Whichever candidate — Kamala Harris or Donald Trump — wins the 2024 presidential election will not have a significant impact on the path of interest rates, but they will bring changes to the mortgage industry from a regulatory standpoint, according to Mortgage Bankers Association (MBA) president and CEO Bob Broeksmit.
“Neither candidate is serious about fiscal discipline,“ Broeksmit said on Tuesday during HousingWire’s IMB Summit in Dallas. “Why does that matter? Funding the deficit crowds out mortgage debt, because if we’re going to run $1 trillion to $2 trillion of annual deficits, adding to the debt every year, that’s a whole lot of debt buyers can’t (use to) buy MBS [mortgage-backed securities] because they’re going to buy Treasurys,” Broeksmit said.
This trend, which Broeksmit does not see changing, will contribute to maintaining the spread between the 10-year Treasury and the 30-year mortgage rate. The spread is historically elevated, placing pressure on rates for home loans. The result? “We are not coming back to 4% mortgage rates” anytime soon, he said.
According to Broeksmit, the Federal Reserve will continue cutting rates, with the executive expecting a decrease of 100 basis points this year and roughly 100 bps more in 2025.
From a regulatory perspective, Broeksmit said that the 2024 “elections matter a lot” and divide independent mortgage banks into two groups.
For “IMBs that hate all the regulatory nonsense but have invested in a good compliance program,” a Harris presidency “is not the end of the world because the Democrats very much favor the government-sponsored enterprises having a large percentage of volume.”
Meanwhile, IMBs that worry about enforcement actions and can’t stand all the regulations may believe the Trump administration is better. But in this case, GSE reform would “very much be on the table,” meaning that Fannie Mae and Freddie Mac could shrink or at least be returned to the private sector.
“I’m not telling anybody how to vote,“ Broeksmit said. “I’m just saying that there are different outcomes from different electoral outcomes, and it does very much matter to our industry in a way that perhaps when things were a little less polarized, it wouldn’t matter.”
Political musings
Regarding the 2024 presidential race, Broeksmit said, “Don’t pay any attention to the national polls — they don’t matter at all. If there were a huge difference, then you could sort of easily translate the difference into electoral college votes.”
According to him, due to the tremendous momentum after the Democratic National Convention, “it’s entirely likely that Vice President Harris will win the popular vote. The question simply becomes, how is it distributed and who wins the electoral vote?”
For an audience of mortgage professionals, Broeksmit said that the good news is “people care about housing and housing finance, and it’s a bipartisan issue.”
Another piece of positivity? “At least we’re not in the news because everybody’s going into foreclosure, right? I mean, when we made all those loans that didn’t pay out, it was considered our fault, and of course, we deserve our share of the blame,“ he said.
“This time, it’s macroeconomic factors that we’re all working creatively with all our borrowers to try to solve one by one, but we need some help from the government.”
Broeksmit said the main issue for the housing sector is on the supply side, so proposals to increase demand, such as providing down payment assistance, will not help.
“We’re not going to have $25,000 down payment assistance. I don’t care who wins these elections; it’s never going to get 60 votes in the Senate. … I also think it’s a dumb idea,” he said, adding that down payment programs already exist for homebuyers.
Regarding the supply side, he said, “I don’t want the government to subsidize builders for stuff they’re going to build anyway” But he also believes it’s a good idea to support more affordable homes by eliminating red tape and costs through state and local government initiatives and federal tax benefits.