Vail Daily column: Trump appointments send conflicting messages
President-elect Trump has always said he likes to be unpredictable, and few would have predicted the growing list of cabinet positions. From Sarah Palin reportedly to run the Veterans Affairs administration, to “Dr. Sleepy” Carson to head Housing and Urban Development to Goldman Sachs executive Steven Mnuchin as secretary of treasury, one must wonder what is next. All of these three positions will oversee programs and policies that have a direct impact on homeowners.
As head of HUD, Dr. Carson will, amongst many other duties, oversee the Federal Housing Administration which guarantees FHA loans. FHA loans are designed, generally, for low to moderate income homeowners and are somewhat easier to qualify for than a conventional loan. FHA also provides reverse mortgages for senior citizens. While the FHA programs have had their ups and downs over the years, overall they have played a solid role in helping millions of families buy homes. While HUD has many other programs to assist, for example, the creation of low income rental housing and arresting urban blight the FHA program is probably the single largest element in terms of impacting citizens.
To run a program like FHA requires an enormous amount of knowledge of the financial markets and housing trends and a strong business management background. While there are no major changes needed currently, such a program is constantly evolving over the years. There are many good people currently in place at HUD who keep the wheels in motion, but when a leader is appointed who admits his only qualification is that he grew up in public housing one must take pause and wonder about the depth of Dr. Carson’s ability to make sound policy judgments impacting millions of people and tens of billions of dollars in home loans.
As secretary of the treasury, Steven Mnuchin will probably be a key decision maker on the future of Fannie Mae and Freddie Mac, which fund about 90 percent of the home loans in the US. Once private companies (who enjoyed government backing of their debt) the two companies became wards of the Treasury Department during the housing meltdown.
Many in Washington want the U.S. to get completely out of the housing business in terms of these two companies and would like them to just be wound down and dissolved, leaving the private financial markets to figure out something to replace them. From a pragmatic point of view, that is unlikely to ever happen totally.
Good Advisers key
Mnuchin has expressed the sentiment that these two companies should be returned to private ownership and still enjoy the support of the feds in backing their debt. That, in my view, is what should happen and one of the few positions of the Trump administration. As private enterprises competing for business with each other they will strive for market share by keeping rates competitive and service levels up. They would also have incentives to create new lines of business and creative approaches (not that they should get as creative as they once were). One must hope that Secretary Mnuchin will spin off Fannie and Freddie and have minimal involvement in their management. During his tenure at One West Bank (formerly known as Indy Mac Bank) there were numerous lawsuits that the bank had improperly foreclosed on homeowners and millions were paid in legal settlements to those homeowners who had the resources left to hire an attorney and fight the bank.
One of Sarah Palin’s many responsibilities will be overseeing the VA home loan program, which allows qualified veterans to buy a home with zero down payment.
Like the secretary of HUD, this requires a high level of understanding of the financial markets and a strong business background. It’s not been made clear exactly what life or educational experiences that Palin will draw on to fulfill her duties in regards to assuring the VA home loan program prospers.
One must hope that these individuals are good at delegating responsibilities and that they surround themselves with qualified individuals who are veterans of the housing industry.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at http://www.mtnmortgageguy.com.