The Fed and the Mortgage Mess
The Federal Reserve is about to release new mortgage rules for an industry that is a total mess. The regulators are caught between a rock and a hard place when it comes to these new rules. Lenders say some of their proposals will cause further problems as lenders will tighten their credit issued and consumer groups complain that the "risky" lending will just continue because of the loopholes in what the fed is proposing to do.
Everyone is in agreement that lenders became to loose with credit from 2000-2006. In 2007 the industry experience a rapid tightening of credit and standards which has caused significant problems to the US economy. Finding a "happy" medium is essential with new regulation becuase if the standards are too tight, we could see another significant leg down in the housing mess.
To get peopl to buy, people need access to loans. The Fed hopes to ensure the new regulations do not in anyway prevent qualified people from getting a home loan. People in California know all to well how bad this mess is and tighter regulation could make it worse.
"The question is which way will the Fed head?" said Kurt Eggert, law professor at the Chapman University School of Law and former Fed Consumer Advisory Council member. "That's what we're all waiting to see."
So there is still a possibilty that the Fed does not introduce new regulation to curtail responsible lending.
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