BluefoxToday blog : Mortgage industry regulation overload

Mortgage industry regulation overload

The residential real estate market is still in a state of upheaval in many regions of the country. Overbuilding, investor speculation and lax mortgage lending standards are mentioned as some of the key reasons to the contraction. In many respects, however, it's merely a market economy at work which has its periodic ups and downs. With proper government controls these turbulent periods can be softened, but not eliminated. Yet, the blame game is in full force from coast to coast and the home loan sector, for one, was caught in the cross-hairs of many regulators who are now busy rewriting its rules.

Is it necessary? Maybe, but maybe not.

In the present state of affairs the lending industry is regulated by a host of governmental agencies, including the Federal Reserve, Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), Federal Deposit Insurance Corporation (FDIC) and the Conference of State Bank Supervisors (CSBS). There are others, but the picture is clear that the field is quite crowded. Whether it has evolved to this by design or not is irrelevant.

With that many participants it is inevitable that some enforcement functions are overlapping and causing either duplication of the enforcement effort or none at all because the other agency is supposed to cover it. It's typical for rivalries to develop between entities that frequently leads to withholding of information and sometimes misleading data to be disseminated to gain favorable publicity and additional congressional funding. Sharing information is mandatory for this complex setup to work properly and the more departments, the more difficult it gets.

For truly effective oversight, the mortgage regulatory body should be under one roof. To get there from where it is now would be a massive task, but it certainly would help smooth out severe market downturns like this.

Moreover, the existing laws governing mortgage lending are by no means ideal, but they are functional and with periodic adjustments serve the consumer and the financial industry relatively well. It appears that the past enforcement of the regulations was more or less casual. When the barn door was only open a foot or two a few years ago, the regulators chose to ignore what was bound to happen. As the doors were flung wide open and the cows were all out, they jumped into action and quickly realized it was too late. That's where we are today.

Perhaps the elected officials and the federal government should look at themselves in seeking solutions to the current predicament. Debating new laws now and enacting them will offer some short-term answers, but will predictably lead to another mess down the road. A more comprehensive solution ought to be on the drawing board.


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 6 commentsEsko Kiuru • December 21 2007 01:14PM


I agree with you Esko. I have clients asking me questions about mortgages that I used to be able to answer but with all the changes I send them directly to my lender.
Posted by Steve Glose, TRC, CIPS, 407-616-7286, Orlando Real Estate, Orla (Keller Williams Classic Group) almost 11 years ago
We will recover much quicker without additional regulation.  Supply and demand and free enterprise work just fine if you leave it alone.
Posted by Chris Pollinger, Consulting for Luxury Teams and Brokerages (Berman & Pollinger, LLC.) almost 11 years ago


The industry is changing almost daily. Originators even find it hard to keep up with.

Posted by Esko Kiuru almost 11 years ago


Washington is overreaching and likely to confuse the issue even further.

Posted by Esko Kiuru almost 11 years ago
Esko, I agree, to many cooks in the kitchen.  But I would also say that there needs to me a high standard set for Loan Officers, and it should begin with licensing. 
Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) almost 11 years ago


Federal licensing requirement is a good thing for the industry.

Posted by Esko Kiuru almost 11 years ago