Mortgage professionals can expect a transformed regulatory environment for the financial sector as Donald Trump returns to the White House in January. This includes an increased likelihood of Fannie Mae and Freddie Mac being released from conservatorship along with immediate shifts in agency leadership, analysts said.
“Trump win is a regulatory game changer that likely includes more free markets, less harsh oversight (aid capital, costs, fees) and reduces regulatory risks,” a team of Wells Fargo analysts covering large banks wrote in a report on Wednesday morning.
Under President Joe Biden, the Federal Reserve attempted to implement the Basel III Endgame rules, which were set to increase capital requirements for large banks, including a boost to their residential mortgage portfolios compared to international standards. The rule is under revision after a strong market reaction.
“A new era after 15 years of harsher regulation should aid capital (likely no increase with Basel III), bureaucracy, costs, and fees,” Wells Fargo analysts wrote. They added that regulatory risk is likely to decline under Trump amid more predictable approaches, costs and benefits analyses, and a pro-business attitude.
Trump’s return is also expected to usher in a leadership overhaul across regulatory agencies, including those directly affecting the mortgage space, such as the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB).
“Election could have a significant impact on the regulation of the financial sector, with a Trump administration likely to yield a deregulatory boost,” wrote analysts at Keefe, Bruyette & Woods (KBW) in a report on Wednesday morning. “A Trump administration could yield significant regulatory leadership change, with as many as eight regulatory agencies experiencing day-1 leadership changes.”
At the CFPB, the KBW analysts see a possibility of Rohit Chopra being replaced by an acting director soon after Trump’s inauguration. In the long term, potential replacements could be former CFPB deputy director Brian Johnson or Todd Zywicki, the former chair of the CFPB Task Force on Federal Consumer Financial Law. The timing for this change is in question since the Senate will focus initially on key cabinet members.
During Chopra’s term, the CFPB had a challenge to its funding mechanism rejected by the U.S. Supreme Court, which gave him more confidence in pursuing the bureau’s crusade against junk fees, appraisal bias and fair lending violations — all controversial topics in the industry.
“In governing, policy is personnel and who is appointed will largely determine what gets done in the housing space,” wrote David M. Dworkin, president and CEO of the National Housing Conference.
Under the Biden administration, Dworkin said that the National Economic Council, the U.S. Department of Housing and Urban Development and the FHFA have had “impactful and effective housing leaders.” But “regulatory policy has too often been more problematic.”
“We need regulators who are guard dogs, not lap dogs or attack dogs,” Dworkin wrote. “Overzealous regulation, like a recent decision by the Department of Justice and the CFPB to sue Rocket Mortgage in an appraisal bias case involving a single loan, despite the fact that mortgage lenders are not allowed to question an appraisal report when underwriting a mortgage, is only the most recent example.”
The agencies, including the CFPB, expect more scrutiny in 2025 and beyond. In June, the Supreme Court overturned the 1984 Chevron precedent, meaning that courts can rely on their interpretation of ambiguous laws while reducing the power of federal agencies to interpret the laws they administer.
At the FHFA, analysts at KBW expect Sandra Thompson to also be replaced on day one of the Trump administration. Jonathan McKernan, a board member of the Federal Deposit Insurance Corp. (FDIC), is cited as a potential long-term replacement. The new FHFA commissioner, however, would likely be confirmed in the second half of 2025.
“McKernan leadership would probably work on ending GSE’s conservatorship,” the KBW analysts wrote, adding they expect a positive impact from reduced regulation and a shorter application process for mergers and acquisitions.
The increasing likelihood that the government-sponsored enterprises (GSEs) will be released from conservatorship under the Trump administration made their stocks jump on Wednesday. Fannie Mae was trading at $1.92, up 38%, while Freddie Mac was up 38% to $1.66.
The GSEs delivered $7 billion of combined net income in the third quarter of 2024. Fannie’s total net worth reached $90 billion and Freddie’s reached $56 billion.
“In a Trump victory, we still see better near-term upside for the preferred stock, which have collectively built $25 billion of capital from retained earnings over the last year,” BTIG analysts Eric Hagen and Jake Katsikas wrote in a report.
According to them, credit risk transfer may proliferate in a Trump administration, given the “potential read-thru it creates for accelerating a release from conservatorship, although it could depend on the leadership development at the Treasury and the FHFA.”
Pilot programs, mainly regarding a title insurance alternative and closed-end second loans, are also at risk under the Trump administration. Former FHFA Director Mark Calabria recently criticized an extension of appraisal waiver methods for higher loan-to-value (LTV) purchase loans, calling the decision “truly dumb & irresponsible ” in a social media post.
Looking to the Federal Reserve, KBW analysts forecast possible replacements for Jerome Powell and Vice Chair Michael Barr when their terms end in 2026. Potential successors are Christopher Waller, a member of the Fed Board of Governors; Kevin Warsh, a former member; and David Malpass, a former president of the World Bank Group.
“The new leadership would likely continue Powell’s policies but may be under pressure from Trump to lower interest rates,” the KBW analysts said. “Financials likely to gradually benefit starting in 2026, in areas such as Basel III being watered down and potentially less restrictive monetary policy.”
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