BluefoxToday blog : Another mortgage regulatory agency in the works in Washington?

Another mortgage regulatory agency in the works in Washington?

It just might happen. Both the House and Senate presented bills in March that would set up a brand new agency responsible for keeping a keen eye on all sorts of consumer credit, including home loans. It would ensure everyday financial products would be safe for consumers to use, as a broad term. If such an outfit is created sometime down the road it would be called Financial Products Safety Commission.

It is understandable that policy makers in Washington are highly concerned about soaring mortgage delinquencies and foreclosures and sinking real estate values. The housing industry, after all, is a key player in the entire economy and when it catches the cold, or perhaps better said a life-threatening pneumonia, like now, then the economy gets very sick, too. However, to add another layer of federal regulatory oversight might not be the answer at all.

As has been argued here a few times before, the current financial industry regulatory system is simply bloated, comprising of almost a dozen agencies with varying, often over-lapping responsibilities. To put in another one would almost certainly be overkill. The present set-up failed to arrest the roaring mortgage and real estate fiascoes because of lax oversight from those who were tasked to do that. The existing regulations aren't perfect, but would've been adequate to slow down the avalanche.

One area Washington might want to look at instead is how mortgage-backed securities will be handled in the future. One of the root causes to this meltdown originated with them and their lack of meaningful regulation. It seems that to this day it still isn't fully understood how scores of them were first chopped up and then bundled for resell. Those who now hold chunks of them do know, to their utter dismay, that they are pretty much worthless. If these issues weren't as enticing to potential investors as they were made to be, they wouldn't have bought them as much. That lack of strong demand then would have slowed down the whole buying frenzy of mortgage-backed securities, and prevented the wreckage we are in now.

About the new agency. It appears that Congress does have its plate full right now with other burning issues, so its creation is in its very early stages. If it ever happens.  


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 4 commentsEsko Kiuru • April 25 2009 10:47PM


Thanks again for legislation insight Esko.  More legislation could lead to even rougher UW guideline changes which we really don't need.  I do agree about the mortgage backed securities issue, however!

It's time we start looking into fraudulent transactions and prosecuting or handing down deficiency judgments to those that participated in fraud.  Stuff is already on the books and this could stop if there were consequences.

Posted by Renée Donohue~Home Photography, Western Michigan Real Estate Photographer (Savvy Home Pix) over 10 years ago

Esko, why make the existing agencies do there jobs, when we can instead create a new agency to put our friends in cushy jobs.  Amazing, let's spend more money on more bureaucracy, instead of holding people accountable.  Thanks for the heads up on this one Esko.

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


Washington just likes to add a new agency every time there is trouble.

Posted by Esko Kiuru over 10 years ago


Exactly, make people accountable.

Posted by Esko Kiuru over 10 years ago