Monday, April 28, 2008

World Financial Crisis Not Enough for Mortgage Industry

After bringing the U.S. and global financial markets down to its knees, the mortgage industry is fighting tougher regulations because, if you can believe their audacity, of added paper work and greater exposure to lawsuits.

In another example of corporate socialism at work, the industry’s criticism has already bullied the Fed into possible loser standards than it thought necessary. Surely the public would be outraged at the unfair restrictions on an industry that profited from the destruction of so many lives and families now out on the street. Can’t you hear the protests now?

Over time, no one will remember the overly loose credit, abusive predatory loans, low interest rates and artificially high home values that pulled the rug out from under the American dream.

Gee, these unreasonable new rules would, according to an AP story, “force mortgage companies to show that customers can realistically afford their mortgages. It would require lenders to disclose the hidden fees often rolled into interest payments. And it would prohibit certain types of advertising considered misleading… unfairly deny mortgage brokers the right to earn certain fees…(and)lead to frivolous and expensive litigation."

Having been a real estate salesperson for seven long years, I was shocked to learn these new rules were not already the bottom line standard for the mortgage industry. And now they have the nerve to complain that these common sense regulations would over burden and keep them from “reaping enormous profits by providing millions of unsuitable and abusive loans to homeowners who often did not fully understand the terms or appreciate their risk.”

“As of January, a quarter of all sub-prime adjustable mortgages were delinquent and lenders began foreclosure proceedings on about 190,000 mortgages in the last three months of 2007.”

I think the Center for Responsible Lending said it best; “In the industry, there is a fair amount of denial. They just don’t get it. They don’t have a new script yet, so they rely on the old script, which is that regulation will raise costs. What we now see is that the unintended consequences of deregulation are worse.”

Can we finally put the “regulation will raise costs” myth to rest? Regulation instills trust, stability and consumer confidence in the market. “Regulation will raise costs” assumes the mortgage crisis didn’t already cost so many families, caught up in this mismanagement mess, everything they owned.

It’s the “invisible hand” of the market pushing us all off the cliff.

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