention on his immigration policies and changes he wants to make to Obamacare that are missing some of the positive changes that he will be making in the housing industry. He can take advantage of the fact the media has not paid attention to anything other than the left wing high profile agenda items, that he can make these changes without too much negative media attention. It not only my hopes and prayers that changes are made it is echoing throughout the entire Real Estate industry. So let’s make America Great Again and American Real Estate has been a pillar in the economy for as long as America has had an economy so let’s get working again without the fear of the Government.