Mortgage Market Could Evolve Fast Due To Regulatory Change

Our new president could implement regulatory change in the mortgage industry

Mortgage Market Could Evolve Fast Due To Regulatory Change
November 15, 2016

With the election outcome now known and Donald Trump named as the next U.S. President, the mortgage sector is likely to see many changes in the coming months and years. Aside from the likely rate changes, alterations to existing regulation could affect credit availability, the housing recovery, and the levels of risk lenders are willing to accept.

There are questions on whether the new administration will start a more bank-friendly regulatory environment. This will depend on potential rollbacks of the market's Dodd-Frank Wall Street Reform and Consumer Protection Act. Suggesting that changes are coming, President Trump said in a recent interview, "We have to get rid of [Dodd-Frank] or make it smaller."

Dodd-Frank resulted in mortgage safeguards, including the need for lenders to vet applicants to ensure they could afford home loan repayments. Riskier mortgages have become far harder to find as a result. While many may believe that loosening the market could help mortgage applicants find credit, it could bring risks of foreclosure. Also, banks have become used to risk aversion - institutions often target only those applying for loans over $424,100 and the most creditworthy applicants.

For big lenders, the arrival of a new attorney general will impact how they approach legal risks, because many have stopped making loans with Federal Housing Administration insurance over fears of penalties for defaulted mortgages. According to Mortgage Bankers Association president and chief executive David Stevens, an attorney general seen as "more reasonable" would have a positive impact on the market.

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Brian | 11.17.16 @ 17:30
There will always be mortgage fraud both by consumers and the lenders themselves. The instances of fraud and the resultant enforcement appears to be cyclical. No matter who the next AG is, lenders will likely do better in a Republican environment. Ultimately there will be another meltdown followed by more regulation and enforcement. Insiders with inside information about misconduct by lenders are eligible for whistleblower awards if the misconduct impacts the FHA, Fannie or Freddie. Those insiders can earn awards of up to 30% of whatever the government collects from the wrongdoers. The law that authorized those whistleblower awards is the federal False Claims Act. Our lending industry whistleblowers have already received $100 million in awards and there will likely be many more no matter which party controls Congress and the White House.
$commenter.renderDisplayableName() | 11.29.20 @ 16:19