In First Hour, President Trump Delivers 'Punch in the Gut to Middle Class'

About an hour after President Donald Trump was sworn in on Friday, his administration suspended indefinitely a scheduled cut in mortgage insurance premiums--effectively raising costs for middle-class borrowers by about $500 a year.

The drop in rate, which was announced January 9 and supposed to go into effect on January 27, had been lauded as an opportunity to make homeownership more accessible to an estimated one million first-time and low-to-middle-income borrowers.

"Donald Trump's inaugural speech proclaimed he will govern for the people, instead of the political elite. But minutes after giving this speech, he gave Wall Street a big gift at the expense of everyday people."
--Liz Ryan Murray, People's Action

"After four straight years of growth and with sufficient reserves on hand to meet future claims, it's time for [the Federal Housing Administration or FHA] to pass along some modest savings to working families," said former Housing and Urban Development Secretary Julian Castro when the plan was announced.

That opportunity may now be lost.

CNBCdescribed Friday's move as "one of the Trump [administration's] first orders," and the Department of Housing and Urban Development sent out a release (pdf) dated Friday announcing the suspension of the rule "effective immediately."

However, incoming press secretary Sean Spicer said the newly sworn-in president signed just three orders on Friday: a waiver allowing his defense secretary pick, Marine Gen. James Mattis, to lead the Pentagon; his formal cabinet nominations to the U.S. Senate; and the proclamation of a "National Day of Patriotism"--with no mention of the scheduled mortgage rule.

Regardless of how the suspension was implemented, housing advocates decried the decision.

"President Trump campaigned as the candidate who would stand with the forgotten American worker, but of all of the actions he could have taken on his first day in office, it's telling that his administration has moved to instead make it more expensive for Americans to buy a home this year and beyond," said Sarah Edelman, director of housing policy at the Center for American Progress. "With mortgage interest rates already on the rise, reversing the FHA's move to cut insurance premiums in fact puts the dream of homeownership farther out of reach for millions of hardworking Americans."

"President Trump campaigned as the candidate who would stand with the forgotten American worker, but of all of the actions he could have taken on his first day in office, it's telling that his administration has moved to instead make it more expensive for Americans to buy a home this year and beyond."
--Sarah Edelman, Center for American Progress

Indeed, Politicoreports, "[t]he National Association of Realtors said the Trump administration's reversal could keep as many as 40,000 would-be homebuyers out of the market this year."

Furthermore, David Dayen writes at The Intercept, "by making FHA loans more expensive, traditional bank mortgages become more competitive. Banks typically earn more in profit from of their own products than from FHA loans. So this initial Trump policy also generates a competitive advantage for mortgage lenders to make more money for their business."

In other words, declared Liz Ryan Murray, policy director for national grassroots advocacy group People's Action, the move is "a windfall for Wall Street" that contradicts Trump's populist rhetoric.

"Donald Trump's inaugural speech proclaimed he will govern for the people, instead of the political elite," she said. "But minutes after giving this speech, he gave Wall Street a big gift at the expense of everyday people. Trump may talk a populist game, but policies like this make life better for hedge fund managers and big bankers like his nominee for Treasury, Steven Mnuchin, not for everyday people."

Edelman added: "So-called reckless homeowners didn't cause the housing crisis--but predatory lenders who tricked consumers into mortgages with exploding interest rates and other harmful features did. More than seven million Americans lost their homes during the foreclosure crisis, largely because of predatory mortgages and incompetent servicing practices. As we were reminded yesterday at Steve Mnuchin's Senate confirmation hearing, Trump's own Treasury secretary nominee made millions from the crash, and today's action is all the proof we need to know whose side the Trump administration is on."

She and other observers weighed in on the implications of Trump's Hour One action online:

Hour 1 Trump admin moves to suspend price cuts for new homebuyers. A punch in the gut to middle class buyers https://t.co/STT5ZkexXv

-- Sarah Edelman (@sarahjedel) January 20, 2017