Housing leaders weigh in on Trump’s scaled-back EO

President Donald Trump onThursday signed an executive order aimed at reduced housing costs, which couldsave some mortgage borrowers thousands of dollars, but the final text isnarrower than an earlier draft that had circulated in recent weeks.

Keefe, Bruyette & Woods (KBW)analysts said that the order was “more positive than some expectations,especially for mortgage insurers,” and that they see it as “fairly benign forboth mortgage and title insurers.”

The order directs Fannie Mae andFreddie Mac to create a pilot program that uses automated valuation models(AVMs) to estimate current market value and identify borrowers eligible forcancellation of mortgage insurance, after equity and other requirements aremet.

A draft order reviewed byHousingWire earlier this week would have applied the pilot to all mortgagespurchased by the government-sponsored enterprises (GSEs). Industry estimatessuggested that approach could affect roughly 40% of borrowers with mark-to-marketloan-to-value (LTV) ratios below 80% who might qualify for mortgage insurance(MI) cancellation.

The version Trump signed limitsthe pilot to “mortgages made after the establishment of the pilot program,”sharply reducing its reach for existing borrowers.

“Private MI is designed to betemporary, and the system already works much the way the order envisions,because when MI is cancelled, a borrower’s monthly payment goes down,” SethAppleton, president of U.S. Mortgage Insurers, said in a statement. “This iswhy we supported Director [Bill] Pulte’s recent action aligning the GSEs’policies to allow mortgage servicers to proactively contact current mortgagorswho may qualify for MI cancellation through home price appreciation.”

Under the Homeowners ProtectionAct of 1998, MI cancels automatically when scheduled amortization brings theLTV ratio below 78%. Borrowers also may request cancellation based on a newappraisal if their LTV is below 75% for loans with two to five years ofseasoning, or below 80% for loans with more than five years of seasoning.Mortgage insurance allows borrowers who cannot, or choose not to, make largedown payments, but it adds a monthly cost.

Appleton said a pilot on newloans can still test tools that might eventually accelerate cancellation wherehome price appreciation supports it while preserving the role of MI in helpingborrowers buy earlier.

Expanding title pilot

The order also moves to expand a2024 pilot that uses alternatives to lender’s title policies in certainlow-risk refinances with LTVs below 80% in select areas. The directivecontemplates allowing use on loans above 80% LTV, removing geographic limits andcertifying additional title assessment providers.

Fannie Mae has integratedattorney opinion letters into its selling guide, and it has launched a titleacceptance program that relies on internal data and analytics to waive lendertitle insurance on eligible loans. Lenders have delivered about 8,000 loansbacked by AOLs and another 22,000 through title acceptance, with Fanniereporting zero title defects. Over the past 18 months or so, Fannie estimatesthese initiatives have saved borrowers about $25 million, or roughly $500 to$1,500 per loan.

Freddie Mac’s comparable “lendertitle assessment” option allows originators to perform title exams and curedefects without buying a traditional policy or an AOL. Freddie said borrowerssave an average of $600 to $650 per transaction, with savings ranging from $400to $1,700 depending on state rate structures. Launched about a year ago, theprogram has supported a little more than $3 billion of volume.

The order signals continuedinterest in alternatives to traditional lender’s title policies, particularlyon streamlined refinances. How far these alternatives extend into higher-LTVloans and more markets will depend on how the Federal Housing Finance Agency(FHFA) chooses to implement the directive.

American Land Title Association(ALTA) CEO Chris Morton said the focus on affordability is “critical” butwarned that any changes must maintain protections for homeowners.

“Fraud is unaffordable, and thethreats facing homeowners are growing,” Morton said in a statement. “Researchshows that seller impersonation fraud attempts have more than doubled in twoyears, and fraud and forgery claims associated with mortgage refinances averagenearly $207,000. Now more than ever, we need to ensure that efforts to lowerhousing costs do not shift significant financial risks onto American familiesor the broader housing finance system.”

KBW analysts said they expect theearnings impact to title insurers to be limited. Refinances account for around7% of current title premiums, and that share will likely be lower by 2027 ifinterest rates remain elevated.

Reducing refi costs

The order also goes afterrefinance costs directly. It calls for waiving appraisals, incomereverification and other documentation requirements on certain limited cash-outrefinances that reduce the borrower’s monthly payment, and for reducing oreliminating loan-level price adjustments (LLPAs) and other fees on these loans.

“We’re talking about reforms thatcould cut refinancing costs by nearly $2,400 on an illustrative $500,000 loan,as well as a new pilot that would proactively cancel mortgage insurance onceappropriate equity thresholds have been met. That’s real money,” Brendan McKay,chief advocacy officer at the Broker Action Coalition (BAC), said in astatement.

“It also means more Americanscould take advantage of lower interest rates when they arrive. FHFA now has theopportunity to turn this executive order into one of the most significantreductions in mortgage costs in years.”

In the current rate environment,however, refinance activity remains limited. Marty Green, a principal atPolunsky Beitel Green, said applying loan-level pricing relief only to refisconstrains the benefit.

“Nevertheless, marketparticipants hope that the administration considers expanding this program totemporarily suspend these cost add-ons for purchase transactions to boostaffordability for those purchasing a home in today’s rate environment,” Greensaid in a statement.

On the EO in general, SimplyPMGCEO Jason Madiedo said most of the EO is “a long play,” with people likely tonotice the benefit of the mortgage insurance piece years from now.

“The title insurance piece isreal, but it’s aimed at the wrong part of the problem. Nobody refinances tosave $800 on title. People refinance for one of two reasons: to lower apayment, which is rate-driven, or to pull cash out,” Madiedo said. “If the goalwas to move the needle on refinancing, the lever was the loan-level priceadjustment on cash-out, which FHFA also sets. Removing that would have made afar bigger difference than the closing cost.”

Creighton Oswald, managingpartner at Agility 360 Advisory, said the administration “should get credit fortrying to break the production logjam we have, but this EO is focused on theplumbing inside of housing finance and the problem right now is rates andaffordability.”

“With rates above 7%, and stayinghigher for longer, I don’t see these proposed changes moving volume in ameaningful way anytime soon,” Oswald said.

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