A Trump administration proposal to rewrite the mortgage-bond market is set to go before the Federal Reserve on Monday, with the aim of boosting the market by lowering the rate on loans.
The plan would allow banks to borrow at lower rates, potentially opening the door for borrowers who have been locked out of the market to take advantage of the lower interest rates.
The Trump administration is also proposing to limit the number of times banks can lend to borrowers with negative equity to a maximum of six times per year.
That would allow borrowers with a mortgage with a negative equity of more than 30% to get a loan, if the borrower is willing to take out a higher-rate mortgage.
The Fed is expected to consider the proposals, known as a “reserve requirement,” in a public hearing on Wednesday, though it is not expected to approve any changes to the mortgage market, according to the Wall Street Journal.
The proposal comes at a time when the housing market is in its worst year since the financial crisis, as lenders are taking advantage of low interest rates and the government is tightening restrictions on mortgage-finance products.
The proposed changes come as the Trump Administration is expected, following the November election, to move to reinstate the Glass-Steagall Act, which separated commercial and investment banking.
Glass-steagall was repealed in 1999, but it still protects financial markets from being run by investment banks that would likely engage in high-risk, speculative behavior.
The new proposals would require banks to keep some of their risk-adjusted assets, such as cash and deposits, outside the securities they offer for lending.
That could mean lenders would be required to maintain some amount of reserves in order to pay down the riskier assets.
Banks would also have to provide borrowers with information on the riskiness of their mortgage loans, which could include information on their credit score, credit history and borrower characteristics.
It’s unclear whether the Fed will approve any of the changes.
A few of the proposals are similar to proposals proposed by the Trump Treasury Department and the Federal Housing Finance Agency in April.
The Treasury proposal would have the Treasury pay banks to buy mortgages, while the FHFA proposal would allow a bank to sell a mortgage for a loan.
The two programs are part of a broader effort by the Treasury to get the Federal Government to ease rules on the mortgage industry.
In April, the Federal Home Loan Mortgage Corporation said it expected the housing markets to grow by 3.6% this year, and the Treasury Department expects that to increase to 4% in 2020.
The president is expected on Monday to announce changes to housing regulations, including plans to expand the definition of a prime home to include a second-story home, which would make it easier for borrowers to buy a second home with their income.
The White House has also proposed expanding mortgage-for-loan programs to allow people to borrow up to 30% of their income, up from 15%.
That proposal has the support of the Financial Services Roundtable, a coalition of financial firms.
“This is about ensuring that millions of Americans can get the mortgage they need to be successful and grow their businesses, and that the market can recover,” said Ben Tulchin, CEO of the Federal Deposit Insurance Corporation.
“The president is making a real effort to ensure that people can get mortgages to help them buy a home, and get that loan backed by the government.”
A Trump administration spokeswoman declined to comment on Monday.