WASHINGTON – While the designation of Ben Carson – noted neuroscientist and former GOP presidential candidate – to run the Department of Housing and Urban Development appears like an unusual choice, some credit union observers are taking a wait-and-see approach, even as lenders are hoping he can bring a fresh perspective to the industry.
"The incoming Trump administration has shown a propensity to go outside the box," noted Geoff Bacino, a former NCUA board member and now a partner at Bacino & Associates in Washington. "If you think about it, his entire campaign was outside the box, so that's not to be unexpected. We're going to have to wait to see what Secretary-designate Carson does. I've been on two regulatory boards and I know that the agency tends to take on the personality of the board. This is obviously a cabinet-level position, but there's still day-to-day operations that I assume he's going to leave to some of the professionals. I think you would wait to see who they pick for some of these undersecretary slots and that will give you a better picture" of how HUD might operate under Carson.
Ryan Donovan, chief advocacy officer at the Credit Union National Association, observed that while Carson's nomination will get the headlines, the bigger impact for credit unions is what happens with appointments at the Federal Housing Finance Agency.
"Like the [Consumer Financial Protection Bureau], that is a position here it's not clear whether or not the president is going to have the ability to appoint that position on day one or if Director [Mel] Watt is going to serve out his term. We're paying attention to [HUD], but in the housing world that's a little bit more significant to credit unions."
Close Ties to Trump
At the very least, some industry analysts said Carson's seemingly close relationship with President-elect Donald Trump could help bring more attention to housing issues.
Their relationship will help "elevate the issue of housing," said Brian Montgomery, a former commissioner of the Federal Housing Administration who is now vice chairman of The Collingwood Group. "No doubt in my mind that President Trump values his relationship with Carson."
Many compared Carson to President Reagan's selection of Samuel Pierce, a corporate lawyer who had little experience with housing, as head of HUD in 1980. At that time, the Reagan transition team also selected a Realtor and Home Builder to be Pierce's No. 2 and the head of the FHA.
The team was credited with rejuvenating FHA by introducing a direct endorsement program in 1983. That leaves many in the housing industry waiting to see who is picked to back up Carson.
"Carson does not have a background in this," said Jaret Seiberg, an analyst for Cowen and Co., in a note to clients. "That is why the team that the President-elect picks to surround Carson will be critical. So far, there are few hints on whom that will be."
As HUD secretary, Carson is expected to focus on the revitalization of urban areas and inner cities.
But much of the industry's focus will remain on FHA, which has seen its mortgage fund rebound in the past two years, reigniting calls for it to cut premiums. Carson's view on that issue is a mystery, but analysts have not ruled out a possible further cut, despite traditional Republican opposition to such a move.
"Carson comes from the conservative side of the GOP, but he is also a populist," Seiberg said. "That is why we believe there is still a possibility that FHA under Team Trump will cut FHA premiums, though the odds are much lower than if [Hillary] Clinton had won. Such a move on FHA premiums would matter to mortgage insurers. The real key will be Trump's pick for FHA commissioner."
While Carson's views on most key issues are unknown, there is one area where he has staked out a position: the mortgage interest deduction – which is considered a pillar of the housing market.
Carson is unlikely to be directly involved in such discussions, which are in the bailiwick of Treasury Secretary-designate Steven Mnuchin, but his past support for eliminating the deduction is another sign that the Trump administration is readying to take on the issue. Mnuchin said last week that he is planning to push for capping the deduction as part of tax reform.
Senate Skepticism
The issue is liable to come up during Carson's nomination hearing, but he is likely to be confirmed by the Senate despite some skepticism from Democrats.
"President-elect Trump made big promises to rebuild American infrastructure and revitalize our cities, but this appointment raises real questions about how serious he is about actually getting anything done," said Sen. Sherrod Brown, D-Ohio, in a statement Monday.
The industry's trade groups, meanwhile, including the National Association of Realtors, Mortgage Bankers Association and National Association of Home Builders, welcomed the announcement of Carson.
"MBA looks forward to working with Dr. Carson in helping to build out a well-rounded team of housing experts, with a deep technical understanding of the issues, at HUD, FHA and Ginnie Mae," said David Stevens, the president of MBA and a former FHA commissioner. "MBA wishes Dr. Carson and the rest of the administration success as they get ready to embark upon these next four years."
Aaron Passman contributed to this report.
