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Trump reverses cuts to mortgage fees moments after taking office

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WASHINGTON (CNN) — The Trump administration’s decision to reverse a mortgage-fee cut intended to help low-income borrowers shouldn’t have been a surprise.

It’s a policy, implemented in the final days of the Obama administration, that runs afoul of conservative orthodoxy. Trump’s selection to run the Housing and Urban Development Department, Ben Carson, said he was disappointed in the move during his confirmation hearing. What’s more, it was a decision, announced by Obama’s HUD Secretary Julian Castro, which was made without consulting Trump’s team first, according to two people familiar with the matter.

But the speed with which it occurred — less than an hour after Trump took the oath of office last week — surprised even plugged-in lobbyists, congressional staffers and housing officials, according to a series of interviews with stakeholders by CNN.

“Had no idea,” said one lobbyist with a laugh. “None.”

“Wasn’t expecting it — and have absolutely no insight into how it all happened,” said another.

“Knew it was coming eventually, but damn,” mused a congressional staffer. “That was quick.”

Carson hasn’t been confirmed yet. Trump still hasn’t even named his own Federal Housing Administration commissioner — the individual responsible for overseeing the portfolio the fees effect. Most interviewed were perplexed as to who at the agency actually had the power to pull the trigger on something like this.

The content of the Trump administration’s decision to reverse the decision, at least according to Democrats, was even more problematic. The cut itself is designed to ease the home buying process for first time and low-income homebuyers. It was a decision made amid intense pressure from advocacy groups, according to two people familiar with the process — one final effort by the administration to bolster that specific group of borrowers on Obama’s way out the door.

The Trump team’s move, especially so quickly after inauguration, infuriated Democrats.

“It took only an hour after his positive words on the inaugural platform for his actions to ring hollow,” Senate Minority Leader Chuck Schumer said on the Senate floor just a few hours later. “One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages.”

Sen. Sherrod Brown, the top Democrat on the Banking Committee, tweeted shortly after: “Making it more expensive for Americans to buy their first homes is not the way to make Washington work for people.”

But Trump’s team, in part out of necessity, and in part, according to sources, to make a point to the departing team at the organization, was prepared to pull the trigger on the shift as soon as Trump placed his hand on the two bibles he used for his swearing in.

The primary reason the action was taken immediately was simple, according to multiple people familiar with the process: because it could be done immediately. Unlike most federal rule changes, HUD can operate not only unilaterally on the decision, but without going through traditional rule-making process of doing things like placing the change in the Federal Register for review. A simple letter informing stake holders is all it took to take the action. No official rule-making. No executive orders. Just a letter.

It was also done for marketplace reasons. The cut was supposed to take effect on January 27. If the decision was going to be made, better to make it before lenders started utilizing the cut than after.

“They did it this way so, quite frankly, all the lenders brokers and machinery didn’t bake the wrong premiums into the cake,” said Douglas Holtz-Eakin, the former chief economist of President George W. Bush’s Council of Economic advisers and then director of the Congressional Budget Office. “This is the efficient way to get it fixed as opposed to put it into effect” and having lenders have to backtrack later.

The move was also deliberately telegraphed in advance, according to one official who worked on the process.

Two GOP senators made a point of asking Carson questions about the issue during his confirmation hearing — an effort to lay the groundwork for the eventual move, the official said.

Republicans had made no secret of their disdain for the Obama administration’s decision. The reasons are two-fold: The cut reduces the government’s cushion backing the mortgages. By targeting lower-income borrowers, it also makes the makeup of the risk pool worse. Even lobbyists whose members would benefit from the cut knew where things were headed under Trump.

“It was relatively clear where a lot of Republicans in Congress stood,” one told CNN.

Trump’s landing teams, which had arrived at HUD weeks ago, had targeted the reversal early on the process, a person familiar with the process said.

Apart from the logistical and policy reasons, another was general frustration with Obama’s decision to make the cut at all. Obama’s team hadn’t consulted with Trump’s before making the move — or even told them it was coming, the person said. Carson hinted at that frustration during his confirmation hearing.

“I was surprised to see something of this nature done on the way out the door,” he told lawmakers.

As to who actually did it?

Genger Charles, HUD’s general deputy assistant secretary for Housing, signed the letter and is one of the agency’s staffers the Trump administration has asked to stay on for at least the near term. Widely respected internally, Charles sent the letter because of her position at the agency. The decision itself was made by Trump’s incoming team explicitly, even as where many will end up is still largely unknown or still in the works.

Still, as one put it bluntly (and accurately): “We’re in charge now.”