President Trump has just signed executive orders designed to tackle the ongoing housing affordability crisis from two different angles.
For months, potential homebuyers have been squeezed. Mortgage rates are hovering around 6%, making monthly payments a heavy burden. At the same time, shelter inflation—the cost of housing—remains a stubborn part of overall inflation, making it harder for the Federal Reserve to cut interest rates. To make matters worse, the cost of building new homes continues to rise, driven by high prices for materials like metal and wood, some of which are impacted by the administration's own tariff policies.
Today's executive orders aim to fight this problem on two fronts. First, they seek to encourage smaller, community banks to get back into the business of providing mortgages. For years, larger institutions and non-bank lenders have dominated this space, but the hope is that regulatory relief will make it more attractive for local banks to lend to homebuyers and small builders again. Second, the orders aim to lower the actual cost of construction by streamlining permitting processes and reforming how building materials are sourced and delivered.
This move didn't happen in a vacuum. First, there's significant political momentum. Just last week, the Senate passed a major housing bill with overwhelming bipartisan support, creating pressure for the White House to act. Second, financial regulators have been laying the groundwork. Federal Reserve officials have recently spoken about "revitalizing bank mortgage lending" and are preparing to release a revised version of the Basel III 'endgame' rules, which could ease capital requirements for banks holding mortgages.
These executive orders also build on previous actions. In January, the administration directed government-sponsored enterprises to purchase $200 billion in Mortgage-Backed Securities (MBS) to help bring down mortgage rates. Today's action is the next logical step, aiming to channel those lower rates through more active bank lending. It also serves as a way to offset the rising construction costs that have been partly fueled by tariffs. By boosting the supply of new homes, the policy could also help cool shelter inflation, which would be welcome news for the Federal Reserve.
- Executive Order (EO): A directive issued by the President of the United States that manages operations of the federal government.
- Basel III 'endgame': The final set of international banking regulations that determine how much capital banks must hold against their assets, including mortgages.
- Mortgage-Backed Securities (MBS): Investments that are secured by a bundle of home loans, bought and sold by investors. Government purchases of MBS can help lower mortgage rates.