February 2017 – Cool Tools News Spool

Is CFPB’s Cordary on borrowed time?

Regulations Comments Off

Feb 242017

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

There was much cheer in the real estate industry after last year’s surprising election results. Finally, it would get some relief from the overreaching efforts of the Consumer Financial Protection Bureau (CFPB). Specifically, many figured that Bureau director Richard Cordray’s days were numbered. Well, it hasn’t worked out that way.

Dodd-Frank, which created the CFPB, stipulates the Predsident may only fire Cordray “for cause.” A three-judge panel of the D.C. appeals court last year ruled that the “for cause” language is unconstitutional, which seemed to clear the way for a “you’re fired” moment. However, the court first stayed that ruling and now has agreed to rehear the case. The new hearing is set for late-May with a decision unlikely until late summer.

Industry insiders think it now is unlikely Trump will fire Cordray until the case is decided because the President would have to show cause. It is certain Democrats would file suit to block the firing, which likely would postpone the firing while that case was adjudicated.

The Bureau’s actions over the next few months may dictate the urgency with which Trump feels to act. Recently, it seems the Bureau has focused on aggressive enforcement actions rather than creating new regulations, which make it more likely to fly below the radar.

Meanwhile, Congressional Republicans are moving a bill to replace the Bureau’s single director with a 5-member commission, similar to many other government agencies. However, the bill needs Democratic support to pass, and unless and until the appeals court rules, Dems seemingly have little incentive to acquiesce.

Once the court rules, it’s likely the losing side will appeal to the Supreme Court. That appeal wouldn’t be heard until the fall court term, and at that point Republicans expect the Senate will have confirmed Neil Gorsuch to the court.

Thus, the case may not be resolved for many months, with Cordray in charge of his own destiny. And that actually may be how this plays out. Political pundits believe Cordray is eyeing a run for Ohio governor in 2018. If he can ride out the current court battle, he can leave under his own terms later this year just in time to file for the election.

Fannie housing index shows renewed confidence

Real Estate Market, Residential Mortgage Comments Off

Feb 142017

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Fannie Mae’s Home Purchase Sentiment Index reversed a 5-month slide in Jan, climbing two points. The index is 1.2 points higher than this time last year, which may bode well for spring home buying.

The rise mirrors increases in other measures of consumer confidence, which recently hit post-recession highs. In the Fannie survey, I think the most interesting result was the five-point rise in the net share of consumers reporting significantly higher income in the last year. A higher percentage also expects their financial situation to improve in the coming year. Given the growing concern about home affordability, if consumers are feeling more flush, it may abate some of this concern.

One dramatic result of the survey was the share who expects home prices to rise in the next year, which increased 7 points. This probably reflects growing concerns about home affordability, but interestingly, it runs counter to the recent hard data, which shows home prices moderating. If home prices continue to moderate, it might give you an opportunity to present prospective homebuyers with this contrarian news that would come as a welcome surprise.

Finally, the share who said now is a good time to sell rose two points, while the share saying it’s a good time to buy fell three points. I suspect this, too, reflects concerns about affordability.

Fannie’s housing survey reflects the attitudes of 1000 consumers about the housing market and the economy. Fannie has conducted the survey each month since June 2010. Click here for the survey results.

Freddie Mac predicts uncertain future for housing

Real Estate Market Comments Off

Feb 052017

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Freddie Mac recently released its housing outlook for 2017, and I think the key word is uncertainty. While the economy remains mildly expansionary, we’re faced with a plethora of unknowns that make it likely that last year, which was the best for housing in a decade, will be a high point.

The most obvious source of uncertainty is the election result. The new administration has promised lower taxes and regulation, increased infrastructure spending, and tougher trade policies, but the details are yet to be determined. Some economists have suggested the policies will be inflationary. Other have suggested recessionary. I suggest it’s way too early to tell.

Freddie economists note that the proposed lower tax rates may reduce the appeal of the mortgage interest deduction (MID) and suggest that could impact housing demand. I think that’s a stretch. I’ve never met a homebuyer who based his decision on the MID.

Another area of uncertainty for TX is foreign investment in real estate. 10% of US foreign residential purchases occurred in TX. Foreign investment is impacted by currency fluctuations and capital controls of other countries, among other factors, and those are starting to limit the availability of foreign investment capital.

Finally, Freddie economists suggest that mortgage rates, which start this year higher than last year, will continue to rise. However, as they note, global events, such as the Brexit, helped contain US rates last year. The calendar is loaded with potential surprises this year, and they could keep a lid of US rates again.