The Trump Administration formally rolled out a plan on
Tuesday to massively reorganize the federal government. The proposal is largely
the work of Office of Management and Budget Director and acting head of the
Consumer Financial Protection Bureau (CFPB) Mick Mulvaney, but the
Administration admits the blueprint for the reorganization was produced by the
Heritage Foundation. The 132-page
document touches nearly every part of the executive branch.
Prior to the release, media attention was focused on the
rumored plans, confirmed by the document release, to combine the cabinet level Departments
of Labor and Education into a single unit called the Department of Education
and the Workforce. The explanation for
this change is the need to meet needs of American students and workers from
education and skills development to workplace protection to retirement
The release of the plan highlights several changes which
will affect housing and housing finance.
First, and high on the list which does seem to be in an order of
priority, is to move the Department of Agriculture’s (USDA’s) rural housing
loan guarantee and rental assistance programs to the Department of Housing and
Urban Development (HUD). The government’s
justifications for this proposal include that the agencies operate similar programs
to support rental housing rehab and development, to insure mortgages for home purchase
and refinance, and subsidize rents for low-income tenants. The two sets of programs however, are not
identical. There are differences in
eligibility, assistance levels, delivery and oversight and other features. With the programs housed in separate agencies
with different missions, establishing a unified housing policy has been
The USDA programs are also called outdated. “In fact, due in large part to the sheer size
of its programs, HUD serves more households in USDA-eligible areas than USDA
does.” The plan states that moving USDA’s single-family and multifamily loan
guarantees and rental assistance programs to HUD will mitigate these issues.
According to the New York Times, a proposal to shift veterans’
housing programs to HUD as well was considered and rejected.
Another rumor had the $3 billion Community Development
Block Grant program removed from HUD and transferred to the Department of
Commerce. Mulvaney had zeroed out
funding for the program earlier this year but the Senate restored the funds. We
could not locate any reference to this in the final proposal, but the document
is, strangely, not searchable.
The plan also takes up the fate of Fannie Mae and Freddie
Mac (the GSEs) in a discussion of reforming the federal role in mortgage finance.
The government’s support of the housing market is called a complex system of federal
subsidies and programs intended to make mortgage financing accessible to a wide
range of homebuyers but also a system that is challenged by the operation of
the GSEs which have been in government conservatorship since 2008.
It proposes to transition the GSEs into fully private entities
and ensure that there will be competition to the roles they play in order to
decrease moral hazard and risk to the taxpayer. The GSEs and any other
competitive entities would have access to an explicit federal guarantee for
mortgage-backed securities that they issue, a guarantee that is only exposed in
“limited and exigent circumstances.” The guarantee would be on-budget and fully
paid-for. The proposal says this would increase
the government’s transparency and accountability and minimize the risk of
taxpayer-funded bailouts but still provide support for homeowners.
This proposal is similar to some that have come out of the
appropriate committees in both the House and the Senate, so perhaps the
administration’s endorsement will move it along.
Other changes are proposed for HUD’s rental assistance
programs, but they are longer on rhetoric than specifics.
Washington insiders have declared the plan “dead-on-arrival.” Many in Congress will be reluctant to give up
their oversight of departments and agencies that are being downsized or
eliminated, and special interest groups, including those that represent federal
employees and industries that will be affected by the changes are expected to mount
vigorous opposition to many parts of the plan.