What a Biden administration means for homeowners and lenders

The housing and mortgage sectors are poised to begin a period of meaningful transformation once President-elect Joe Biden assumes office next month. While both sectors certainly experienced positive growth under President Trump, the incoming administration will likely be much more hands-on when it comes to promoting equitable lending and regulating industry participants. 

The incoming Biden administration has already laid out an ambitious and bold vision for homeownership that includes a proposed $15,000 tax credit for first-time buyers and specified steps for closing the racial wealth gap in housing. With this context in mind, all participants in the residential real estate ecosystem need to understand that there are several immediate policy priorities that will need to be addressed early on in 2021.

While the housing industry is set to undergo long-term changes under the Biden administration, the president-elect has made it clear that dealing with the fallout from the COVID-19 crisis is his top priority. This is why the following provisions bear close watching for first-time buyers, current homeowners and lenders:

1. Extending relief provisions for struggling homeowners and renters 

The CARES Act provided unemployment benefits, eviction moratoriums, mortgage forbearances and other protections to millions of Americans. These measures have placed an important floor on the housing economy over the past nine months. In addition to helping keep prices stable, government measures have prevented an erosion of home equity similar to what was seen during the Great Recession.  

Several CARES Act provisions are set to expire on January 31. Regardless of what happens with a near-term extension, the next administration will have to consider how best to provide long-term support to the nearly three million Americans who are in active forbearance. Although this number is down significantly from its peak in May, there has a been a drastic uptick in the number of loans going into new forbearance plans in recent weeks. Keep in mind that many jobs lost this year may never return in their past forms.

Look for the Biden administration to pursue aggressive legislative and regulatory options to widen – not rein in – the safety net for Americans looking to stay in their homes. The president-elect is likely to surround himself with many of the same house policy advisers who worked in the Obama administration during the last financial crisis.

2. Rethinking Fannie Mae and Freddie Mac privatization efforts

A major elephant in the room for industry participants is what President-elect Biden will do with Fannie Mae and Freddie Mac. Over the past four years, President Trump’s appointees at the Treasury Department and the Federal Housing Finance Agency have taken a number of concrete steps to wind down Fannie and Freddie’s 12-year government conservatorship. The Biden administration will likely avoid taking any near-term steps that could destabilize the mortgage market amid the pandemic. Moreover, the president-elect’s background on Capitol Hill makes it more likely that he will look to engage with Congress on housing finance reform, which would be a change in posture from the current administration. 

It is also important to highlight that the Biden housing plan includes a blueprint for boosting a government-run affordable housing trust fund by $20 billion, which would be funded by increasing assessments charged by Fannie and Freddie. Totally cutting their connection to the federal government seems extremely unlikely.

3. Upping regulation

Lastly, the Biden administration has a vision for overhauling federal regulation to mitigate unfair practices and expand access to housing. In his platform, Biden explicitly states that his administration will work to eliminate local and state barriers that have historically contributed to discrimination. In addition, he wants to pass legislation requiring states receiving federal dollars through certain grants to develop strategies for inclusionary zoning and will also invest $300 million to give states and municipalities support to eliminate exclusionary zoning policies and other local regulations that contribute to urban sprawl. It also seems likely that regulators will look at the well-documented racial inequities that have arisen via the analog home appraisal process.

The bottom line is that the status quo is going to change. Moreover, the coronavirus pandemic will continue to present its own set of persistent challenges. Buyers, homeowners and lenders alike would be wise to closely monitor the policy shifts that could impact the housing market for years to come.

Jeremy Sicklick is the co-founder and CEO of HouseCanary, a real estate analytics company.