If there’s one issue in all of finance that sorely needs some sorting out, it’s mortgage regulation and compliance. Dodd-Frank, TILA-RESPA reform, risk retention, servicing agreements and consent orders, qualified residential mortgages, Basel III, there are seemingly dozens of new laws and regulations mortgage lenders must comply with.
It seems as if the government has painted a big red bull’s-eye on the back of the mortgage industry, as penance for its part in the big real estate and loan bubble that blew up in 2008, sending the national economy into recession.
Many think that while some extra vigilance is needed to prevent a repetition of the mortgage boom and bust, the government is overreacting, going from virtually no vigilance to a current hyper-vigilance that is hampering lenders and constraining markets.
The zero-down mortgages of five years ago are being replaced with QRMs that are looking for 20% downpayments. How many borrowers can afford to put 20% down?
It is questions like this that make the upcoming SourceMedia Mortgage Regulatory Conference indispensable for everybody in the business. The conference will be held in Washington Sept. 19-20 and we are set to chair.
There has to be a balance between reasonable re-regulation of the mortgage industry, to ensure there is no repeat of the debacle of the last decade, and supporting a business environment that allows consumers reasonable access to capital and companies reasonable access to profitability.
Housing is a key driver of economic prosperity, and it is no coincidence that an anemic recovery from the Great Recession has been accomplished during a time of doldrums for the housing industry. That being said, the first-quarter volume of $325 billion came in slightly higher than projected. Some sources have predicted that 2011 will see less than $1 trillion in mortgages for the first time in more than a decade. That run rate would translate to a little more healthy $1.3 trillion.
But housing sales are bleak, mortgage layoffs have re-accelerated, and mortgage regulation makes it harder for even qualified borrowers to get mortgages. Only the continuance of an extraordinarily low set of interest rates has kept the mortgage industry from collapsing.
From every past recession in recent memory, though, one fact stands out—once the housing industry starts cooking again, the general economy follows suit. There’s no sign of that formidable one-two punch yet, and 2012 is looking bearish, as well.
