the line I hear from Dugan and the press is always "state agencies implementing..." My understanding is that most of the relevant state agencies are authorized to do consumer protection, not safety and soundness. Beyond the disclosure rules, how much authority would state agencies have to implement this guidance? In many cases, wouldn't it require action from state legislatures? Talk about your time consuming processes with uncertain outcomes!
Are you sure? From what I know of state governments and state regulators I'd be awfully surprised if the regulated industry allowed the regulators to have much power. And what of the states where lenders aren't licensed?
mort_fin, I don't believe that the state governments and state agencies will be quick to act. The lobbying money on the state level will tend to prevent it. A quick look at payday lending in states and gaming will show why I believe this. The unregulated lenders also have a powerful argument, which is that extending the interagency guidelines will produce a sharp drop in mortgage originations and a corresponding drop in home values.
The issue here is not the conflict between federal and state regulators, but the fact that a substantially unregulated industry is rapidly gaining market share. This is the concern that Dugan mentioned - recent trends in the industry are to increase the unregulated segments, and it is possible that the interagency guidance may only serve to accelerate that trend.
Indeed, the appetite for mortgages to securitize is so strong that we now see investment banks and other financial intermediaries acquiring mortgage originators in an effort to lock in volume for their securitization business.
If the demand for the product is that high - does it even matter if it's regulated or not?
I mean it almost sounds like they are discussing an illegal drug & the demand is from junkies. If that's the case, can any regulators stop the 'hook up'?
And where is the demand coming from? Asian CBs? Oil money? Or just garden variety domestic 'yield chasers' - anyone know???
Demand is coming from pension funds, insurance companies, banks, fixed income security mutual funds, Fannie Mae.... everybody has MBS in their portfolio.
The reason they are lowering their standards is because they know that WE the taxpayers are going to bail them out. Banks are making money today with reckless abandon, knowing they can further raid the SS Trust Fund and the taxpayer when it all implodes. Does that seem fair?
I have to take a lot of this with a major grain of salt. Banks have been whining about how nobody else is regulated as much as they are since approximately 1640. You didn't hear them bitching about unregulated or underregulated lenders when they were making huge profits downsizing or eliminating their retail lending operations in order to replace them with correspondent (buying loans from state-regulated mortgage banking operations) or wholesale (closing loans brokered by state-licensed mortgage brokers) lending operations. So now they're dependent for volume on the market participants who can walk away from them and go play with Wall Street instead. What, it just got to be news that you can't control your suppliers?
Actually, states and localities have been way busier over the last several years writing anti-predatory lending laws whilst the feds noodled around. Then the federally-regulated institutions got "federal preemption" from state regs, prompting state-regulated lenders to scream bloody murder because they had to follow predatory lending laws that the big national banks didn't. And if I remember correctly, the feces hit the fan with predatory lending laws as soon as someone proposed that liability be tied to the loan, not the originator, meaning that suddenly secondary market investors--Wall Street--could actually "buy" regulatory liability when they bought loans. Can't have that! Everybody backed off, because these laws (Georgia's was the big test case) were going to suck lending capital out of states that wanted to force investors to run the same regulatory risks as originators.
the line I hear from Dugan and the press is always "state agencies implementing..." My understanding is that most of the relevant state agencies are authorized to do consumer protection, not safety and soundness. Beyond the disclosure rules, how much authority would state agencies have to implement this guidance? In many cases, wouldn't it require action from state legislatures? Talk about your time consuming processes with uncertain outcomes!
The state agencies have regulatory powers over the state licensed lenders, no legislative action need to be taken.
But this line is kind of scary: "In so doing, it is vital that key principles of our nontraditional mortgage guidance not be watered down"
We arent out of the woods quite yet.
Are you sure? From what I know of state governments and state regulators I'd be awfully surprised if the regulated industry allowed the regulators to have much power. And what of the states where lenders aren't licensed?
mort_fin, I don't believe that the state governments and state agencies will be quick to act. The lobbying money on the state level will tend to prevent it. A quick look at payday lending in states and gaming will show why I believe this. The unregulated lenders also have a powerful argument, which is that extending the interagency guidelines will produce a sharp drop in mortgage originations and a corresponding drop in home values.
The issue here is not the conflict between federal and state regulators, but the fact that a substantially unregulated industry is rapidly gaining market share. This is the concern that Dugan mentioned - recent trends in the industry are to increase the unregulated segments, and it is possible that the interagency guidance may only serve to accelerate that trend.
Indeed, the appetite for mortgages to securitize is so strong that we now see investment banks and other financial intermediaries acquiring mortgage originators in an effort to lock in volume for their securitization business.
If the demand for the product is that high - does it even matter if it's regulated or not?
I mean it almost sounds like they are discussing an illegal drug & the demand is from junkies. If that's the case, can any regulators stop the 'hook up'?
And where is the demand coming from? Asian CBs? Oil money? Or just garden variety domestic 'yield chasers' - anyone know???
Demand is coming from pension funds, insurance companies, banks, fixed income security mutual funds, Fannie Mae.... everybody has MBS in their portfolio.
The reason they are lowering their standards is because they know that WE the taxpayers are going to bail them out. Banks are making money today with reckless abandon, knowing they can further raid the SS Trust Fund and the taxpayer when it all implodes. Does that seem fair?
I have to take a lot of this with a major grain of salt. Banks have been whining about how nobody else is regulated as much as they are since approximately 1640. You didn't hear them bitching about unregulated or underregulated lenders when they were making huge profits downsizing or eliminating their retail lending operations in order to replace them with correspondent (buying loans from state-regulated mortgage banking operations) or wholesale (closing loans brokered by state-licensed mortgage brokers) lending operations. So now they're dependent for volume on the market participants who can walk away from them and go play with Wall Street instead. What, it just got to be news that you can't control your suppliers?
Actually, states and localities have been way busier over the last several years writing anti-predatory lending laws whilst the feds noodled around. Then the federally-regulated institutions got "federal preemption" from state regs, prompting state-regulated lenders to scream bloody murder because they had to follow predatory lending laws that the big national banks didn't. And if I remember correctly, the feces hit the fan with predatory lending laws as soon as someone proposed that liability be tied to the loan, not the originator, meaning that suddenly secondary market investors--Wall Street--could actually "buy" regulatory liability when they bought loans. Can't have that! Everybody backed off, because these laws (Georgia's was the big test case) were going to suck lending capital out of states that wanted to force investors to run the same regulatory risks as originators.