Regulations Expected to Squeeze Industry and Consumers

Regulations Expected to Squeeze Industry and Consumers

09/12/2013 BY: HUGH MOORE

Everyone agrees: The mortgage industry is about to become more expensive and more restrictive for lenders and borrowers.

In the wake of the Dodd-Frank Wall Street Reform and Consumer Protection Act, government regulations are poised to price a significant portion of the home finance industry and the homebuying public out of the market.

During a day-long symposium at the 10th Annual Five Star Conference and Expo this week, a number of expert panelists shared their visions of what the future might look like for an innovative industry that wants to remain profitable while beleaguered by difficult times.

The keynote address of the day-long Compliance Caucus featured Congressman Barney Frank—former chairman of the House Financial Services Committee and co-author of much of the new regulatory legislation.

Congressman Frank insisted that the American economy is sometimes faced with circumstances that—because they are unprecedented—require robust government intervention in order to provide for the broader, common welfare.

“It is not the job of the government on the whole to tell the private sector what degree of risk they should take,” Congressman Frank said. “In our economy, the private sector innovates, and that’s a very good thing.”

The problem, according to Congressman Frank, was that too many non-bank entities were in the securitized mortgage business, and they weren’t subject to rigorous capital requirements. “Essentially what we tried to do was make the people who were lending money responsible for the risk they took,” he said in explaining the logic behind Dodd-Frank.

However, mortgage and housing experts note that the resulting requirements present costly challenges to the industry.

Jack Konyk, executive director of government affairs for D.C.-based Weiner Brodsky Kider, moderated the Audit Solutions and Strategies discussion at the Compliance Caucus, and he says compliance will price many smaller servicers out of business.

“People always talk about ‘too big to fail,’” Konyk said. “My biggest fear is ‘too small to comply.’”


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