The Doctor Is In… at HUD: What Carson Pick Means for Lenders

Mortgage

Bloomberg News

WASHINGTON — While the designation of retired neurosurgeon Ben Carson to run the Department of Housing and Urban Development appears like an unusual choice, lenders are hoping he can bring a fresh perspective to the industry.

At the very least, some industry analysts said Carson’s seemingly close relationship with President-elect Donald Trump could help bring more attention to housing issues.

Their relationship will help “elevate the issue of housing,” said Brian Montgomery, a former commissioner of the Federal Housing Administration who is now vice chairman of The Collingwood Group. “No doubt in my mind that President Trump values his relationship with Carson.”

Many compared Carson to President Reagan’s selection of Samuel Pierce, a corporate lawyer who had little experience with housing, as head of HUD in 1980. At that time, the Reagan transition team also selected a Realtor and Home Builder to be Pierce’s No. 2 and the head of the FHA.

The team was credited with rejuvenating FHA by introducing a direct endorsement program in 1983. That leaves many in the housing industry waiting to see who is picked to back up Carson.

“Carson does not have a background in this,” said Jaret Seiberg, an analyst for Cowen and Co., in a note to clients. “That is why the team that the President-elect picks to surround Carson will be critical. So far, there are few hints on whom that will be.”

As HUD secretary, Carson is expected to focus on the revitalization of urban areas and inner cities.

But much of the industry’s focus will remain on FHA, which has seen its mortgage fund rebound in the past two years, reigniting calls for it to cut premiums. Carson’s view on that issue is a mystery, but analysts have not ruled out a possible further cut, despite traditional Republican opposition to such a move.

“Carson comes from the conservative side of the GOP, but he is also a populist,” Seiberg said. “That is why we believe there is still a possibility that FHA under Team Trump will cut FHA premiums, though the odds are much lower than if [Hillary] Clinton had won. Such a move on FHA premiums would matter to mortgage insurers. The real key will be Trump’s pick for FHA commissioner.”

While Carson’s views on most key issues are unknown, there is one area where he has staked out a position: the mortgage interest deduction — which is considered a pillar of the housing market.

Carson is unlikely to be directly involved in such discussions, which are in the bailiwick of Treasury Secretary-designate Steven Mnuchin, but his past support for eliminating the deduction is another sign that the Trump administration is readying to take on the issue. Mnuchin said last week that he is planning to push for capping the deduction as part of tax reform.

The issue is liable to come up during Carson’s nomination hearing, but he is likely to be confirmed by the Senate despite some skepticism from Democrats.

“President-elect Trump made big promises to rebuild American infrastructure and revitalize our cities, but this appointment raises real questions about how serious he is about actually getting anything done,” said Sen. Sherrod Brown, D-Ohio, in a statement Monday.

The industry’s trade groups, meanwhile, including the National Association of Realtors, Mortgage Bankers Association and National Association of Home Builders, welcomed the announcement of Carson.

He is a top neurosurgeon and ran a medical center. As a politician, he also “brings leadership skills along with his political sense and his persuasive and communication skills to HUD,” said David Stevens, the president and chief executive of MBA and a former FHA commissioner, in an interview.

He also grew up in a big family that needed help with housing challenges and paying the bills. “He has direct knowledge of what it is like to suffer and having a need for housing support,” Stevens said. “If he surrounds himself with good technical housing people, we think he can be an effective secretary.”

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