Tuesday, September 6, 2011

Mortgage regulation - going from too hot to too cold and getting to just right

Let me relate to you a recent experience I just had. My wife and I just refinanced our home with a friendly local lender. We have a nice income, a very reasonable LTV and basically perfect credit. And being a doctor and a real estate lawyer, we know paperwork inside out. I, in particular, should.

And yet it took three months to close a simple refi. Why? Overregulation.

I understand that things were loosey-goosey a few years back. I said so. On some commercial deals I felt like we were in the Wild West. But now we have gone to the other extreme, where so many boxes had to be checked (at least half of which were not required even three years ago) that I got irate and almost killed the deal. (I will not even get into an absolutely idiotic title underwriting decision made by a certain large title company, but may do so in the future.)

And if I got angry and frustrated -- knowing more than 99% of the public about this process -- imagine the average person, with less than impeccable credit, LTVs or income. What a nightmare.

According to this story, at least six federal agencies have gotten further into the mortgage regulation act. The HUD-1, which was supposed to be made simpler, is now almost indecipherable, even for people in the industry.

So let's wake up. Regulation isn't bad per se. Too little of it is bad. But too much of it isn't good either because it stifles the economy.  Let's find a happy, rational middle ground that protects consumers without grinding markets to a halt.

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