Treasurys rose Wednesday following the Republican sweep of the White House and U.S. Senate. The market is anticipating a Federal Reserve interest rate cut, but is also wary of a Trump Administration's prospective tax cuts and adding to the federal deficit, the Mortgage Bankers Association said Wednesday. 

Mortgage players generally tight-lipped before Tuesday's results are now reacting with uncertainty around the impact to housing, from mortgage rates to regulation and home building.

"Trump would make comments on the campaign trail about different types of tax and other policies than you would normally expect from a Republican," said Sairah Burki, managing director and head of regulatory affairs and sustainability at the Commercial Real Estate Finance Council. "So I think we just have to be prepared for those types of surprises, and be nimble."

Lending CEOs, capital markets experts and venerated industry watchers told National Mortgage News to anticipate a pullback in regulatory action, and general efforts by Capitol Hill to aid home buyers.

"The next few years should provide our industry with some positive momentum and less regulations," said Glenn Stearns, CEO of Kind Lending. "We may be able to get legislation through that promotes homeownership."

But home builders could see a negative impact from tariff and immigration action, sources said, and rates seem poised for a wild ride. 

Rate reaction

GOP rule on Capitol Hill could extend Trump tax cuts next year and add over $7 trillion to the national debt, according to a recent analysis from the Committee for a Responsible Federal Budget. Trump has floated tariffs on imported goods that could increase inflation, experts said. 

"Every [Trump] policy seems to lend itself to increasing the deficit, and deficit increases are certainly inflationary, and therefore certainly impact at a minimum 30-year fixed rate mortgages," said Justin Messer, CEO of Prosperity Home Mortgage. "The knee-jerk reaction is certainly not great for interest rates in the near-term."

Rates are rising on expectations of a pro-business administration, growth via tax reductions, and less need for reductions from the Federal Reserve, said Jason Obradovich, chief investment officer at New American Funding. 

"This is purely speculative, as the actual policies, legislation, or tariffs under Trump's administration remain uncertain," he wrote in an email Wednesday. 

A volatility in interest rates could represent short-term pain for long-term gain, said Kenny Hodges, CEO of Assurance Financial.

"That's just going to be the price that we're going to have to pay right now, and hopefully down the road, it puts more money in people's pockets," Hodges said about the market.

Should the yield curve get steeper, demand for adjustable-rate mortgages could grow, said Ted Tozer, former president of Ginnie Mae and a nonresident fellow at the Urban Institute's housing finance policy center. The pattern would be similar to ARM originations prior to the Great Financial Crisis. 

"But for lenders hoping for a refinance wave, it may be postponed," said Tozer. "We may not really see a drop in rates. Postponing any kind of refi wave could lead to more consolidation with fewer loans to go around between lenders."

Regulatory easing

Industry players Wednesday echoed pre-election comments in predicting regulatory rollbacks, particularly at the Consumer Financial Protection Bureau.

"We're likely to see some rollback of the CFPB's Open Banking final rules due to financial industry pushback," said Curtis Knuth, CEO of S1/Service First Information Solutions. "But a hallmark of the Trump administration is unpredictability… so we'll see."

Knuth said his firm is anxious to see an expansion of instant verification of deposit and banking data capabilities that would drive down application costs. 

Marx Sterbcow, a mortgage industry compliance attorney, suggested government agencies anticipated a Trump win because of their quick settlements on controversial cases, with small sums and sparse stipulations. The attorney represented Townstone Financial in its yearslong redlining dispute with the CFPB, which was resolved last week with a six-figure settlement.

Sterbcow suggested Real Estate Settlement Procedures Act enforcement would now largely come from Democrat state attorneys general.  

"It's going to be going back to a lot more of the nuts and bolts of enforcement, where they concentrate on the bad players and not use these government agencies for political policy-making decisions," said Sterbow. 

He also predicted former housing agency lieutenants Brian Johnson and Brian Montgomery would lead the CFPB and the Department of Housing and Urban Development. Former Federal Housing Finance Agency director Mark Calabria was also floated by some to return to his post, but the Trump administration has so far been silent on appointments. 

Pain points

Residential construction could feel the double-whammy of Trump's proposed tariffs and immigration policies. Question marks also remain around government efforts on energy efficiency and resilient building, CREFC experts said. 

"If I were a home builder, I'd be terrified," said Andrew Dort, broker and owner of Pride Lending. "His plan to raise tariffs will skyrocket the price of materials and his goal of deporting vast swaths of people in this country means fewer trades to help build those homes."

Industry consultant Paul Hindman echoed that sentiment, suggesting Trump would "deport all the people that build houses." Christopher Maloney, a mortgage strategist at BOK Financial Capital Markets, said supply will remain hamstrung by problems at the local level.

"You can't create more single-family housing by legislative edict," he said. "Homes must be physically built."

Experts meanwhile remain largely uncertain of what the Trump Administration's long-term housing goals would be. Much could hinge on the consequential Tax Cuts and Jobs Act expiration next year, which the MBA and the Community Home Lenders of America both said they would discuss with lawmakers. 

Tozer said he's concerned about Trump making short-term housing actions without considering long-term consequences, considering how his first term unfolded. 

"A lot of times housing solutions look very, very easy, but then when you look at the repercussions down the road, they aren't," said Tozer. "Will he try to do something that has a quick fix that ends up being more damaging?"

It's still unclear if Republicans will have full control of Congress to enact their policies undeterred. As of Wednesday evening, control for the U.S. House of Representatives was still up for grabs. 

"If the Republicans do retain the House … we should see a great 2025 market in housing," said Randy Howell, a broker and owner of Mortgage Power, Inc. " I just feel the next 60 days may be a very rocky time for our industry."

— Brad Finkelstein, Spencer Lee, Bonnie Sinnock and Maria Volkova contributed reporting to this story