Panel Cautions Against Federal Mortgage Regs

The Shadow Financial Regulatory Committee has cautioned against federal intervention in the mortgage markets other than requiring "vastly simplified disclosures," arguing that market solutions to the subprime crisis are already under way.The committee, a panel sponsored by the Washington-based American Enterprise Institute, said subprime lenders with inadequate underwriting standards are already being forced to exit the industry. "If allowed to run their course, these market solutions will, on average, penalize unwise and careless lenders more severely than they will punish conscientious but delinquent borrowers," the committee says in its Statement No. 245, Subprime Mortgage Lending Remedies and Concerns. ".... Putting the mortgage-lending and mortgage-backed securities industries through these disciplines is the fairest and most efficient way to insure that subprime and other mortgage lenders upgrade and rationalize their underwriting activities in the future." Any assistance to borrowers in deteriorating local housing markets should be funded locally, and the "only reform that merits attention" is a regulatory requirement of "vastly simplified disclosures to borrowers on their applications," the panel says. It can be found online at http://www.aei.org/research/shadow.