One chief reason mortgage application volume is slowing and home prices have yet to recover is regulatory “overreaction” in the wake of the housing bust, according to former Federal Home Loan Bank president Alex Pollock.
The former Chicago banker/regulator noted that regulatory overreaction is natural after a housing meltdown, but such behavior is making it "much more difficult" for consumers to obtain a mortgage.
Speaking at a House Budget Committee hearing Thursday morning, Pollock said, "Lenders are terrified with the increased legal/regulatory risks," he said.
Even borrowers with good credit are put through the "most outrageous process" to get a loan, he said. "When credit is tied up this way, it makes it harder for anyone to buy a house," he testified.
This regulatory clamp-down happens cycle after cycle, he told the committee, and it "makes a recovery from the bust more difficult."
The former GSE official is a resident fellow at the American Enterprise Institute, a conservative think tank. As FHLB Chicago president, he created the ‘mortgage partnership finance’ program, which allowed the bank to compete directly against Fannie Mae and Freddie Mac.
