Trump's first executive action: Cancel Obama's mortgage premium cuts
WASHINGTON — The very first executive action by the new Trump administration wasn't a sweeping order on immigration, trade or health care — but rather to block an Obama administration policy change that would have reduced the cost of mortgages for millions of home buyers.
In the first hour of Trump's presidency, the U.S. Department of Housing and Urban Development sent a letter to lenders, real estate brokers and closing agents suspending the 0.25 percentage point premium rate cut for Federal Housing Administration-backed loans.
That cut would have saved home buyers about $29 a month on a $200,000 mortgage.
More:What the mortgage action means for you
But Republicans cast the move as hasty and said it threatened to undermine the stability of the system. So shortly after Trump was sworn in at noon Friday, General Deputy Assistant Secretary for Housing Genger Charles — an Obama administration holdover — announced that HUD would "suspend indefinitely" the rate reduction, saying "more analysis and research are deemed necessary."
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The premiums fund the Mutual Mortgage Insurance Fund, which would bail out lenders if borrowers default on their mortgages.
It was Sen. Pat Toomey, R-Pa., who pressed the issue at confirmation hearings for Ben Carson, Trump's nominee for HUD secretary.
Toomey said the planned rate reduction was "surprising," since the balance in the fund that backs FHA mortgages is just 16% higher than the legal minimum. "This strikes me as very little buffer above the minimum. And after all, as recently as 2013, the FHA needed a bailout," he said.
"I, too, was surprised to see something of this nature done on the way out the door, which of course has a profound effect," Carson said. "So certainly, if confirmed, I'm going to work with the FHA administrator and other financial experts to really examine that policy."
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In his campaign, Trump promised Day One executive actions repealing Obama policies on immigration and health care, so the change in mortgage premiums took Democrats and consumer groups by surprise.
"I think we were surprised by how quickly this was something that they wanted to look at," said Sarah Wolff of the Center for Responsible Lending. "I think it unfortunately signals that they don’t place as great an emphasis as we would hope on access and affordability of mortgage credit."
FHA insures about 16% of new mortgages in the United States.
The timing of the Trump administration action was dictated more by the procedural requirements that govern such changes, said David Stevens, a former Federal Housing Commissioner in the Obama administration.
"If they stop a fee that hasn't been implemented, then it’s no-harm, no-foul," said Stevens, who now heads the Mortgage Bankers Association. "Today was really the last day to do it in order not to disrupt a whole lot of mortgage closings."
Without any action, the new rates would have gone into effect Jan. 27.
"The Trump team coming into office, they haven't had their own chance to look at the state of the reserves, the strength of the fund and make their own analysis," he said. "My view of this is that it is not ideological whatsoever. It is a technical decision."
Carson has not been confirmed as HUD secretary. Until he's confirmed, the department is being run by Acting Secretary Craig Clemmensen, an Obama holdover.
Senate Minority Leader Charles Schumer, D-N.Y., said Friday that Trump’s words in his inaugural speech “ring hollow” following the mortgage premium action.
"In one of his first acts as president, President Trump made it harder for Americans to afford a mortgage," he said. "What a terrible thing to do to homeowners. ... Actions speak louder than words."
Contributing: Bart Jansen