Trump Tax Cuts and Homeownership

As we pass April 15 and the associated tax reporting, many in the media have been focused on how the Tax Cut and Jobs Act of 2017 impacted consumer refunds. This topline coverage has not addressed other impacts, such as home buying motivation.

In the lead-up to the Trump tax cuts, chief economic advisor Gary Cohn famously said: “People don’t buy houses for the tax deduction.” And Urban Institute’s Laurie Goodman similarly commented: “I don’t think the mortgage interest deduction plays a large role in the decision [to buy a home].”

Interestingly, it does appear at this point, that the increase in the standard deduction and more importantly, the limitation on the state and local tax deduction, is having an impact on the housing market. This week, the New York Fed published a study finding that … “changes in federal tax laws enacted in December of 2017 have contributed to the slowing of housing market activity that occurred over the course of 2018.”

In furtherance of the point, compared home sales activity in counties with a high concentration of households claiming the mortgage-interest deduction versus those who do not. In the so-called “high-impact” counties, home sales dropped 5.4% in October from the previous year. We will keep our eye on this data point as it could lead to a second Trump tax bill, one that would start as a SALT fix.

Step Toward Automating 4506T Passes

Passing with a voice vote before its Easter break, the House of Representatives successfully moved House Resolution 1957, the Taxpayer First Act of 2019, which includes a provision to automate the 4506T tax transcript process.

House Resolution 1957 and its Senate companion, Senate Bill 928, introduced by Senators Charles Grassley (R-IA) and Ron Wyden (D-OR), is the first legislative reform to the Internal Revenue Service in nearly two decades.

The measure is expected to gain traction in the Senate and could be one of the few pieces of legislation considered for debate and a vote.

Calabria Takes Helm, Welcomes Adolfo Marzol

Mark Calabria was sworn in this week as FHFA Director following his confirmation by the Senate in a party- line vote on April 4.

As Director of FHFA, Calabria is set to implement the plan President Trump announced last month to end U.S. control of Fannie and Freddie.

As FHFA director, Calabria has latitude to take some administrative actions without Congress, but he may be limited as the Treasury Department draws up its own reform blueprint in the coming months.

On his second day at the agency, Calabria named Adolfo Marzol to the position of Principal Deputy Director. For the past two years, Marzol has served as advisor to Secretary Carson, helping guide FHA and Ginnie Mae.

Marzol has 30 years of private sector experience and has held senior positions at Essent, Fannie Mae, Chase Mortgage and Equitable Mortgage.

“I believe the foundations of our current mortgage finance system remain vulnerable. After years of strong house price growth, too many remain locked out of housing, while others are dangerously leveraged. We must not let this opportunity for reform pass,” said FHFA’s Calabria.

Kraninger Speaks to BPC

CFPB Director Kathy Kraninger chose the Bi-Partisan Policy Center for her first public remarks laying out her vision for the Bureau. In a speech at BPC this week, she covered topics including protecting consumers from bad actors, providing clear rules of the road for financial institutions and non-bank lenders and empowering consumers to make sound financial choices.

Kraninger said today she is focusing the agency on preventing consumer harm. “An ounce of prevention is worth a pound of cure,” Kraninger told the BPC audience.

With a greater emphasis on prevention, Kraninger said she expects the number of complaints to the CFPB and the size and number of enforcement actions to decline.

“Violations, if unaddressed, can lead to future violations. We need to ensure a culture of compliance,” she asserted.

Administration Rolls Out Opportunity Zones v2

This week, the Department of Treasury announced the issuance of a second set of Opportunity Zone regulations at a press conference held at the White House with addresses by HUD Secretary Carson and Treasury Secretary Mnuchin.

The White House Opportunity and Revitalization Council aims to accelerate the formation of businesses in Opportunity Zones and other economically distressed communities. Economic growth and entrepreneurship are crucial for driving down unemployment and promoting greater economic stability.

This initiative aims to improve access to capital and government contracts in Opportunity Zones by integrating Opportunity Zones into existing programs that target business formation and economic development. As part of their outreach, Federal agencies will also use their field networks across the country to increase awareness of the benefits of Opportunity Zones.

The strategies and goals for the Entrepreneurship work stream include:

  • Assist Opportunity Zones and other economically distressed communities and investors with entrepreneurial engagement;
  • Provide targeted assistance and toolkits to Opportunity Zone entrepreneurs;
  • Integrate Opportunity Zones into existing Federal programs;
  • Leverage government lending and grants to address the unique challenges of minority, female, rural entrepreneurs; and
  • Promote available Federal resources and programs to entrepreneurs in Opportunity Zones.

Secretary Carson said: “Few programs in modern American history have the potential to touch the lives of so many people as powerfully as Opportunity Zones, which are home to roughly 35 million Americans.”

Faith’s Corner: A Growing Hispanic Market

This week, we looked closely at the 2018 State of Hispanic Homeownership Report, which was released recently. The report and data announced the largest net gain for Hispanic homeownership since 2005. Demographics are key to understanding the future of our business.

Download the full report

In 2018, Hispanics achieved a net gain of 362,000 homeowners. This raised the Hispanic homeownership rate from 46.2 percent in 2017 to 47.1 percent in 2018.

Leveraging unemployment at historic lows and a red hot economy in the midst of the longest expansion on record, these advances are due in large part to the contributions of Hispanics, especially in three key areas:

  • Hispanics were responsible for 81 percent of the U.S. labor force growth.
  • Hispanics accounted for 39.6 percent of U.S. household formations.
  • Hispanic homeownership gains represented 62.7 percent of the U.S. net homeownership increase.

Despite concerns about housing inventory and changing government policies related to homeownership, the leading indicators, such as household formation, income trends, age and consumer sentiment, suggest that Hispanics will continue to drive homeownership gains in America for the foreseeable future.

In the years following the recession, Hispanics have remained passionate about homeownership.

As the team at Housing Finance Strategies contemplates the burgeoning Hispanic market and the data in this report, we stand ready to share our perspective.

Cheryl Stanton Confirmed for Labor Role

Before breaking for Easter, the Senate confirmed Cheryl Stanton to head the Labor Department’s division tasked with enforcing federal wage laws by a 53-45 vote.

Ms. Stanton will lead the DOL’s Wage and Hour Division. Stanton, the former head of the South Carolina state employment agency, has been waiting to be confirmed by the Senate since President Trump nominated her in September 2017.

NAHB Confidence Steady

Builder confidence in the market for newly-built single-family homes rose one point to 63 in April, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held in the low 60s for the past three months.

“Builders report solid demand for new single-family homes but they are also grappling with affordability concerns stemming from a chronic shortage of construction workers and buildable lots,” said NAHB Chairman Greg Ugalde, a home builder from Torrington, Conn.

The Week Ahead

The Congress is adjourned for its Easter recess.

Upcoming Conferences

  • VA Lender Conference, 4/23-25
  • MBA Secondary, 5/19-22
  • NRMLA Eastern Regional, 5/19
  • SIFMA Regional, 6/12
  • Ginnie Mae Summit, 6/13-14
  • NEXT #NEXTSummer19, 8/26-27
  • MBA Risk Management, 9/15-17
  • MBA Annual and Expo, 10/27-30


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