President-elect Joe Biden said he wants to quickly reverse key Trump administration housing policies, but his success will largely depend on the courts.
Biden has pledged to restore a sweeping Obama-era regulation that would have required local governments to take active steps to end segregation or else lose federal funding — what President Donald Trump called an attempt to "abolish the suburbs." His administration eventually scrapped the so-called Affirmatively Furthering Fair Housing regulation altogether in July.
Lawsuits challenging a weaker replacement unveiled this summer are almost certain. If courts hold that the new Trump measure revoking the regulation is illegal, the original 2015 rule would most likely stand, allowing Biden to sidestep the issue. If they uphold the new Trump rule, however, the Biden administration likely would have to again propose the 2015 rule, with a notice-and-comment period that would severely delay putting it into practice.
Biden’s influence over the future of Fannie Mae and Freddie Mac — the government-controlled companies that stand behind about half of the residential mortgages in the U.S. — also hinges on the courts. The Supreme Court ruled this year that a law that says the director of the Consumer Financial Protection Bureau can only be fired for cause was unconstitutional, giving the president more leeway to remove the head of the agency.
The high court is expected to rule next year on a similar case challenging the structure of Fannie and Freddie’s regulator, the Federal Housing Finance Agency, also led by a single director with a five-year term who can only be dismissed for cause.
A Biden-appointed FHFA director would pump the brakes on the agency’s plan to end Fannie and Freddie’s 12 years under government control, given Democrats’ concerns that affordable housing would be less of a priority for the newly private companies. The companies have also played a major role in the federal government’s response to the economic crisis caused by the coronavirus, so plans to spin them off could be abandoned altogether.
But Biden will have an easier time quickly replacing the comptroller of the currency, a top bank regulator, giving him the chance to halt Trump’s overhaul of the Community Reinvestment Act, the landmark law designed to combat redlining, or discrimination in lending.
Former Comptroller Joseph Otting’s rewrite of the rules, under the 1977 law that’s intended to help low-income and minority borrowers, has been criticized by Democrats, community groups and even banks. Democrats warn that the new approach would place too much importance on the dollar amount of a bank’s investment in poorer areas, rather than on getting a community’s input on what it needs.
Both the FDIC and the Federal Reserve have signaled interest in ultimately updating the rules as well, since they haven’t been modernized since the emergence of online banking. Coupled with the lack of support for the Office of the Comptroller of the Currency’s approach and the renewed focus on racial justice generally, and the banking agencies would likely move CRA to the top of their priority list under a Democratic administration.
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