Trump Signs Order Directing Agencies to Cut Mortgage Insurance, Refinance and VA Loan Costs

On the same day Treasury proposed its rule barring large investors from buying single-family homes, President Donald Trump signed a second housing measure: an executive order titled "Decreasing Housing Costs for the American People."

The order targets the back end of the mortgage process: insurance premiums, closing costs and agency loan rates. It is mostly a set of directions to federal agencies, not a set of finished programs.

What the order directs

The Federal Housing Finance Agency (FHFA) is told to launch a pilot program that proactively cancels mortgage insurance premiums for borrowers who meet equity requirements based on current property values. Fannie Mae and Freddie Mac are directed to review their portfolios for borrowers eligible for cancellation of what the order calls "excessive mortgage insurance."

FHFA is also directed to make permanent its pilot waiving title insurance on refinances, so more borrowers can use alternatives. The order calls for reducing loan-level pricing fees on eligible refinances and for waiving appraisals and income reverification on certain cash-out refinances.

The secretaries of Agriculture and Veterans Affairs are told to reduce interest rates on the single-family loans their departments issue or guarantee.

A task force on manufactured and factory-built housing is also created. It will include HUD, Commerce, USDA, the VA and FHFA, and it is charged with recommending ways to align and streamline production and financing standards across federal housing programs and to "promote competition."

The order says unnecessary regulatory requirements and outdated origination processes "have driven up closing costs and made homeownership unaffordable."

Speed and dependence on industry

Scotsman Guide, which obtained a draft earlier in the week, found the signed text hewed closely to it. Some provisions, such as the waivers on appraisals and income reverification, would require industry input to carry out. Others, such as cutting loan-level pricing fees and the portfolio review at Fannie and Freddie, could move faster.

The order sets pilots, reviews and recommendations. It does not itself change a borrower's rate or premium.

The market it lands in

The Freddie Mac average 30-year fixed mortgage rate hit 7.40% last week, the highest in about three years, before easing to 7.32% this week. The 10-year Treasury yield, a pricing benchmark for mortgages, has dropped more than a quarter point in the past two weeks.

The National Association of Realtors reported that contracts to buy previously owned homes fell to a record low in September. Single-family housing starts fell 4.6% in September, and permits dropped 4% to their lowest level in 3.5 years.

The National Association of Home Builders/Wells Fargo Housing Market Index, released Oct. 19, fell three points to 29 in October, the lowest reading since June 2012. Of builders surveyed, 43% cut prices, the highest share in the 2020-2026 period, and 65% used sales incentives.

NAHB chief economist Robert Dietz said "higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines."

Reaction

HUD Secretary Scott Turner defended the administration's housing record in a statement to Breitbart News. "America cannot regulate its way to housing affordability," he said, adding that the administration is "clearing barriers to enable builders to build, buyers to buy."

NAHB Chairman Bill Owens said the administration's regulatory reform efforts are "helping to ease some of the cost pressures" builders face, even as they contend with higher costs for construction loans, materials and diesel.

Mortgage industry groups welcomed the order. Scott Olson, executive director of the Community Home Lenders of America, said lowering title insurance costs, improving manufactured housing affordability and cutting veterans' mortgage costs "have long been CHLA priorities."

Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said lenders welcome the initiatives and that the MBA will work with agencies toward "a timely and thorough implementation."

Reuters reported that affordability has become a political vulnerability for Republicans ahead of the November midterms. The order was signed less than two weeks before voters go to the polls.

What to watch

The first test is FHFA. The agency has to design the mortgage insurance cancellation pilot, including the equity thresholds and valuation method it will use, and decide how fast to make the title insurance waiver permanent.

The USDA and VA have not yet said how much they will lower rates on their loans. The manufactured housing task force has no published deadline in the sources reviewed. Until those details arrive, borrowers have an order but not yet a lower payment.