Trumps plan for home loans could disrupt the Austin real estate market in 2020
September 6, 2019 | Front Porch Realty
The Trump Administration released a new plan for the home loan market that aims to change the rules for the mortgage giants Fannie Mae and Freddie Mac. The two companies that make up the foundation of the home mortgage market in the U.S.
That would ensure money would always be available for responsible qualified home buyers . .
The government created Fannie Mae and Freddie Mac decades ago to give federal backing to home loans which would ensure money is always available for responsible qualified home buyers to get mortgages. They would later go on to become largely private companies but since the 2008 financial crisis they have fallen back under government control.
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They say these changes to the U.S. mortgage market would . .
Until now, the Trump administration wants to let Fannie and Freddie go private again, they say these changes to the U.S. mortgage market would allow for more private competition from other private companies.
The administration could impose new rules on homebuyers
These changes have been met with scrutiny by Mike Calhoun, president of the nonprofit Center for Responsible Lending, who worries that this change would drive up the cost for borrowers and that the administration could impose new rules on homebuyers that would make home loans more difficult for the average home buyer. “For working class Americans who want to buy a house this could make it much more difficult to get a mortgage and much more expensive..” Calhoun stated.
Steven Mnuchin argued that the plan will protect the taxpayers and help Americans who want to buy a home. Mnuchin said in a statement that “an effective and efficient Federal housing system will also meaningfully contribute to the continued economic growth understanding this administation”
Parts of the plan still require approval by a divided Congress . .
Parts of the plan still require approval by a divided Congress, it will likely not pass in its current form. Other parts of the plan would not require congressional approval, including making Fannie and Freddie private again. They were seized during the financial crisis for their abuse of CDO’s and placed under government control as part of the $190 billion dollar bailout.
Historic Annual Appreciation Rates (1996 – 2014)
| Median Sales Price | Median Sales Price Per Square Foot | |
| UT 1/1 Condos (built in 1980s) | 5.9% | 6.6% |
| UT 2/2 Condos (built in 1980s) | 6.9% | 6.3% |
| UT Houses | 6.6% | 6.0% |
| Austin 1/1 Condos (built in 1980s) | 6.0% | 5.7% |
| Austin 2/2 Condos (built in 1980s) | 5.4% | 5.5% |
| Austin Houses | 5.6% | 4.7% |
| Austin Suburb Houses | 4.2% | 2.9% |
In recent years their profits have paid back the taxpayer money . .
Also unclear is the path the two companies would take to go private again. The terms of the bailout essentially re-routed all of Fannie and Freddie profits back to the treasury department. In recent years their profits have paid back the taxpayer money they received during the 2008 bailout. Yet the companies are still handing over their profits to the U.S. treasury so how will they recapitalize? They would need billions of dollars in cash in order to return to operating privately. The plan doesn’t make clear what the path forward would look like for these two.
Any abrupt changes involving Freddie and Fannie would be inherently disruptive to the $11 trillion dollar U.S. mortgage market
The Trump administration did say they want to avoid disrupting the mortgage market yet by definition any abrupt changes involving Freddie and Fannie would be inherently disruptive to the $11 trillion dollar U.S. mortgage market that Fannie and Freddie make up more than half of.
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