What impact will the Trump Administration’s regulatory and legislative priorities have on CRE finance market participants? In a wide-ranging interview with MortgageOrb, Sairah Burki, managing director, head of regulatory affairs at the CRE Finance Council, and David McCarthy, managing director, chief lobbyist and head of legislative affairs, examine the Securities and Exchange Commission’s and banking regulators’ approach to regulating financial markets, the Basel endgame, and the outlook for reform of housing agencies Fannie Mae and Freddie Mac.
Q: What does the regulatory landscape look like for CRE finance professionals with the new administration? What do the newly confirmed regulators tell you about the administration’s policies and priorities?
Burki: CRE Finance Council membership is anticipating a deregulatory environment that hopefully addresses market inefficiencies. Securities and Exchange Commission (SEC) rulemakings, given their implication for market liquidity and efficiency, are critically important to the CRE finance market. We believe that the new SEC Chair, Paul Atkins, will be open to weighing changes to rules in search of problems that do not exist or were implemented in an unnecessarily burdensome or ambiguous manner. The application of Rule 15c2-11 to the fixed income market is one example of a rule that was unnecessarily burdensome. We are also working via a joint trade effort on gaining more clarity on the Conflicts of Interest in Securitization Rule.
McCarthy: We are still awaiting leadership appointments at the banking agencies. Both the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp. (FDIC) currently have acting heads. We would assume that Jonathan Gould, who was reported favorably out of the Senate Banking Committee will be head of the OCC within the next couple of months.
Burki: Regardless, we do anticipate the banking agencies to also soften their regulatory stance. Federal Reserve Governor Michelle Bowman, likely to be confirmed as vice-chair of supervision any day, has emphasized the need for tailored regulation that takes into account bank size and profile. Our members will be laser focused on new developments in bank capital requirements.
Q: What is your outlook for Basel 3, and how will any implementation of these regulations impact CRE finance professionals? If Basel 3 is not implemented, will this help CRE finance market participants?
Burki: The Basel “endgame” has been in play since 2023, when Biden-era banking agencies released their proposal. It was quite punitive on many measures and faced an intense backlash from many parties including banking trades and in Congress on a bipartisan basis. CREFC met with bank regulators and submitted a comment letter targeted at CRE finance-related concerns. The most significant issue was the very onerous – and unjustified – increase in capital requirements for bank investment in securitization. We also had concerns with other areas including the proposed universal cross default provision and potential treatment of warehouse lines.
Our understanding is that the banking regulators will likely release another proposal that would be very different from the previous proposal and aim to be capital neutral.
Specifically, Treasury Secretary Scott Bessent recently argued that the Biden-era proposed Basel Endgame was not the right starting point for this modernization effort, stating: “We should not outsource decision making for the United States to international bodies. Instead, we should conduct our own analysis from the ground up to determine a regulatory framework that is in the interests of the United States. To the extent that the Endgame standards can provide inspiration, we could borrow selectively from them. But this should only be done to the extent that we can independently validate the underlying rationale and then make that rationale available for public comment.”
Q: Some market observers may expect the new administration to impose fewer new regulations and even roll back some regulations. What should CRE professionals expect from the new administration and are there any pitfalls involved with the rollback of existing regulations?
Burki: CRE finance industry welcomes deregulation of rules that are unnecessarily cumbersome and/or interfere with market efficiencies, we would note that the deregulatory process does not take place overnight. Under the Administrative Procedure Act, in most cases regulators must follow appropriate notice and comment processes, which can take several months or more.
Additionally, the Trump administration has introduced a new process via executive order and recent guidance under which independent agencies’ regulatory actions are subject to review by the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA). Independent regulatory agencies must involve OIRA at all stages of rulemaking (e.g., advanced notices of proposed rulemaking, notices of proposed rulemaking, and final rules) and are subject to this centralized review. It applies to at least 20 boards, commissions and other agencies, including the Federal Reserve, the FDIC, the OCC and the SEC.
Q: What is the outlook for the reform of Fannie Mae and Freddie Mac?
McCarthy: We expect the Trump Administration to lead —as opposed to Congress—on any effort to end the conservatorship and possible privatization of Fannie Mae and Freddie Mac. While internal discussion could start this year, the D.C. community is expecting this to be more of a 2026 priority.
For CREFC, we are focused on the multifamily market and educating policymakers on the GSE role in multifamily finance. It can be easy to overlook the large presence of the GSEs in the multifamily market as it is dwarfed by the trillion Fannie and Freddie back in the single family.
The first Trump Administration prioritized this effort under then-Director Mark Calabria and Treasury Secretary Steve Mnuchin and developed a framework to start the reform and release process. The COVID-19 pandemic, however, derailed that effort as regulators responded to the real time health crisis and economic turmoil.
Looking back, the 2010s saw a number of partisan and bipartisan legislative proposals aimed at ending the conservatorship and implementing a new mortgage finance system, but the complexity and scale of the issue contributed to those proposals eventually stalling.
Even under a “go-it-alone” administrative reform plan without legislation, the Executive Branch will need to keep key lawmakers engaged and apprised of their goals. President Trump and current FHFA Director Bill Pulte have emphasized their commitment to lower cost housing and affordability, and a negative market reaction or significant congressional pushback could stymie the effort if it impacts the cost of home loans.
In any reform plan, regulators – and lawmakers – will have to confront several key questions: What does a government guarantee look like? What do the entities look like? How are they regulated? How do they pay back the Treasury for the crisis era bailouts?