Mortgage experts call ROAD to Housing Act a starting point for improved supply, affordability

The newly enacted 21st Century ROAD to Housing Act is a “consequential” but incremental step toward addressing housing affordability challenges, with potential benefits for small-dollar mortgages, manufactured housing and multifamily financing, according to several industry trade groups.

Bill Killmer, senior vice president of legislative and political affairs at the Mortgage Bankers Association (MBA) — who has spent roughly four decades working in Washington — said the legislation represents Congress “at its best” after the House and Senate combined more than 60 housing provisions into a bipartisan package.

“By themselves, none of them are silver bullets,” Kilmer told HousingWire. “But when you have them all together, I think they are going to move the needle and encourage further dialogue. Whether it’s small dollar, whether it’s the title issues, whether it’s the appraisal issues, whether it’s rural housing reforms, housing counseling, creating awareness for the VA home loan program …. they’re all positive actions in terms of raising awareness.”

Kimber White, president of the National Association of Mortgage Brokers (NAMB), agrees that the new law provides a framework for future housing efforts but said implementation will determine its impact.

“This is the first major housing bill that we’ve passed in 40 years,” White said. “But now let’s move forward. Let’s just not say we got a great housing bill. Let’s start working on those parts of that housing bill.”

Making smaller loans more profitable

One of the mortgage industry’s most closely watched provisions is a Federal Housing Administration (FHA) small-dollar mortgage pilot aimed at encouraging lenders to originate lower-balance loans, particularly in rural and lower-cost markets.

Frank Cassidy, senior managing director at Walker & Dunlop and the former FHA commissioner during the second Trump administration, said the challenge facing small-dollar mortgages has long been tied to the economics of origination.

“Small-dollar mortgages are an important part of the nation’s housing finance system,” he said. “But the issue has always been that it’s the same amount of work to do a $50,000 loan as it is to do a $500,000 loan.”

Because lenders face similar underwriting, processing and compliance costs regardless of loan size, Cassidy said many have been unable to generate enough revenue from smaller loans to justify the expense.

Killmer said MBA has supported efforts to expand small-dollar lending but views the pilot as a starting point. “I think that studying this is something that we hope will bear fruit,” he said. “Our lenders would like to find a way to more profitably and more smoothly be able to examine doing the smaller loan amounts.”

The law establishes a $100,000 threshold for small-dollar mortgages, though Kilmer said the definition could eventually expand depending on local market conditions.

“We think that, frankly, $250,000, depending on the marketplace, could qualify as a small-dollar mortgage as well,” he said.

Laurie Goodman, a fellow at the Urban Institute and founder of its Housing Finance Policy Center, disagrees. She points out that the definition of a small-dollar mortgage is difficult to standardize nationwide because housing markets vary widely.

“There’s nothing magic about it,” Goodman said regarding the $100,000 threshold. “I think $100,000 is a fine number.”

Scott Olson, executive director of the Community Home Lenders of America (CHLA), argued that while the threshold represents a small pool of eligible areas and borrowers, the measure could have an impact on the percentage of loans that are made below $100,000.

“Small things can have a big impact in these communities where their prices are really low, and so that’s why it’s a good thing,” he said. 

White added: “It’s the first-time homebuyer that’s going to benefit, the person who’s downsizing, the retired person who’s buying a $100,000 condo, or the person in a small house in rural North Carolina.”

Despite the doors that this provision is expected to open, Goodman said that one of the challenges with small-dollar mortgages is the mismatch between origination costs and loan sizes.

“It’s just so expensive to originate that you end up originating very few of them,” she said.

She pointed to the Illinois Housing Development Authority’s small-dollar mortgage program as a potential model. The program helps offset lender costs by providing additional compensation for originating smaller loans.

“The Illinois program was the first one that I’ve actually seen work,” Goodman said. “By eliminating the friction on the lender side, that actually helps a lot.”

Goodman said the key will be ensuring the incentives are large enough to change lender behavior. “If you give a lender $1 for originating this $2,000 loan, [they’re] probably not going to do it,” she said.

Institutional investors and private equity

The ROAD to Housing Act’s Title X, sometimes described as the “Home-Ownership for Main Street America” provision, responds to political pressure by addressing the role of institutional investors and private equity in single-family housing markets.

The provision would generally bar large institutional investors that control at least 350 single-family homes from acquiring additional properties, although the legislation includes broad exceptions for certain types of new construction such as build-to-rent, renovate-to-rent, homeownership and debt-enforcement programs.

The measure would not require investors to sell homes acquired before enactment and broadly defines both covered purchases and institutional control.

Kilmer said MBA’s analysis shows that while institutional investors can significantly affect specific metropolitan areas, they still represent a relatively small share of the overall market.

“Our economists would still suggest that this is probably 3% of the volume of investment in the total market,” he said.

An early version of the measure included a ban on certain institutional purchases of single-family homes with a long list of exceptions and a seven-year disposition requirement that would have effectively forced the sale of some build-to-rent communities, Kilmer said. MBA’s advocacy focused on unwinding these risks.

“The bill claimed to and had an explicit provision that would have exempted build-to-rent communities, but then it imposed a seven-year disposition requirement that would have forced the sale of those communities,” he said. “That ultimately was removed.”

White expects that limiting investor activity will have an eventual but not immediate impact because of the “disruption” that institutional investors did to “transitional neighborhoods,” which caused irreversible rent hikes.

“Think about this: We had institutional investors setting the rates of rents by what they did — and purchase prices by what they did, either up or down — scoring how they bought. This should solve the problem, but it’s not overnight,” he said.

Cassidy said that Title X follows President Donald Trump’s directive earlier this year about wanting to ban institutional investors. “He signed the executive order to prevent giant Wall Street corporations from buying up single-family homes, and Congress followed suit,” Cassidy said. “I believe, and I think President Trump does as well, that homes are for families, not for corporations.”

Others aren’t so sure the measures outlined in ROAD will curb investor activity.

“To some extent, this is yesterday’s issue, because what happened was coming out of the Great Recession in 2008 — like five years later — there was still demand for home purchases, so a lot of players got into the game of buying up a lot of properties and renting them out,” Olson said. “So I just think this is probably kind of late in the cycle to have that big an impact.”

Manufactured housing provisions, multifamily developments

Experts also pointed to manufactured housing reforms as one of the most consequential parts of the new law. The legislation removes the long-standing chassis requirement in the Department of Housing and Urban Development code for manufactured homes, clarifies HUD’s authority over manufactured and modular housing standards, and increases FHA loan limits for manufactured homes.

“It really opens the door for manufactured housing to play a bigger part in the housing ecosystem,” Cassidy said.

Kilmer said manufactured and modular housing reforms could become among the law’s most impactful provisions.

“In so many markets, you can’t really tell the difference between a stick-built and a modular home,” he said. “These building system-produced homes are really quality structures.”

Kilmer also pointed to the law’s increase in FHA multifamily loan limits as a major industry win, noting that the changes better reflect today’s construction costs. “I think one of the more consequential provisions in our view is the first increase in FHA multifamily loan limits since 2003,” he said.

Cassidy agreed, saying that the changes could expand opportunities for affordable housing development.

“FHA multifamily financing is alive and well, and it’s ready to adapt to the changing market,” he said.

While some experts expressed optimism about the provisions of the ROAD Act, they cautioned that its effects will not be immediate. Cassidy said that the agencies will play a central role in translating the legislation into real-world outcomes, but that the law ultimately recognizes that increasing housing supply will be essential to improving affordability.

“You can’t subsidize your way out of a housing crisis,” Cassidy said. “You can only build your way out of it.”