Trump’s presidency ushers in a new era of mortgage regulation

Mortgage professionals can expect a transformed regulatory environment for the financial industry as Donald Trump returns to the US White House in January. This includes an increased risk of Fannie Mae And Freddie Mac have been removed from conservatorship, along with immediate shifts in agency leadership, analysts said.

“Trump’s victory is a regulatory game changer that is likely to include more free markets, less stringent oversight (auxiliary capital, costs, fees) and reduced regulatory risks,” said a team of Wells Fargo Analysts from major banks wrote this in a report on Wednesday morning.

Under President Joe Biden, the Federal Reserve attempted to implement the Basel III Endgame rules, which were intended to increase capital requirements for major banks, including a boost to their residential mortgage portfolios compared to international standards. The rule is currently under review following a strong market reaction.

“A new era after 15 years of stricter regulation should boost capital (probably not an increase with Basel III), bureaucracy, costs and fees,” Wells Fargo analysts wrote. They added that regulatory risk is likely to decline under Trump due to more predictable approaches, cost-benefit analyzes and a pro-business stance.

Trump’s return is also expected to herald a change in regulatory leadership, including those that directly impact the mortgage industry, such as the Federal Agency for Housing Financing (FHFA) and the Consumer Financial Protection Bureau (CFPB).

“Elections could have a significant impact on financial sector regulation, with a Trump administration likely to deliver a deregulatory push,” analysts at Keefe, Bruyette & Woods (KBW) in a report Wednesday morning. “A Trump administration could bring about a significant change in regulatory leadership, with as many as eight regulators undergoing leadership changes on day one.”

At the CFPB, KBW analysts see a possibility that Rohit Chopra will be replaced by an acting director shortly after Trump’s inauguration. In the long run, former CFPB Deputy Director Brian Johnson or Todd Zywicki, the former chairman of the CFPB Task Force on Federal Consumer Financial Law, could be potential replacements.. The timing for this change has been under debate since the Senate will initially focus on important cabinet members.

During Chopra’s tenure, the CFPB faced a challenge to its funding mechanism, rejected by the CFPB US Supreme Courtwhich made him more confident in continuing the agency’s crusade against junk fees, rating biases and fair lending violations – all controversial topics in the industry.

“In governance, policy is personnel and who is appointed will largely determine what is done in the housing space,” wrote David M. Dworkin, president and CEO of the National Housing Conference.

Under the Biden administration, Dworkin said the National Economic Council, the U.S. Department of Housing and Urban Development and the FHFA have had “impactful and effective leaders in housing.” But “regulatory policy has too often been more problematic.”

“We need supervisors who are watchdogs, not lap or attack dogs,” Dworkin wrote. “Overzealous regulation, such as a recent decision by the Ministry of Justice and the CFPB to file a lawsuit Rocket mortgage in an appraisal bias case involving a single loan, despite the fact that mortgage lenders are not allowed to question an appraisal report when underwriting a mortgage, is just the most recent example.”

The agencies, including the CFPB, expect more scrutiny in 2025 and beyond. In June, the Supreme Court overturned the 1984 Chevron precedent, meaning courts can rely on their interpretation of ambiguous laws while limiting the power of federal agencies to interpret the laws they administer.

At the FHFA, analysts at KBW expect Sandra Thompson will also be replaced on the first day of the Trump administration. Jonathan McKernan, board member of the Federal Deposit Insurance Corp. (FDIC), is being cited as a potential long-term replacement. However, the new FHFA commissioner would likely be confirmed in the second half of 2025.

“McKernan’s leadership would likely work to end GSE’s receivership,” the KBW analysts wrote, adding that they expect a positive impact from reduced regulation and a shorter M&A filing process.

The increasing likelihood that government-sponsored enterprises (GSEs) will be removed from receivership under the Trump administration sent their stocks higher on Wednesday. Fannie Mae was trade at $1.92, up 38%, while Freddie Mac was up 38% to $1.66.

The GSEs delivered a combined net income of $7 billion in the third quarter of 2024. Fannie’s total net worth was $90 billion and Freddie’s was $56 billion.

“With a Trump win, we still see better near-term upside potential for the preferred stock, which has collectively built $25 billion in capital from retained earnings over the past year,” BTIG analysts Eric Hagen and Jake Katsikas wrote in a note report.

According to them, the transfer of credit risk could increase in a Trump administration given the “potential read-thru it creates for accelerating a release from conservatorship, although this could depend on leadership development at the Treasury Department and the FHFA.”

Pilot programs, mainly involving an alternative to title insurance and closed-end second loans, are also at risk under the Trump administration. Former FHFA Director Mark Calabria recently criticized an expansion of appraisal exemption methods for higher loan-to-value (LTV) purchase loans, calling the decision “truly stupid and irresponsible” in a post on social media.

Looking at the Federal ReserveKBW analysts predict possible replacements for Jerome Powell and Vice Chairman Michael Barr when their terms expire in 2026. Potential successors include Christopher Waller, a member of the Fed Board of Governors; Kevin Warsh, a former member; and David Malpass, a former president of the World Bank Group.

“The new leadership would likely continue Powell’s policies, but may be under pressure from Trump to cut rates,” the KBW analysts said. “Financials are likely to benefit gradually from 2026, with areas such as Basel III being diluted and possibly less restrictive monetary policy.”