Recently President Trump issued another Executive Order addressing housing costs, along with a related fact sheet.

The Executive Order, entitled Decreasing Housing Costs for the American People, addresses:

  • The cancellation of private mortgage insurance on mortgage loans acquired in the future by Fannie Mae or Freddie Mac (the “Enterprises”).
  • Facilitating the use of modern manufacturing methods in the production of manufactured and other factory-built housing eligible for federal housing programs.
  • Expanding the acceptance by the Enterprises of an automated title review or other title-risk assessment approved by the Federal Housing Finance Agency (FHFA) in lieu of a lender’s title insurance policy on eligible refinance transactions.
  • The reduction of interest rates on certain single-family home loans made directly by the U.S. Department of Agriculture (USDA) under 42 U.S.C. 1490a(a)(1)(B) and the U.S. Department of Veterans Affairs (VA) under 38 U.S.C. 3762(c)(1).

Mortgage Insurance Cancellation. Currently, for covered loans at the federal level the cancellation of private mortgage insurance is governed by the Homeowners Protection Act. Subject to certain requirements, the Act provides for the borrower requesting cancellation of the insurance when the principal balance of the loan is scheduled to reach, or actually reaches, 80% of the home’s value, and the automatic termination of the insurance when the principal balance of the loan is scheduled to reach 78% of the home’s value.

The Executive Order provides that if the FHFA Director determines that it is in the best interests of the Enterprises or FHFA, and the American public, the Director shall require that the Enterprises establish a pilot program, applicable only to mortgages made after the establishment of the pilot program, that periodically reviews single-family mortgage loans they own, guarantee, or securitize, using automated valuation models and other available data to assess current market value, to identify borrowers who appear to satisfy equity and other requirements for cancellation of private mortgage insurance.

The Executive Order also provides that the FHFA Director shall direct the Enterprises to require servicers, to the extent permitted by law and operationally feasible, to notify borrowers promptly when private mortgage insurance may be canceled under the pilot program, and to reduce or eliminate unnecessary documentation requests, appraisal costs, and other administrative barriers to cancellation.

Housing Production. The Executive Order establishes a Task Force on Manufactured Housing Innovation that is co-chaired by the Secretary of the U.S. Department of Housing and Urban Development and FHFA Director, or their designees, and includes the USDA Secretary, Secretary of Commerce, and VA Secretary, or their designees. The co-chairs may invite the heads of other executive departments and agencies to participate, as appropriate.

Within 180 days of the date of the Executive Order, the Task Force must submit to the President recommendations to facilitate the use of modern manufacturing methods in the production of manufactured and other factory-built housing eligible for federal housing programs, including actions to:

  • Promote specifications, certifications, inspections, and approvals across federal housing and housing-finance programs.
  • Establish reciprocal recognition among agencies of licenses, certifications, approvals, and inspections, where doing so would avoid unnecessary duplication.
  • Eliminate federal requirements and duplicative reviews that unnecessarily impede automation, modularization, standardized production, or other advanced manufacturing techniques, or that increase the time or cost of bringing homes to market.
  • Use federal financing, insurance, guarantee, purchasing, and other program authorities to encourage innovation and increased production of affordable manufactured and factory-built homes.
  • Promote competition among manufacturers and other market participants while maintaining appropriate standards for safety, quality, durability, and consumer protection.

Title Insurance. Currently, the Enterprises have a pilot program under which an automated title review process may be used in lieu of a lender’s title insurance policy with certain loans. Among other requirements and limitations, the program is available only with refinance loans that have a loan-to-value ratio of less than 80%.

The Executive Order provides that if the FHFA Director determines that it is in the best interests of the Enterprises or the FHFA, and the American public, and consistent with financial safety and soundness, the Director’s authorities as regulator and conservator, and applicable law, the Director shall require the Enterprises to expand the title acceptance pilot into an ongoing program, available nationwide through both Enterprises, under which an Enterprise may accept an automated title review or other title-risk assessment approved by the FHFA in lieu of a lender’s title insurance policy on eligible refinance transactions.

The Executive Order further provides that in expanding the program, the Director shall consider:

  • Extending eligibility to refinance transactions with loan-to-value ratios above the current 80% limit where title risk remains low.
  • Removing geographic limitations and certifying additional title-assessment providers to promote competition.
  • Waiving appraisals, income re-verification, and other documentation requirements for limited cash-out refinances that reduce the borrower’s monthly payment, where the Enterprise’s existing data support doing so.
  • Reducing or eliminating loan-level price adjustments and other Enterprise fees on such refinances.

Addressing the Executive Order, Mortgage Bankers Association President and CEO Bob Broeksmit stated “[o]ur lender members welcome these latest initiatives to reduce the costs of refinancing and expand innovative manufactured housing options for potential homebuyers. We also appreciate the EO’s acknowledgment of the need to balance consumer, taxpayer, and GSE interests and will work with the Federal Housing Finance Agency and Fannie Mae and Freddie Mac on a timely and thorough implementation.”