Many changes have been introduced to the mortgage marketplace over the past few years in the wake of the legendary housing crash. Existing government regulations have been massaged and in many cases completely new ones were legislated and the private home loan industry has with a heavy hand recalibrated its approach to underwriting mortgages. The recent real estate troubles made these adjustments necessary. More of the same – or even close to the same - was just unworkable and unacceptable.
Along these lines, a new program to help government policy making and better monitoring of the ebbs and flows of the vast home loan arena is being created, with the idea that future near-total housing meltdowns like this one can be predicted and subsequently averted. It’s called the National Mortgage Database – NMD - and the FHFA – Federal Housing Finance Agency – and the CFPB – Consumer Financial Protection Bureau – are the organizations working on getting it up and running.
The database will hold information on a given mortgage from origination through servicing. As expected, it will include key data such as the home loan product and its terms, the borrower’s credit and financial profile, the purchased or refinanced property’s characteristics and then the continuing payment history of the mortgage. This information dates back to 1998 and is updated monthly.
FHFA and CFBP assemble the database by combining a national sampling of credit bureau files containing the needed information on mortgage borrowers. Proper precautions will be put in force to protect the privacy of individual consumers so that they cannot be indentified through the database by anyone, be they federal researchers, academics or the public. The early version of this huge undertaking should be done sometime during 2013.
Currently multiple federal and state agencies and private industry entities gather data on mortgages but their output usually covers just a narrow segment of the whole. This new NMD will aim at creating a comprehensive warehouse where everything considered necessary for smart policy making is under one roof. It should assist regulators in keeping a keen eye on mortgage market trends and interfere promptly when the warning light begins blinking.
That’s one thing, having the tools to initiate a proper correction. The other is that those tools are used expeditiously when appropriate financial and market-specific action appears to be needed. As storm clouds where gathering over the recent real estate collapse regulators – obviously under minimal supervision - were often probably browsing the Internet for latest sports scores – or worse - instead of debating what to do about all those red flags being waved over their heads. The rules then in the books were good enough to keep the impending housing crisis from plummeting to the depths it eventually did if they were properly enforced.
With this new vehicle the country is better prepared to successfully tackle the next mortgage excesses – and a predictable real estate downturn - so long as self-serving politics and the influences of special interests are being duly checked.