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Housing and mortgage industry groups have thrown their support behind the Trump administration’s picks to lead the FHFA and CFPB, but questions remain about the prospect for dramatic policy shifts at the crucial agencies.
Homebuilder scion Bill Pulte was confirmed in a 56-43 Senate vote Thursday to lead Fannie Mae and Freddie Mac’s federal regulator, the Federal Housing Finance Agency (FHFA). Three Democrats (Angela Alsobrooks of Maryland, Ruben Gallego of Arizona and Elissa Slotkin of Michigan) broke party ranks to confirm Pulte, the grandson of PulteGroup founder William J. Pulte.
In a party-line vote on March 6, the Senate Banking Committee voted 13-11 to endorse attorney and former FDIC board member Jonathan McKernan to lead the Consumer Financial Protection Bureau. The full Senate has yet to vote on McKernan’s nomination.
Pulte and McKernan’s nominations were considered by the Senate Banking Committee at a Feb. 27 hearing, where Pulte testified that his connection to housing “began at a young age. While many children spent their weekends at sporting events, I spent mine on homebuilding jobsites with my father and grandfather.”
After learning about every aspect of housing from the ground up, Pulte founded an investment firm and “led multiple companies” with thousands of employees before joining Pulte Homes, “during a difficult period when poor management was threatening its future.”
Although no longer affiliated with the company, in 2016 Pulte helped his grandfather oust PulteGroup Chairman and Chief Executive Officer Richard Dugas and served on the company’s board of directors until May 2020.
Bill Pulte | Credit: X
“I stepped in and worked with dedicated partners to revitalize the company,” Pulte said. “Today, Pulte Homes is more than three times the size from when I stepped in, and our efforts ensured the company continues to provide housing for hundreds of thousands of Americans.”
During Trump’s second term, his administration is expected to revive attempts to privatize Fannie and Freddie by releasing them from conservatorship — an endeavor that, depending on how it’s carried out, could mean higher mortgage rates for homeowners.
Pulte assured lawmakers that while Fannie and Freddie can’t remain under government stewardship forever, “any exit from conservatorship must be carefully planned to ensure the safety and soundness of the housing market without upward pressures on mortgage rates.”
Pulte “comfortably fielded a brief range of questions from members,” National Housing Conference President and CEO David Dworkin said in an analysis of the hearing. Pulte agreed on the importance of the credit risk transfer (CRT) market that has already allowed the mortgage giants to offload some mortgage credit risk to private investors.
Pulte said he would follow the laws that established the Housing Trust Fund and Capital Magnet Fund, which provide grants aimed at increasing and preserving affordable rental housing and homeownership for low-income households. But he said it’s important to make sure the funds — financed through fees paid by Fannie and Freddie on new mortgage guarantees that they make — are used wisely.
In addition to supervising Fannie Mae and Freddie Mac, the FHFA oversees affordable housing and community investment activities of the nation’s 11 Federal Home Loan Banks. Fannie, Freddie and the Federal Home Loan Bank System provide more than $8.1 trillion in funding for the U.S. mortgage markets and financial institutions.
Pulte said he would be willing to keep an open mind to Nevada Democrat Catherine Cortez Masto’s suggestion that the Federal Home Loan Banks be required to earmark 20 percent of their net income for affordable housing and community development projects, double the current requirement.
Industry groups back Pulte, voice positions
Industry groups including the Mortgage Bankers Association, the Community Home Lenders of America (CHLA), and U.S. Mortgage Insurers (USMI) welcomed Pulte’s Senate confirmation vote and reiterated their policy positions.
Private mortgage insurers compete with FHA, VA and USDA loan programs by providing mortgage insurance when homebuyers take out loans backed by Fannie and Freddie and make down payments of less than 20 percent.
Seth Appleton
“USMI strongly agrees with Director Pulte’s statement in his nomination hearing that taking risk away from the taxpayers and giving it to the private market is a win,” U.S. Mortgage Insurers President Seth Appleton said in a statement.
In a November position paper, the CHLA supported ending Fannie and Freddie’s conservatorship, but said the Treasury Department should continue to provide a backstop to the mortgage giants to keep mortgage rates affordable and that measures that help small lenders compete with Wall Street banks should remain in place.
While Fannie and Freddie remain under government conservatorship or supervision, FHFA can help tackle affordability issues for homebuyers by encouraging competition and innovation, UWM Chief Innovation Officer Lee Jelenic said.
Testifying at a March 12 Senate Banking Committee hearing on housing affordability, Jelenic said the three main headwinds are mortgage rates, housing inventory and costs in the mortgage process.
Lee Jelenic
“We believe competition between [Fannie and Freddie] is necessary to spur innovation, increase the responsible flow of credit, and achieve greater efficiency and affordability in the mortgage process,” Jelenic said in his prepared testimony.
Jelenic cited title insurance, appraisals and credit reporting as areas that are ripe for innovation, and urged Congress to incentivize competition.
UWM, the nation’s largest mortgage lender, has been an enthusiastic adopter of title insurance alternatives, launching a title review and closing (TRAC) tool in 2022 that allows lenders to employ attorney opinion letters in lieu of traditional title insurance. The title insurance industry has lobbied to shut down a Fannie Mae pilot program aimed at letting some homeowners refinance their mortgage without having to pay for title insurance.
Fannie Mae and Freddie Mac have rankled appraisers by expanding programs that rely on automated valuation models instead of appraisals to allow participation by homebuyers putting less than 20 percent down.
While FHFA had been planning to allow lenders this year to deliver loans with credit reports from any two of the nationwide consumer reporting agencies instead of obtaining “tri-merge” report from all three, that timeline has been pushed back due to delays in implementing new scoring models from VantageScore and Fair Isaac.
Jelenic complained about a recent price increase on tri-merge credit reports, saying the “effective monopoly that the three bureaus collectively enjoy results in higher and unnecessary costs to consumers.”
Fate of CFPB remains in doubt
While McKernan’s hearing to head up the CFPB went fairly smoothly, it was conducted as doubts about the very existence of the agency he is expected to lead swirled.
Democracts have been fighting what they view as efforts by the Office of Management and Budget (OMB) and the Department of Government Efficiency (DOGE) to gut the CFPB altogether.
The day of the hearing, the CFPB filed notices that it was dismissing enforcement actions brought under the Biden administration against companies including Rocket Homes, Capital One and Vanderbilt Mortgage.
Sen. Elizabeth Warren
“While you’ve been sitting here and you’ve been talking about the importance of following the law, we get the news that the CFPB is dropping lawsuits against companies that are cheating American families, or alleged to be cheating American families,” Sen. Elizabeth Warren, D-MA, told McKernan. “It seems to me the timing of that announcement is designed to embarrass you and to show exactly who is in charge of this agency right now: Elon Musk and his little band of hackers.”
Jonathan McKernan
McKernan assured the committee that if confirmed, “I will fully and faithfully execute the law. Under my watch, the CFPB will take all steps necessary to implement and enforce the federal consumer financial laws and perform each of its other statutorily assigned functions. But the CFPB will do this by centering its regulation on real risks to consumers and by focusing its enforcement on bad actors.”
But he also claimed that in the past, the CFPB has “acted in a politicized manner” and “pushed beyond the limits of its statutory authority,” offending “basic notions of fairness and due process.”
“Even if you don’t agree with that view, it’s clear that the CFPB suffers from a crisis of legitimacy,” McKernan said in his prepared testimony.
“I appreciate all of your happy talk about following the law, but I think we all know what’s going on here, and that is Elon Musk is determined to shut down this agency even though he has no legal authority to do that,” Warren said.
Rhode Island Democrat Sen. Jack Reed echoed that sentiment, warning McKernan that “I have the sinking feeling you’re departing Liverpool on the Titanic.”
Dworkin concurred with Democrats that “it’s unclear how much of the Bureau will be left once McKernan is confirmed, or how much OMB will interfere with his leadership.”
But Dworkin — a centrist advocate for affordable housing stakeholders — said he believes McKernan “will bring CFPB back to its appropriate role, if he is permitted to follow the law.”
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