It hasn’t become real apparent yet at the consumer level, but the lenders are increasingly under pressure to conform to the banking rules and guidance that they’ve been ducking for the last few years. Congress is considering closing the loopholes that allow mortgage lenders who aren’t banks to avoid regulatory oversight.
More of the states are stepping up their enforcement programs for appraisers and mortgage brokers, and the FBI is getting more active in investigating mortgage fraud and its components.
Taking all this in context I am reminded of the period from 1986 – 1995, which on a national scale was when we had the S&L bailout (the cost of which we’re still paying for). The lenders had been cut loose in the early-80’s, they ran up some really risky loans, and it all melted down. In response the federal government enacted some additional lending rules, regulations and criteria.
For a while the feds enforced them with some vigor and everyone involved in the process straightened up for fear of getting kicked out. It even involved a certain amount of paranoia – people tended to play it safe. When the economy started coming back the pendulum swung to the other extreme and the feds cut way back on their enforcement. This is what led us to the Wild West environment that we’ve had for the last few years.
I fully anticipate the pendulum will continue to swing towards conservative lending criteria – probably to an extreme equal in severity to the degree of anarchy that fed this last boom.
Sooner or later we’re going to have to start working on the national deficit and the costs of the war. If that comes about in the next couple years and mortgage interest rates go back over 8% this downturn could last for a lot longer than just a couple years.
