11.3.26 Election Day; Polunsky Beitel Green’s Marty Green on Housing Policy; Oil and Rates

Robbie ChrismanWelcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include it's election day, why oil dropping ten dollars a barrel should help rates, and my interview with Polunsky Beitel Green, Marty Green, on why President Trump's housing executive order was seen as a limited measure with little immediate impact, and what is needed for meaningful affordability. Here, take a listen to a little preview. Robbie ChrismanWhen it comes to the Trump administration and housing, several big ticket items have been floated. Maybe we privatized Fannie and Freddie, then it was assumable mortgages or the 50-year mortgage. This is the latest swing at things. What did you expect him to do? Or I should say, generally speaking, has he lived up to expectations for addressing affordability? Like what is still on the table that he hasn't quite gotten to? Marty GreenYou know, they the two things that I thought that they the administration could do is maybe temporarily reduce or suspend the guarantee fee for Fannie and Freddie, or temporarily suspend uh loan-level price adjustments. Uh, because Fannie and Freddie are making a fair amount of money right now and you know, certainly building their coffers uh to ultimately go public at some point or to come out of conservatorship, one would expect. But at least in the short term, that would be a way to lower rates pretty directly across the board in terms of the conventional space, which they have the authority to do, and which it seems like that would be something that would be a more direct way of doing this as opposed to some of these things that are a little bit more uh have a longer tail, uh, may have a more limited impact, may impact mostly people who already have mortgages versus people who are struggling to get them. Robbie ChrismanThanks to this week's podcast sponsor, First Close, which helps financial institutions grow a successful home equity business with innovative solutions that minimize application drop-off, automate time-consuming processes, and reduce time to close from weeks to days. To learn more, visit firstclose.com. Robbie ChrismanWaiting for election results is like waiting for a grade on a group project. I know I did my part, right, but I'm worried the rest of you screwed it up. Fifty years ago, when response rates to polls were much better than today's 1%, Rod Stewart's Tonight the Night was the top song in the USA. There are some who believe that the election will not directly impact lenders, while others think that the results being tied up in court or possible impact on foreign policies will not help interest rates. Rulemaking has shifted from the legislative branch to the executive branch which runs the agencies. And he or she, when there is a female president, dictates policies and priorities. The president's, any president's executive orders are like a wish list. I want this to be a policy of your agency. They take time to study and implement. At the state level, they aren't sitting on their hands given virtually no CFPB activity. Places like Illinois and Washington are cracking down on LO comp related issues, taking a look at borrower paid versus lender-paid plans and structures, tales of the DFPI being much stricter than the DRE about. But back to the midterms, briefly, it's election day today and it's shaping up as a referendum on the Trump administration, with cost of living pressures, fuel prices, and AI-related economic concerns dominating voter sentiment. For mortgage markets, the outcome could influence treasury yields through expectations around fiscal policy, government spending, deficits, and the likelihood of legislative gridlock. A divided government could limit major policy changes and potentially provide some stability for rates, while a broader Republican hold could raise questions about additional fiscal stimulus and deficit finance spending, potentially putting upward pressure on treasury yields. Conversely, a Democratic House could introduce greater policy uncertainty and episodic volatility as markets assess the implications for the administration's agenda. However, the election's impact on mortgage rates will likely be secondary to inflation. Treasury market sentiment and the Fed's December policy decision, any short-term rate relief will depend more on a sustained decline in treasury yields than on the election outcome itself. And it should be noted that treasuries continued their rally yesterday as a sharp decline in oil prices, driven by optimism around a potential US Iran diplomatic breakthrough and continued weakness in high beta equities fueled safe haven demand and pushed yields lower, particularly at the long end of the yield curve. This renewed flight to quality demand for treasuries has pushed the 10-year yield below 5% and provided some relief to mortgage-backed securities. However, wider primary-secondary spreads limited the benefit to borrowers, with lenders retaining much of the improvement rather than passing it through to mortgage rates. For today's interview, I wanted to welcome back to the show Polunsky Beitel Green's Marty Green to talk about why President Trump's housing executive order was seen as a limited measure with little immediate impact and what is needed for meaningful affordability. He has nearly four decades of experience in the legal, banking, and financial services industries, which he brings to his client engagements. He advises clients on the latest rules and regulations covering residential lending, in addition to building on the firm's long tradition of delivering loan closing documents with speed and accuracy. Robbie ChrismanFor months, it had been expected that President Trump would sign some sort of executive order focused on housing, housing affordability, and he finally followed through on that promise pretty close to the midterms. Before we talk about what he actually signed and its impact, just the the thought on timing and the effort itself and kind of where where his head is with this, does he does he realistically say, wow, there's so many millions of swing voters and this issue is so important that this is going to swing them at the last? I just want kind of the calculus behind the timing and the why and all that. Marty GreenYou know, I thought the timing was peculiar as well, Robbie. I thought that the if you were really wanting to make a splash, one, you would do it before this. You wouldn't wait until just uh, you know, basically two weeks before the election to do it. And then I think the many of the provisions here are not things that have an immediate impact. They're things that are going to take time. And so knowing all of that, I think you would probably do have done something maybe different and earlier if you were if the goal was really to influence the midterms. I think it's so positive overall that it's out there because I do think it it's sort of as a demonstration that housing policy is still a very, very important political issue, none nonetheless. But I did find the timing of this a little bit peculiar because it seems a little late to the game and then not doing as much as what some people were advocating for for sure. Robbie ChrismanWell, I was going to say what was peculiar to me was between the trying to slash VA and USDA rates, cancel some mortgage insurance, uh, and change some of the LLPAs, all of this addresses the demand side of the equation. None of it really addresses the supply side of the equation, which is why we're in this problem in the first place. Marty GreenWell, and most of it addresses people who already have mortgages, not people who are trying to get them today. That's the other thing that's kind of peculiar about it. And if you look at the USDA and the VA provisions, it's only the direct loan piece of that that they do. It's not the ones that they insure, which is the lion's share uh of what the originations would be anyway. So it's it's it's peculiar in terms of how limited it is in terms of some of the scope of what's being done here. Robbie ChrismanToday is the midterms, are the midterms. I I studied finance, not grammar at the Great University of Texas. Um is this going to make any measurable impact in your estimation? Does this move the needle? Obviously, Trump has been out doing a lot of rallies and campaigning and often times and places that we wouldn't have expected him to be two years ago or four years ago. So it seems like a lot of swings. Is this is this swing going to hit the ball, proverbially speaking? Marty GreenIt it's hard to imagine that people would read this executive order and change their vote uh just because it again doesn't impact anyone immediately and they're reminded of other things like you know the price at the pump every day they drive to work. So it's hard to believe that this would move the needle a ton. Robbie ChrismanI just wonder where we go from here because as we both know housing has become such a mainstream issue, affordability has become such a big issue in ways that it didn't used to be. And it almost seems like there needs to be a big shift. Maybe some maybe that's the wrong way of looking at it, and through a bunch of small changes, we could get to a better place. Like I said, my my focus has always been on the supply side of the equation and how we could help there. Your thoughts on how we get to a better place with housing affordability and the the government's role in doing so. Marty GreenSure. But before we get there, I kind of want to address that supply side issue because you know what you have is really an interesting dynamic because I think long term you have a sh a shortage in terms of housing based upon what our we anticipate our demands gonna be. But in the short term, that's not the case. I mean, you have builders who are really struggling to to uh for absorption of the inventory that they're bringing to market today. So it's not if you brought more to market, you're just gonna have more of a glut in terms of that, which would put it does put some price pressure on, but it for in the builder sector, they're already have margins that are getting squeezed pretty tremendously. So it's hard to see, sort of see how you might move that lever too much in the short term. Maybe in the longer term, you could do it, but in the short term, I think that's a little bit of a struggle to do that just because of what the absorption looks like. And I think builders have already responded to that by fewer housing starts and some other things that they're looking at just to take into account what the new sales pace is. One thing that was interesting about the executive orders is just the fact that the the pilot program on the cancellation of mortgage insurance, I did notice that there was a it only applies to mortgages that are originated after the execution of the order. So it's really future stuff that's impacted, not the people who are three and four percent interest, because initially that's what I thought. And I assume that the reason they did that was really because that it's gonna impact the actuarial equation for the mortgage insurance companies. And if they applied it to the entire portfolio, it really could drive up uh the immediate cost of mortgage insurance uh for people who are getting mortgages today. So I think that's one reason that they did that. Robbie ChrismanPeople that work in the mortgage industry that have gone to Washington, D.C. say they only feel like 5%, 10%, 15% of congressmen really understand mortgage banking and the plight of the homeowner. How does the in how can the industry be better about educating those in positions of power and government about the industry, just what we can do to get more people into housing, we make housing more affordable. Thoughts on on that disconnect and how we can bridge that gap? Marty GreenYou know, I I think it's it's telling real people stories to some extent. This is, I mean, because you can tell show data and data helps to some extent, but real person stories of people that they know or people that they uh, you know, young people, particularly fresh out of college or starting, trying to start a family. I mean, one of the and put it into those real terms of real families, I think uh one of the things that is is starting to really become more readily apparent is because people are struggling so much to get into a home, they're really delaying having families, and we're really starting to see the birth rate continue to deteriorate to a point where it's it's concerning just from an economic standpoint in terms of sustainability, that you we really do need to get families started better. And uh so finding some ways to do that in terms of that affordability is gonna be pretty key. But you're absolutely right. I I think there is a lack of understanding of the of how this works and how you can most easily move um move the needle um and and finding ways to do that. But I think it's gonna be telling telling the story in terms of people, not data, probably. Robbie ChrismanCan you make us privy to some of the discussions you have with clients regarding it? Seems like policy can be changed with a tweet these days. There's a lot of uncertainty, and oh, how do I implement some of these measures that are that are now apparently the way that we're doing things, best practices for clients when it comes to there's so much uncertainty out there about the the shifts in the the nature of lending. Marty GreenWell, I think you can't pay too much attention to tweets, first of all, although I agree with you that we do have sort of policy needles that get moved by result of that, but ultimately there's still the Administrative Procedures Act and things that the government's supposed to go through. And if you're relying on things, you really have to rely on what the government does through the proper channels rather than just something that's tweeted out there. Uh I mean, ultimately the the key thing in terms of what we're talking to clients about today is just a reminder that notwithstanding the fact that we have a reduced sort of federal regulator sort of presence with the CFPB not being as active, uh you have two more years of this administration. You do have states that you have to be concerned about. And so still doing things the right way really still matters very, very much. And so uh just reminding people of that pretty with some regularity is sort of the conversations that we're having with folks. Robbie ChrismanWe don't have clarity on the outcome of the midterms. There's been a lot of speculation. Obviously, polling is not voting. I will remind people of that. Thoughts on what a divided Congress or now Democrats in control of Congress means for housing versus what we've seen the last couple of years? Marty GreenYou know, interestingly, I think housing is one of the things that uh could bring the two parties together, that this is an issue that doesn't have party lines at all associated with it. It's really helping people. And so you would think that perhaps with divided government, with the reality of that, that there could be uh actually some more productive things done in the space, particularly in the housing space, where uh if people are not as worried about who gets credit, maybe both sides get credit, maybe we can get some good solutions and some things that could spur the market forward. Robbie ChrismanAlways a pleasure, never a chore. You know I like doing these. Thank you very much for your time, sir. Thank you, Robbie. Appreciate it. Thanks for having me on. Robbie ChrismanData yesterday saw manufacturing remain resilient in October, with the ISM index rising, signaling stronger expansion despite ongoing input cost pressures, while the final S&P Global PMI was revised down slightly. In contrast, September construction spending fell 1.9% month over month and 2.7% year over year, driven largely by a slump in residential investment, as elevated financing costs continued to weigh on housing activity. Investors stayed cautious ahead of the midterm elections and Treasury refunding announcement, which projected $618 billion in borrowing for October to December, and $800 billion for January to March 2027. While the announcement modestly reduced projected Q4 borrowing, underlying financial needs increased by $24 billion, with $800 billion projected for the first quarter of 2027, putting greater focus on future issuance composition and its potential impact on long-term yields and mortgage markets. The markets are watching the price of oil dropping $10 per barrel, which is bound to help mortgage rates and lots of things. Today's economic calendar kicks off later this morning with September business inventories, which will be followed by September JOLTS, job openings, and September factory orders. In addition to economic data, there's election uncertainty, technology earnings, and geopolitical risks all poised to drive further volatility. With Treasury strength yet to translate into meaningful mortgage market improvement, we begin the day with agency MBS prices slightly worse than yesterday's close, the two-year yielding 4.61, and the 10-year yielding 4.92 after closing yesterday at 4.90%. Let's wrap up with a joke and some housekeeping. If Republicans win the election, I'll leave the US. If Democrats win the election, I'll leave the US. It's not a political post. I just want to travel. Robbie ChrismanThanks again to First Close for sponsoring this week's podcast. First Close helps financial institutions grow a successful home equity business with innovative solutions that minimize application drop-off, automate time-consuming processes, and reduce time to close from weeks to days. To learn more, visit firstclose.com.