I have commented here before that government policy was largely responsible for the subprime mortgage meltdown and its aftermath throughout the housing sector and the U.S. economy generally.
The saga continues: I got a chuckle recently about a new federal regulation requiring mortgage lenders to confirm borrowers’ ability to repay their loans. Seems pretty reasonable, huh? That’s what lenders always did, and what underwriters still want to do, what they get paid for. But when the mortgage industry was mandated to make mortgage loans more widely available, and when the secondary markets for mortgage loans began buying those more risky loans, the result was predictable. All the reward with none of the risk? Make the loan!
To compensate for past sins, the Dodd-Frank Act purported to create new-found sanity among lenders, and created the Consumer Financial Protection Board (CFPB) to create and enforce rules toward that end. As it happens the director of the CFPB was a “recess appointment” simultaneous with those at the National Labor Relations Board that recently lost their own test in court.
Against that backdrop, foreclosure specialist RealtyTrac published this viewpoint yesterday:
It’s an interesting question. I don’t know anybody in the mortgage business with praise for Dodd-Frank or the CFPB. They have processed and implemented hundreds of “significant” new rules, and more were just approved. But it is true that markets abhor uncertainty. What if the result of all that time and effort and change is a court-ordered “Never mind!“?
I won’t attempt to answer that for now. An ancient proverb comes to mind, though: “May you live in interesting times.”