10.23.26 Trump’s Executive Order; Former FHA Commissioner Frank Cassidy on Housing; Price Correlations

Robbie ChrismanWelcome to the Chrisman Commentary Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include the latest executive order to address housing, why bond and stock prices aren't tightly correlated currently, and my interview with former FHA Commissioner Frank Cassidy on housing affordability and policy approaches to expand housing supply. Here, take a listen to a little preview. Robbie ChrismanOne thing you would change to get more building happening tomorrow. Frank CassidyI I would incentivize local governments to adapt best practices for zoning and for entitlement. I wouldn't make uh local governments do it. I would make it voluntarily. We don't want bureaucrats in DC telling local communities what they should and should shouldn't be doing. But the role of the government should be to, you know, the carrot and the stairs. Let's incentivize local governments to voluntarily adapt best practices. Let's use the power of FHA, of Fannie, and Freddie to uh incentivize local governments to make it easier for builders to build or to bring new housing online. Robbie ChrismanThanks to today's podcast sponsor, Experian. Experian verifies integration with Workday, gives mortgage lenders broader access to reliable, up-to-date income and employment data, streamlining verification, enhancing efficiency, and delivering a smoother borrower experience from application to closing. To learn more, visit Experian.com slash business slash products slash Experian dash verify. High prices and high rates are impacting potential borrowers and voters alike, and there's nothing our Fed can do about it. On the Fed front, it's been relatively quiet, aside from President Trump's accusations of criminal wrongdoings by ex-Chair Powell being dismissed. There is, however, a federal open market committee meeting next week. The upcoming FOMC meeting is a key catalyst for Treasury markets, with investors weighing the risk of an unexpected rate hike against the likelihood of a hold accompanied by hawkish guidance to preserve expectations for a December hike. A surprise hike could trigger a sharp sell-off in short-term treasuries, while a dovish hold could initially steepen the yield curve as safe haven flows unwind and longer-term inflation concerns resurface. But the big news yesterday was this executive order coming out of Washington, D.C. President Trump signed an executive order aimed at lowering mortgage and housing costs. It directs Fannie Mae, Freddie Mac, and federal agencies to cut specific homeownership expenses. NAM noted that earlier draft reporting also described a review of loan-level price adjustments, appraisal requirements, and the use of AI by the GSEs. The White House fact sheet does not mention those items. Until the full order text is published, treat those as unconfirmed rather than part of the signed order. NAM's president Michael Farrell pointed out that, quote, a signed order is a starting point, not the finish line. What matters now is how FHFA, USDA, and VA carry it out. NAM will be at the table to make sure these changes actually lower costs for borrowers, stay within the law, and protect the broker channel that keeps this market competitive. Our advice to members is simple. Watch for the agency guidance and do not change how you do business until it arrives. End quote. According to the White House fact sheet, the order directs four main actions. Proactive mortgage insurance cancellation, FHFA must create a pilot program that proactively cancels borrowers' mortgage insurance once they meet equity requirements based on current market value, removing a monthly cost for qualifying home buyers, permanent title insurance waiver, where FHFA must expand the existing title insurance waiver pilot into a permanent program, letting more borrowers use lower-cost alternatives to title insurance, and reducing refinance closing costs. Lower USDA and VA loan rates, the Secretaries of Agriculture and Veteran Affairs must reduce interest rates on the single-family home loans made directly by their departments. No target rates were given. And finally, the order establishes a task force on manufactured housing innovation to improve quality and lower the cost of factory-built homes for eligible housing programs. Seth Appleton, president of U.S. Mortgage Insurers, said, quote, we commend the president's focus on lowering costs for future homeowners. And the private mortgage insurance industry is proud to already be delivering on that goal. Private MI is one of the only costs of homeownership that has declined, with premium rates falling 25% since 2017, driven by robust competition in the market and tax policies enacted in President Trump's first term. End quote. MBA's president and CEO Bob Broeksmit said, quote, the MBA appreciates the Trump administration's continued focus on lowering housing costs by reducing unnecessary regulatory burdens, streamlining mortgage processes, and promoting competition across the housing market. We also appreciate the Executive Order's acknowledgement of the need to balance consumer, taxpayer, and GSE interests, and will work with the Federal Housing Finance Agency and Fannie Mae and Freddie Mac on a timely and thorough implementation. End quote. My take is that the order appears relatively benign for mortgage and title insurers with more limited mortgage industry implications than initially anticipated. The order would make the Fannie Mae and Freddie Mac title insurance pilot permanent, but its continued focus on refinancing limits its reach, as refinances account for an estimated 7% of industry title premiums. It also directs the FHFA to establish a mortgage insurance cancellation pilot for loans originated after the program's launch, using automated valuations and other data to identify eligible borrowers and require servicers to notify them when coverage can be canceled. Broader measures include streamlining manufactured home permitting and directing the VA to reduce rates on single-family mortgage loans, collectively aiming to lower borrowing and transaction costs and expand homeownership affordability, while the prospective only mortgage insurance provisions limit the immediate impact on existing loans and insurers. For today's interview, I wanted to welcome to the show former FHA Commissioner Frank Cassidy to talk about housing affordability and policy approaches to expand housing supply. He was nominated by President Trump and confirmed by the U.S. Senate in 2025. As Federal Housing Commissioner, he led Housing and Urban Development's Office of Housing and oversaw the Federal Housing Administration. Robbie ChrismanLet me start by talking about your background a little bit. You've been on the public policy side of things, even though your background is in commercial real estate finance. When we think about the Federal Housing Administration or HUD, where you've been at both of those places, kind of the goals that they have been set out to work toward and your experience there, what you like about the public policy side. Maybe what you don't like too. I don't know. Frank CassidyWell, look, I've been uh originator uh my entire career on the multifamily and healthcare commercial side. So originating loans for multifamily and senior housing. Um been in the business since really college, uh always on the origination sales side, had the unique opportunity to join the Trump administration shortly after the president was inaugurated and lead the Federal Housing Administration and HUD's Office of Housing. So I figured opportunity of a lifetime to go on the inside and you know run uh one of the nation's largest mortgage programs, right? FHA is a $2 trillion portfolio, one out of five mortgages on the single family side, and a $200 billion portfolio of multifamily senior housing and healthcare properties. So it was an honor to serve the country um in the Trump administration. And I think we've got you know a lot done in record time. Robbie ChrismanWell, let's talk about the state of housing today. And it seems like when you canvass opinion, there aren't necessarily many bright spots out there. People complain about affordability, mortgage rates have obviously run up here over the last several months. However, Americans have record equity in their homes. I was here at MBA Annual, and someone said recently that there's like 12, 11, 12 trillion dollars of tappable equity. So what's the real problem? You nailed it. Frank CassidyYou nailed it, Robbie. Americans are sitting on over 12 trillion dollars of equity in their homes, trapped equity, right? We have the lock-in effect where a lot of Americans were very smart and they refinanced their mortgages between two and four percent during the record lows of 2020 and 2021. And now we have the the lock-in effect. You've got interest rates six and a half touching seven percent. And it doesn't make sense for a lot of Americans to sell their homes and give up those low rate mortgages, especially when they got 25 years left at at fixed rate uh financing, you know, where you went from historic interest rate lows to, you know, now a 20-year high, it's caused the market to potentially flatten, right? It's not as not as much activity as you would typically see. Robbie ChrismanIt's not as simple as just building more homes at this point, is it? Frank CassidyI mean, look, it's uh it's a complex issue with a simple answer that is harder to implement than it is to just come up with the answer. As a country, we haven't built enough homes. We have created uh a housing market that rewards existing ownership while making it hard for new ownership and new people to become homeowners. We simply haven't built enough enough homes in this country. The regulatory red tape has driven up the cost of housing. It's made it harder for builders to build. It's created a lot of uncertainty. And it's, I hear from developers every day, you know, it takes years and years to get these projects uh off the ground. The enemy of every good real estate deal is time. And we've created an environment that almost punishes builders who want to bring new housing online. The only way housing is going to get more affordable is to build more of it. Look at markets like Austin, Texas, where they let builders build. You actually have uh rents and home prices coming down, right? And that inventory is quickly being filled up. Um, markets like New York and California, you don't you don't have that that new inventory coming into the market, and housing gets more and more expensive. Robbie ChrismanAs a quick sidebar, then is it good to see home values come down for the people that have created wealth based on? I don't mean that in any political sense. I just mean you think it's good for markets to build more or not. Frank CassidyIt's a balancing act, right? It's a it's it's it's a it's a balancing act. If you have a shortage of something, how how do you solve that? You know, it's not by uh subsidizing something that um there's a limited supply of, right? Because what does that do? It drives the drives the cost up. You you need to produce more of it. You know, obviously we want to protect homeowners' existing equity, but we want to prioritize and support policies that that make it easier to bring new supply online. Um ultimately, if you want housing to be affordable, you you you got to produce more of it. Robbie ChrismanYep. So you brought up the phrase red tape. And I want your opinion on the biggest piece of red tape or pieces of red tape that stand between builders and more new homes today. Frank CassidyI think it's a combination of local zoning restrictions and unpredictable entitlement process. You have projects that you know make sense, they pass all the feasibility tests, but they're hung up for years and years. And I think it's the uncertainty that creates a lot of unnecessary red tape and it creates that administrative tax that ultimately gets passed on to the home buyer or the renter. If you look at the cost to produce new housing, 20 to 40 percent of that is some form of government red tape. And I think that's very much because of the unpredictability and the years and years that it can take to get these uh proper. Obviously, you need to work with local governments and municipalities, but we need to create some type of predictability for developers and builders. Robbie ChrismanSo seeing it from the government side of things, and actually uh I I worked at the Texas Water Development Board the summer after my freshman year at the University of Texas at Austin to get in-state tuition. And I remember thinking like wanted to pull my hair out because it was so there's so much bureaucracy, and just yeah, like you said, red tape that I mean you're you're a better man than me for work continuing to work in government. Thoughts on seeing it from that side though, things that maybe the public doesn't understand about why we need some of the red tape or where do you think there's room to fix it? Frank CassidyLook, I think a lot of these programs, particularly government housing programs, were created with the right goals and the right intent. But like a lot of things in government, there's been so much bureaucratic red tape that has been added along the way where these programs have deviated from their mission. Look at FHA. It was created in 1934 during the Great Depression. People couldn't get mortgages, right? So they created the FHA to guarantee these loans that private lenders make to create liquidity in the mortgage market. Great thing. However, coming up on you know 90 to 100 years, there's been so much red tape that has been added into these programs. Ultimately, government needs to support the private sector in solving these problems. And the government shouldn't should be in the background. It shouldn't necessarily take take lead. It should rely on the private sector. And FHA is a great example of a public-private partnership that works and this is and has stood the test of time. But what should these government programs be doing? Uh, incentivizing and working with the private sector to support bringing more housing online. It's the only way it's going to get more affordable. Robbie ChrismanThoughts on what it would look like if we gave private builders or developers or lenders more certainty to take risks, especially when it comes to the new construction side. Frank CassidyLook, I think if we created a market where developers could get projects off the ground quickly, you would see a massive amount of supply hitting the market, which would ultimately make housing more affordable. You'd see more Americans entering homeownership, particularly at a younger age and having an opportunity to build the long-term wealth that comes with homeownership. Look at the average age of the first-time home buyer. It used to be in its 20s. Now it's up to it's up to 40. As a country, that's that's something that we need to change, right? We want to support property ownership. We want more Americans to enter homeownership and build long-term wealth and and create families, right? I mean, there's actually Wall Street Journal did an article correlating the birth or the birth rate among Americans with the decline in homeownership, right? So when people own a home, they have a foundation, they they have stability. So I think ultimately government needs to get out of the way and government needs to support the private sector uh in terms of bringing more housing online. And let's look at housing more as an infrastructure issue, right? As something that we need in this country. Robbie ChrismanDo you get the sense that the administration currently in the White House, Congress, they grasp the enormity of this issue? I'm here at MBA Annual, and I've heard people say that when they visit Capitol Hill, maybe 10% of senators or representatives really understand how the mortgage industry works, and obviously residents. Frank CassidyI'd say it's probably it's probably even less, right? If you look at housing and housing affordability, every poll, it's a top three issue of importance to Americans, but it's not necessarily treated like that on Capitol Hill. I do think more policymakers are starting to take interest in in housing. You look at the Road to Housing Bill, the biggest piece of housing legislation that has it has passed probably since the low-income housing tax credit. So I feel like there's room now to expand on that. There's momentum, but I think it's becoming such a big issue that that people can't ignore, right? You have younger Americans that can't get any type of affordable housing, whether it's uh you know, renters or or or or homeownership. Um and it's something that is part of the American dream, right? Owning a home, you know, having a foundation, building equity. And we've we've lost focus uh on that as policymakers and we need to get back to it. Robbie ChrismanMr. Cassidy, I really appreciate the time. Thank you very much. Frank CassidyAbsolutely. Thank you, Robbie. Robbie ChrismanThe thinking that when stocks rally, bonds sell off, and vice versa is wrong. Just look at the rally bonds saw from 1982 on as prices improved and rates fell, and how stock prices rallied as well. But there's some residual thinking. U.S. Treasuries and agency mortgage-backed securities rallied sharply on Thursday as technology stocks sold off, pushing bond yields to their lowest levels in at least a month and reversing the late September to early October sell-off. Five-year yields fell 18 basis points, and 10-year yields dropped 16 basis points to break below the psychologically significant 5% level, as weakness in French debt triggered safe haven flows into U.S. fixed income. The rally was fueled further by escalating geopolitical concerns surrounding Iran as the US and Israel drew up plans to renew strikes on Iran after the midterms, persistent weakness in highly leveraged AI infrastructure companies, and short covering, reinforcing demand for safe haven assets amid heightened global market uncertainty. Markets will now assess whether the rally holds into the weekend with University of Michigan sentiment data and S&P PMI releases due out today ahead of next week's FOMC meeting. With both of those releases scheduled for later this morning, we begin Friday with agency MBS prices, little change from Thursday after the fine rally, the two-year yielding 4.67, and the 10-year yielding 4.99 after closing yesterday at 4.95%. Let's wrap up with a joke and some housekeeping. Maybe it's not a joke, it's a dose of reality. Thinking about 2009 doesn't seem like that long ago, but trying to imagine 2029 seems like a lifetime away. Thanks again to Experian for sponsoring this week's podcasts. Experian verifies integration with Workday gives mortgage lenders broader access to reliable, up-to-date income and employment data, streamlining verification, enhancing efficiency, and delivering a smoother borrower experience from application to closing.