1.28.25 1000th Episode; Peter Idziak on Trump Executive Orders; Month-End Supply

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Transcript

SPEAKER_01 0:04

Welcome to the thousandth episode of the Christman Commentary Daily Mortgage News Podcast. Holy smokes. I'm your host, Robbie Christman. Topics on today's episode include a little spook in the markets, my interview with Polansky Biddle Greens, Peter Aids Yak on the various executive orders Trump has issued since he entered office and their potential impacts on the housing industry, and how month-end supply from Treasury could impact bond prices. Thanks to today's podcast sponsor, Figure. Rates seem like they're higher for longer, and it's the perfect time for you to consider a HELOC or HELON strategy. Figure is the right partner. Fifty percent of the top IMBs use them, and if you're not one of them, it's time to get on it. Check out figure.com and their information about partnerships on their website. Markets got spooked to open the week and a flight to safety triggered rally in the bond market due to a new AI model called Deep Seek created by a Chinese startup. The model is cheaper to develop than major models like ChatGPT. It doesn't need the expensive hardware that companies like NVIDIA and Micron typically rely on. As a result, investors became more risk-averse, shifting their money into safer investments like treasuries and other government bonds. On the economic front, we learned yesterday that new home sales vested expectations to rise 3.6% during December. The second consecutive month again. The solid sales print adds to the evidence that the temporary late summer dip in mortgage rates spurred a pickup in residential investment in the fourth quarter of 2024. More recently, mortgage rates have crept up and are currently hovering around seven percent. Although the new home market has become less sensitive to changes in interest rates thanks to home builders' ability to offer rate buy downs and other pricing incentives, the elevated stance of financing costs threatens to discourage home buyers in the months ahead. Elevated new home inventory levels and improved availability in the existing market stand as additional headlines. For today's interview, I want to welcome back to the show Polensky Bidal Greens, Peter Idzyak, to talk about the various executive orders Trump has issued since he entered office and their potential impacts on the housing industry. Lenders regularly call him for advice on regulatory matters and compliance issues concerning all aspects of consumer lending and real property law.

SPEAKER_02 2:48

Which ones specifically impact the housing industry or the mortgage industry?

SPEAKER_00 2:54

Well, he issued one that was titled Delivering Emergency Price Relief for American Families and Defeating the Cost of Living Crisis. And that was perhaps the uh the order that most directly affects housing in the mortgage markets. And in it, uh he cited a statistic from the um, I think American home builders that uh due to regulatory requirements alone, uh, they account for 25% of the cost of constructing new homes. And in this order, he thereby ordered the heads of all executive departments and agencies to deliver emergency price relief that includes appropriate actions to lower the cost of housing and expand housing supply. So that order is the most on point. Um the other order I think that will affect uh housing in multiple aspects is um his orders dealing with immigration and you know restricting the inflow of immigrants to the United States and the deportation orders. And the two ways that this sort of affects it is one, you know, within the construction industry, uh there are studies out there that show that, you know, anywhere from one in 10 to depending on the area, one in five construction workers may be undocumented. Um, so to the extent that you see a reduction in that labor force, that could affect the cost of constructing new homes. But conversely, you know, there is a HUD study out there that shows that illegal immigration is one of the drivers of homelessness. And of course, the more people that need homes visa via you know standard supply, the uh the higher hits of affordability. So I think those orders will also affect home prices. Now, how that sort of shakes out in the end, I think remains to be seen. Um, you know, on the one hand, you may see an increase in costs with uh reduced labor force, but on the other hand, if you sort of increase the supply that and reduce the demand, then you could see you know home affordability increasing. So those are the two um that I think are are the most um applicable to housing right now.

SPEAKER_02 5:04

Well, the illegal immigration one is certainly interesting considering the fires in LA. They're going to need all the labor they can get. The first one you mentioned, do you feel like it's going to be helpful? I mean, he can't actually impact it in the ways that he thinks. What what do you think will ultimately come from the executive order?

SPEAKER_00 5:23

Well, I will say, you know, there there is a recent HUD, it was from 2024, HUD US Day USDA rule that required increasing uh energy efficiency standards in new home construction. And the American Home Builders Association says that that can increase the cost about $33,000 on average in constructing a new home. Uh the agencies themselves in the rule even admitted that it would uh, you know, in their view, increase cost by $8,000. So to the extent that that rule gets um rescinded and you go back to sort of these older standards, you could see you know cost reduction there. But Robbie, you you know, you are correct that 25% of the cost due to regulation, a lot of that is state and local regulations. Um the federal government's ability to directly impact that is a bit limited. Now, that's not to say they can't do anything. Um, you know, there can be both a carrot and stick approach here, where if um Trump is really focused on this, that you can incentivize localities and states through federal funding to uh sort of open up um their, you know, their home building process to reduce regulations to allow for higher home density, um, that kind of thing. And there's also the stick approach where you could sort of um withhold certain federal benefits and um and uh funds if localities don't adopt a more promo supply housing policy. Um as far as immigration, I think like that is something that they definitely can um impact. But you're right, you know, that there's sort of there are competing goals and competing needs out there. So how this all shakes out, I think remains to be seen. The other thing to note is that you know, this this executive order on home affordability uh was issued before there were and there you know still aren't any confirmed uh heads of housing or mortgage-related industries, you know, Trump appointees. So, you know, like Eric Scott Turner, who's the current HUD nominee, you know, has made home affordability one of his main focuses in uh his answers to questions at his confirmation hearing. But even he said that he wanted to get in there to HUD and see what programs were working and what programs were not working. So I think that it is important anytime a president focuses attention within his administration and you know, through executive order, and orders agency heads to address a certain problem. You know, in the Biden administration, we saw um you know purported appraisal discrimination was an important uh Biden administration policy. So you had PAVE that was formed, you had this multi-agency task force, you had regulations being you know proposed and enacted that address this uh problem. So the extent that you know Trump is focused on home affordability, I would expect you sort of see the same thing where you have this whole of government approach where different agencies are looking for ways, because it's important to the president, to increase home affordability.

SPEAKER_02 8:28

Well, he campaigned by saying he would build on federal lands. Has he pivoted much? What's his plan for more housing supply and more affordable housing as it currently stands? What do you and I mean that in the sense of what do you think he will actually do rather than talk about doing?

SPEAKER_00 8:47

With Trump, I think um, because he is um so, I don't know, I think open to successful solutions, um, I think that he will, if he is presented with evidence or you know, his uh his agency heads are prevented presented with evidence that suggests that building on federal lands is something that can increase the housing supply and increase affordability, I think we'll go for it. I think if uh like Eric Scott Turner gets in there and for whatever reason decides like, no, this is maybe more trouble than it's worth, um, that you will you would see maybe a pivot away from that to other successful, you know, uh uh initiatives. And I think that's one of the interesting things about Trump is that he seems to be driven by um, you know, not necessarily like personal, you know, this is my belief. I'm going to do this, whether it turns out to be successful or not. But he's more open, I think, to uh enacting policies that you know his his uh his industry, his appointments, his executives tell him, you know, based on the way that we're looking at the data, this will work. So I think that you will see some programs that do seek to build on federal land. Um, you know, there aren't a lot of details right now, but again, you know, we're recording this on uh January 24th. So we're not even a week into the Trump presidency. You know, we've had a lot of executive orders, we've had a lot going on, so it maybe feels like it's been longer. Um, but I think that, you know, within a month or two, whenever he gets his people in place, we'll have a much better idea of where they're gonna go.

SPEAKER_02 10:27

Yeah, I was going to say, do you anticipate him issuing any more executive orders on housing in the near future? And if so, uh what has he talked about doing that he hasn't yet issued an executive order on?

SPEAKER_00 10:41

I would say I'm not sure. Um, and I would think that we're not gonna see anything in the near term. And the reason I say that is that um the executive order he did issue was very broad-based. You know, it wasn't a specific order to a specific agency head, it was to all executive department heads. And the order calls for, you know, within 30 days, um, the assistant to the president for economic policy will report back to Trump on what's um been done in this regard. So I think at the very least, you're not going to see anything before that 30-day period and then you know, probably a little bit of time after that. Um, I think what you'll see more is a pivot towards um agency heads getting in place and looking to rescind regulations that they feel um you know increase the house of housing or cost of housing or reduce supply, or start the rulemaking process themselves on rules that they believe will increase home affordability. So I wouldn't look or expect um you know more granular executive orders targeting housing.

SPEAKER_02 11:50

Trump certainly makes multiple headlines every single day. And it's almost hard to keep up between what the news is reporting, what he's tweeting, what he's actually doing. If you were someone in the mortgage industry, what would you be paying attention to uh to cut through some of the noise?

SPEAKER_00 12:09

Well, I you know, I think I would pay attention, I you know, in my view, as a sort of a compliance attorney in this space, to the two things that I think you know maybe have a most direct impact right now. And that is, you know, the hiring freeze and the regulation freeze. So without you know, sort of additional people and without additional regulation, my day-to-day is probably going to be the same, regardless of sort of the you know, the public pronouncements that come out. I do think that I would expect that this is an administration that is focused on home affordability, so that maybe in sort of the you know, six months to a year out, I can expect that my regulatory burdens will be a little bit lighter, that my compliance costs might go down a little bit, and that we might see new programs either issued under Fannie Freddie, because for right now, you know, they are still in the conservatorship. Um we don't have a you know a Trump head of FHFA, although he has nominated a man by the name of Bill Poulty who has housing industry experience. So that's what I would think. You know, on the day-to-day, yes, you're right. You know, there's a lot of statements that that go out that sort of give you a hint as to the direction that I think the Trump administration is going to take. But for the day-to-day, you know, for the next uh one month, three months, I don't really think it's going to change a lot for someone in the mortgage industry focused on their job. I think that you will see over the middle term and the longer term that we are going to see new targeted uh programs through HUD and FHFA, um, through VA for veterans housing issues because veterans homelessness is a big issue, um, a bipartisan issue too that this administration is focusing on. Um so I would expect sort of new initiatives from you know Fannie Freddie, FHA, via USDA to increase home affordability. And I think that's what you might even see before you really see you know new rulemaking that that has gone into effect or the rescission of existing regulations.

SPEAKER_02 14:23

And since you mentioned his name, how do you feel about Mr. Poulti leading the FHFA? What can people expect?

SPEAKER_00 14:30

You know, he's um he's a little bit of an unknown, I think, because he doesn't have the public history of statements addressing this. I would say that uh, you know, he is a former director of um of uh Poulty Homes. So he understands the concerns of home builders. He is uh the head of a um private equity firm that uh apparently owns you know sort of middle market housing supply companies so the HVAC, building supplies. So I think one of the important things there is that he's very attuned to, I would expect, to input costs. So not just the financing side, but also the cost of construction and you know how much it costs a builder to build a home. So I think that he will be someone who really focuses on both sides of the equation, you know, not only increasing uh financing affordability um for borrowers, both individual and those looking to construct multifamily, but that on the input side, he will see what he can do at FHFA to reduce those costs as well. So I think yeah, for sorry, for industry, I think I think he's a he's a good pick.

SPEAKER_02 15:45

I guess I guess we'll just fasten our seat belts and see what happens here. I always enjoy talking to you. Thank you very much, Peter.

SPEAKER_00 15:50

My pleasure.

SPEAKER_01 15:55

December durable goods orders kick off today's economic calendar and will be followed by Red Book Same Store Sales. November house price indices from FHFA and Case Schiller, consumer confidence for January, Richmond Fed Manufacturing and Services for January, Dallas Fed Texas Services for January, and Treasury Activity that will be headlined by auctions of $30 billion of two year FRNs, $44 billion of seven-year notes, and a buyback in seven and a half to thirty year tip for up to five hundred million dollars. We begin Tuesday with aid in CMBS prices, a few 30 seconds worse than Monday's close, the two-year yielding 4.21, and the ten-year yielding 4.56 after closing Monday at 4.53%. Let's wrap up with a joke and some housekeeping. A man walked into the produce section of his local supermarket and asked to buy a half head of lettuce. The boy working in that department told him they only sold whole heads of lettuce, but the man was insistent that the boy ask his manager about the matter. Walking into the back room, the boy said to the manager, Some jerk wants to buy a half head of lettuce. And as he finished his sentence, he turned to find the man standing right behind him. So he added, And this gentleman kindly offered to buy the other half. The manager approved the deal, and the man went on his way. Later, the manager said to the boy, I was impressed with the way you got yourself out of that situation earlier. We like people who think on their feet here. Where are you from, son? Texas, sir, the boy replied. Well, why'd you leave Texas? The manager asked. To which the boy said, Sir, there's nothing but call girls and football players there. Really? said the manager. My wife is from Texas. Get out of here, said the boy. Who'd you play for? Thanks again to today's podcast sponsor, Figure. Fifty percent of the top IMBs use them, and if you haven't examined your HELOC or ELOM strategy recently, it's time to get on it. Learn more at figure technologies.com.