Are Changes Coming to Mortgage Regulations?
June 17, 2009 by Miranda Marquit
Filed under Finance
The big news today is that President Barack Obama is proposing sweeping changes to the regulatory system that oversees our financial products and services industry. In addition to expanding the scope of some of 
the Federal Reserve’s powers to regulate large firms, Obama suggests that a consumer protection agency be created. One of the issues that such a consumer protection agency will oversee is that of home mortgage loans .
The main idea is to have mortgage lenders first offer traditional mortgages to borrowers, and help them find the mortgage that would best fit their situations . The Wall Street Journal offers this information on what could happen in terms of new mortgage regulations under a new system of oversight :
Mortgage brokers also could be charged with new duties, such as presenting homeowners with the best available mortgage loans and ensuring consumers can afford the mortgages . And the new agency could ban certain practices like prepayment fees or “yield spread premiums,” blamed for incentivizing brokers to steer borrowers to costly loans.
Any new requirements would be applied uniformly to all lenders in the industry , including banks, nonbanks and mortgage brokers. And the states would have the power to offer tougher rules than the federal agency.
This news comes on the heels of efforts by some in the Senate to pass a new $15,000 home buyer tax credit to be available to anyone buying a home. The housing market is a hot topic right now, and it is considered Very Important that matters in the housing and mortgage market stabilize, and that home buyers start buying homes again. A new tax credit would do that (in the short term, at least). And if new mortgage regulations actually pass, it may result in home buyers actually being able to keep their homes later on down the road.
Image source: Sean O’Flaherty via Wikimedia Commons
Instead of creating more bloated bureaucracies that will add to the ranks of our ineffective regulators, the best thing that could happen is for the consumer to become knowledgeable and responsible for their own financial well-being. Do we really need Big-Brother telling us what is in our best interests? Are we not capable of being the CEO of ourselves and our finances? Maybe our grandparents were onto something doing business in cash only…. less temptation to do stupid things, and dollar bills are more real than plastic.
I think that we will see a lot of states following IL in that there will be a mandatory arms length between loan agents and appraisers. One of the greatest areas of fraud is false valuation. Given that home prices have moved either up or down so drastically over the past 5 yrs, its harder than ever to track. So the best way is to keep the appraisers as far away from influence as possible.
You’ll also see a lot more states loan officers to take a mandatory test before giving them their license.
If you are curious as to what the laws look like in your state – I found this list the other day- pretty helpful:
http://www.bankapedia.com/mortgage-encyclopedia/state-mortgage-laws
I like the idea of a distance between appraisers and loan officers. You are right that one of the biggest problems leading up to the mortgage crisis was, in fact, valuation. An appraiser would have to give a certain value — or risk losing business from the lender.