Home Front

A blog about the economy and the Sacramento-area real estate market.

April 8, 2008
The high-stakes politics of mortgage banking

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These are times to test the fortitude of mortgage bankers. Their loans are going bad, the financial system is scared to death to let them make more and the knives are out in Congress and state capitals.
Lawmakers everywhere are dreaming up a thousand new ways to increase regulations and tighten the grip on their business.

I just had a short interview with Dustin Hobbs, spokesman for the California Mortgage Bankers Association. The Capitol is awash in bills and amendments to those bills to change the landscape of mortgage lending.

There are bills to make them try harder to avoid foreclosing on their borrowers and bills to ban them from steering borrowers to loans that get bigger instead of smaller. The bills, as their supporters say, are about bringing back common sense to lending and restoring accountability for bad loans throughout the global financial system.

As always in politics, no one is opposed to that. It is the details that worry mortgage bankers. In a nutshell, they are arguing that too much regulation can make the current credit crunch even worse by making the investors even more reluctant to provide capital.

Hobbs argues that this could make it even harder for people to get home loans and prolong the housing slump.

There are counter views to that, of course, and all sides are aggressively working your California lawmakers beneath the Capitol dome. I am hoping to go a little further into this in the Friday Home Front column this week.

In the meantime, Hobbs offers a look at what the industry is thinking in this video:

Capitol photo courtesy of wedrivecalifornia.com

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