CFPB leaves GSE questions unanswered
The Consumer Financial Protection Bureau's new mortgage rules have ignited lots of debate.
One view is that the new rules will crimp mortgage lending at least in the short term. One could argue that a net decline in lending is a good thing if it will end the once-rife practice of giving anyone a loan regardless of the loan quality or the debtor's ability to repay. Overt time, these rules should lead to much higher quality loans and much more safety from legal liability for lenders that make qualified loan.
Either way, the conditions for a lasting, healthy recovery in the housing sector are slowly materializing. But there is still work to be done.
Bloomberg reports that, "Other pieces must fall into place, including finalizing -- and harmonizing -- a rule detailing which types of mortgages will be exempt from a requirement that lenders retain a 5 percent financial stake in loans that are packaged into securities and sold. Capital levels for banks must also be firmed up so companies can determine how much they can safely lend. Most important, the U.S. must outline its plans for Fannie Mae and Freddie Mac, which own or guarantee about 84 percent of mortgages, including whether the U.S. will continue to offer a mortgage guarantee at all."
At this point, it would appear that the industry and the government are willing to live with Fannie and Freddie in their current states, that is, as government-owned entities. It seems clear at this point that the GSE reform push has stalled. It may be that we can't get a quick recovery without them, so the status quo is likely to exist for some time.
- here's the article
New CFPB mortgage rules may prevent future bubbles