How a Trump presidency will shock the mortgage industry


Shock doesn’t even begin to cover it. I, like everyone else on the planet, figured it would be a pretty one-sided victory last night — for Hillary Clinton. 

I stopped by a taco shop on the way home from work for takeout and it was filled with people celebrating the likely win of a home-town sheriff. Balloons, beer and tacos aplenty filled the place with a festive air — a nice reminder that somewhere, people were enjoying this election.

I settled in front of my TV and laptop with queso in hand and figured I would fall asleep at some point listening to pundits talk about who was going to fill spots in the Clinton White House.

But right away there was something weird going on. Having watched election coverage since the landslide of Reagan in 1980 when I was a teenager, I’ve gotten a pretty good education in reading the broadcasters’ emotions. Clearly, they start getting results way before they report them, and try as they might, their nonverbals give them away.

Last night, even by 8 pm, the broadcasters were looking a lot more like they had when polls started closing for Bush 43 than the Clinton victories of ’92 or ’96, much less the historic election of ’08.

On MSNBC and CNN the hosts looked spooked, tense, while on Fox they seemed much more relaxed, even jovial. Megyn Kelly, a target of Trump’s vitriol throughout the election, was especially interesting to watch. At one point around 9 pm she asked one of the Democrats she was interviewing, “Are you starting to panic?” He said no, although he admitted he was concerned.

Whatever he was really feeling, the atmosphere at Clinton and Trump headquarters were broadcasting their own zeitgeist loud and clear. Clinton supporters were incredibly subdued, even early on, while all the energy seemed to be at the Trump event.

And this year, Twitter acted like a canary in a coal mine, with results being announced ahead of the networks, and quick reaction from pollsters sending shockwaves through an unbelieving audience. Between FiveThirtyEight’s shifting odds (at 10:15 each candidate had a 49% chance of winning) and The New York Times’ vibrating vote-margin dial, the Twittersphere radiated anxiety.

In the background, reports of falling global financial markets only reinforced the theme of impending doom.

The unbelievable outcome was clear even before the final states reported. Trump ended the night with 276 electoral votes to Clinton’s 218.

The apocalypse was real.

So what happens now?

I can only imagine how many businesses are holding meetings this morning to ask this same question. How do you adjust for a black swan event you probably didn’t see coming?

After all, pollsters were still giving Hillary a 90% chance of winning as late as Monday. Nate Silver was taking heat this weekend for polls that gave Trump a 32.5% chance of winning. 

This morning has seen a slew of mea culpas from pollsters of every stripe, for good reason: The entire nation has been left flat-footed.

For the mortgage industry, one thing is clear — the era of massive regulation is over.

The PHH ruling that put the Consumer Financial Protection Bureau under the authority of the president seemed like a nonevent given a Clinton victory — it’s not like she was going to disband the regulatory agency birthed by Elizabeth Warren. Any change to the status quo was kicked down the road by at least four years.

Except Trump won. And Republicans have control of the Senate and the House.

What is the scene like at the CFPB this morning? Is Cordray cleaning out his desk? And what in the world are lenders and servicers supposed to do now?

I started working for HousingWire three years ago, and the soundtrack of our industry has been one song on repeat the whole time: compliance.

In 2013 the industry was gearing up for the qualified mortgage rule and calculating a borrower’s ability to repay. That morphed quickly into the yearlong panic to comply with the TILA-RESPA Integrated Disclosure rule and, in the last several months, how to handle changes in HMDA requirements.

Through it all, lenders and servicers — with the help of a constellation of software companies and service providers — have spent millions upgrading systems, overhauling policies and procedures and turning themselves inside out to comply.

What to make of that now that there might not be a CFPB to send auditors to look at your compliance trail? How do companies decide what’s the baby and what’s the bathwater in this environment?

No wonder financial markets are spooked.

Personally, I tend to be suspicious of government regulation. I need to be convinced that the costs outweigh the benefits and the unintended consequences don’t bury the very thing the regulations are trying to help. I see that as one of the most important duties of the press in general — watching the watchers.

But even I blanch at the potential scale of a Trump-led regulatory rollback.

Does this mean a return to the Wild West days of mortgage finance? What will motivate companies to do what’s best for consumers when no one is holding them accountable? If you’re a public company, is it even right to spend shareholder dollars to fulfill compliance obligations that will no longer result in huge fines?

For a country that is just now recovering from a foreclosure crisis wrought by reckless lending, the mortgage industry should step carefully into this brave new world.

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