Eyeing Legislation's Unintended Consequences

If there was one point that a state legislator and an industry representative agreed on during a panel on state and federal regulation at the Mortgage Bankers Association, it was that any legislative solutions being crafted have to avoid unintended consequences. California State Sen. Michael Machado said there is a need to update statutes but the effort need not to be so capricious it would hurt the marketplace. Being able to meet the desires of those who live in their districts and take actions that do not exacerbate the problem is a balancing act, he said. Jack Konyk, senior vice president at National City Corp., said, "Everybody is trying to find a fair solution to a complex problem." The problem is finding out what exactly constitutes a fair approach. He then gave the example of an iceberg where it is easy to see and react to the 5% above the water, but it takes patience and perseverance to see the 95% below the water. It is easy, Mr. Konyk said, to call for a moratorium on foreclosures. But it is a difficult task for loan servicers, who are still responsible for advancing principal and interest payments to the investor whether they are made or not.