BluefoxToday blog : Mortgage industry reform plans skirting the real issues

Mortgage industry reform plans skirting the real issues

There is no question that the home loan industry needs a fresh look and some adjustments have to be made to prevent in the future what just happened to it. Easy underwriting requirements were part of the reason the real estate market ultimately tanked and dragged the entire economy into a filthy gutter. But those, the underwriting criteria, really were poor business decisions and can't be regulated.

Anyway, Congress is working on all sorts of angles now to find the right reform solutions. The House just introduced an act that has a long name and lots of ideas, some reasonable and some less so, on how to restructure the whole thing. One of them goes deep into loan officer compensation, how it played a significant role in the meltdown and that it needs urgent revision. To see this issue command such a prominent role in all of this is beyond belief. It truly prompts the reader to go over it a few more times to make sure he got it right. A real head-scratcher.

There are actually several directions the reform effort should take to arrive at more meaningful improvements than leaning on mortgage broker commission setup. One of them is to overhaul the entire financial industry regulatory regimen. Currently there must be close to a dozen or so government agencies that are tasked with keeping an eye on what's going on. Their functions often overlap, there are nasty rivalries and coordination between them is less than what it ought to be. To make the system more efficient, all its work should be gathered under one or two roofs.

That's one thing. If the present regulatory system had functioned halfway as mandated this mess would be much less severe. The current laws probably are somewhat outdated but had they been enforced properly mortgage foreclosure rates wouldn't be anywhere near where they are now. So, where was the oversight of the Fed, SEC etc? The executive and legislative oversight?

It really appears that Wall Street is writing much of the new plan, laying blame on everyone else but themselves. And using the chaotic situation to further its own agenda.   



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 20 commentsEsko Kiuru • April 07 2009 08:24PM


Hi Esko. I hope in adding new regulations back into the system they don't make them too strict, but just strike the balance of what we need to give out good loans to qualified borrowers.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 10 years ago

Just look back to the '30s when the gommitt regulated the financial industry into stagnation then had to come up with programs to help get around the regulations so folks could get loans to purchase homes.  And so it goes and will continue to be.

Posted by Ross Westerman over 10 years ago

Esko, they create more agencies that they know what to do with and then wonder why nothing gets done, except more salaries for more staffs.

I just hope they do not over reacted like they have done with everything else so far.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 10 years ago

Esko - Much of the problems were due as you stated to lax oversight, Hopefully the pendulum does not swing to far in the opposite direction to "overcompensate" for the past.

Posted by Claude Cross, Charlotte NC Homes For Sale (Homes By Cross, Inc. ) over 10 years ago

Hi Esko,

I wonder if a new law forbidding congress to make any new laws for 12 months and send them home would help.....

I was being facetious, but it seems like congress just makes things worse and should just leave the markets alone to sort themselves out.

Posted by Roger Howell, We do business the Fair way! (Fairway Independent Mortgage Corporation NMLS #2289) over 10 years ago

I'm worried that it os only going to get much worse before things get any better... I hope I'm wrong.

Posted by Roland Woodworth, Q Realty - Power In Real Estate (Q Realty) over 10 years ago

Yep, Congress is going to punish the little guy and let the financial industry off free.  All of this could have been avoided.  There is a part of me that is beginning to buy into the theory that this is all planned to force a global currency. 

Posted by Kate Bourland, Onlilne Marketing Mobile Marketing (Marketing with Kate) over 10 years ago

Hi Esko -- You make some good points.  I think there is plenty of blame to go along, but then again America is just one big science experiment and more data needs to be collected and more studies done to analyze things <just kidding.>

Posted by Chris Olsen, Broker Owner Cleveland Ohio Real Estate (Olsen Ziegler Realty) over 10 years ago

Esko: Thanks for the post. I appreciate your insights. I agree with you. The new legislation seems to be written favoring the people who got us in this mess in the first place. I was meeting with an attorney this morning and he stated the easiest solution would be for the lenders to rewrite all the bad loans out there rather than foreclosing on someone's property. I realize that's only a start but there are alot of "make sense" ideas out there that could be implemented. Thanks again!

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) over 10 years ago

SEC Regulations are definitely antiquated.  

Also, what about corruption in Congressional Banking oversight?   Look no further than the Head of the Senate Banking Committe:  Christopher Dodd.

He had a sweetheart deal with Countrywide for his own personal residence and let Banking executives make out with millions of dollars in bailout compensation.

Posted by Tyler over 10 years ago


Some tightening is needed, obviously, but, yes, a healthy balance is essential.

Posted by Esko Kiuru over 10 years ago


Hopefully they have learned from the past mistakes.

Posted by Esko Kiuru over 10 years ago


Bringing the regulatory function under one, maybe two, roofs is urgently needed.

Posted by Esko Kiuru over 10 years ago


Overreaction is always a danger, hopefully it won't happen now.

Posted by Esko Kiuru over 10 years ago


Sometimes you wonder what's going on up there on Capitol Hill.

Posted by Esko Kiuru over 10 years ago


The dark clouds ares still around but let's stay optimistic.

Posted by Esko Kiuru over 10 years ago


Looks like the real culprits are trying to pull a Houdini on the rest of us.

Posted by Esko Kiuru over 10 years ago


Just hate to see a group's compensation regimen being so prominently scrutinized as a major problem.

Posted by Esko Kiuru over 10 years ago


Hopefully some of these ideas will be considered by those on Capitol Hill.

Posted by Esko Kiuru over 10 years ago


Some of those guys out there are way too cozy with Wall Street.

Posted by Esko Kiuru over 10 years ago