How the White House Reorg Plan Affects Housing

The Trump Administration last week released a plan to reorganize the executive branch, entitled “Delivering Government Solutions in the 21st Century.”  Among the proposals having a direct impact on the housing industry: 
  • GSE Reform.  The proposal calls for fully privatizing Fannie Mae and Freddie Mac (GSEs) by removing their federal charter, ending conservatorship and making the federal guarantee on losses explicit, but limited.  The aim is reducing the GSE’s role and creating room for new entrants, increasing competition.  The federal guarantee would be available to all actors in the space but would kick-in as a back-stop, after primary responsibility for losses fell on the private guarantors themselves.  FHFA’s fate is unclear, as the proposal calls for regulation by an unnamed regulator which would be able to approve the additional private guarantors and develop a regulatory framework.  The regulator would impose capital requirements on the guarantors, establish loan underwriting standards, set fees and create an insurance fund as the back-stop for losses.  The proposal also eliminates Fannie and Freddie’s mandate to serve low- and moderate-income borrowers, shifting that responsibility primarily to HUD FHA.  A separate fee on mortgage backed securities issued by these new private guarantors would go to HUD for affordable housing development purposes.  The proposal seems to continue many of the GSE reform themes prevalent in the Corker-Warner proposals and discussions of recent years. 
  • Move CDBG to Commerce.   The plan proposes a Bureau of Economic Growth at the Department of Commerce to consolidate federal economic assistance resources, including Community Development Block Grants (CDBG), currently at HUD.   The new bureau would also absorb other listed economic develop programs and functions from other agencies.  CDBG advocates worry that, since the Administration’s budget proposal zeroed out CDBG, this could be another way to essentially eliminate the program.
  • RD to HUD.  The plan would move the USDA Rural Development (RD) loan guarantee program to HUD.  The proposal notes that HUD’s FHA actually already serves more households in USDA-eligible areas than USDA does.   
  • Council on Public Assistance.  The proposal would establish a Council on Public Assistance, housed in a newly created Department of Health and Public Welfare.  The council would be comprised of all agencies that administer public assistance including USDA, CMS, HUD and others.  The proposal would give the Council cross-agency authority to establish requirements, such as work requirements. 
  • In addition, HUD has listed in a section of the proposal set-aside for agency-specific proposals its rent reform proposal and a proposal to eliminate satellite office space in DC. 
Other proposals include moving most social safety net programs to HHS and renaming it as the Department of Health and Public Welfare, merging the Education and Labor Departments, reorganize USAID programs, privatize the Post Office, moving several OPM functions to other agencies and encouraging private-public partnerships. 
An Executive Order called for a reorg plan in March 2017.  Public comments were solicited in early 2017.   The draft is said to be based off of a 2017 list of Heritage Foundation recommendations and coincidentally comes on the heels of an NY Federal District Court ruling that the structure of the CFPB is unconstitutional.  Legislation would be needed to accomplish much of the proposals.