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Wednesday, July 14, 2010

Try Enforcement Before Any More Regulations

This week I took two tests to fulfill the requirements of the National Mortgage Licensing System Requirements (NMLSR) for the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act, Title V of Housing and Economic Recovery Act). As I studied for the tests I realized how many different agencies, acts, regulations and oversight departments I am responsible to for the simple act of originating a mortgage. Despite the myriad of reports, licenses, disclosures, compliance audits, etc we go through, somehow we must go through even more since Congress and the Administration feel the only way to solve any problem is with more regulations and agencies (this applies to state government as well).

Here is a partial list of the Federal Laws covering the mortgage industry:

  • SAFE Secure and Fair Enforcement for Mortgage Licensing
  • Housing and Economic Recovery Act
  • TILA Truth In Lending Act
  • Regulation Z
  • RESPA Real Estate Settlement Procedures Act
  • Regulation X
  • HPA Homeowner's Protection Act
  • HOEPA Home Ownership and Equity Protection Act
  • FCRA Fair Credit Reporting Act
  • FACT Fair and Accurate Credit Transaction Act of 2003
  • Do Not Call Registry
  • Gramm-Leach-Bliley Act (aka Financial Modernization Act)
  • Fair Housing Act
  • ECOA Equal Credit Opportunity Act
  • CRA Community Reinvestment Act
  • HMDA Home Mortgage Disclosure Act
  • MDIA Mortgage Disclosure Improvement Act
  • Regulation H Flood Disaster Protection Act

We are regulated, overseen, report to or otherwise beholden to:

  • FTC
  • HUD
  • Federal Reserve Board
  • FNMA
  • FHA
  • FHFA
  • CA DRE (or CA DOC)
  • OCC

These are not complete lists but the major ones of regulations and overseers. But evidently we need more as exemplified by the financial reform bill about to be passed by Congress that will add more agencies, more acts, more regulations, plus more costs, more paperwork and fewer options for consumers.

Our government is expanding its influence and control to solve problems or issues that could be solved by following and enforcing existing regulations, or eliminating existing regulations.

Obamacare could have been cut to 10% if existing regulations were repealed to allow greater freedom for Americans to shop and purchase insurance and existing regulations enforced to reduce and eliminate fraud and waste.

The Gulf oil disaster could most likely have been averted had existing regulations and oversight been enforced and active.

The housing and credit crisis could have been mitigated and the depth of the recession shallower if existing regulations had not created an environment where Fannie Mae and Freddie Mac became subprime lenders with the encouragement and blessing of Congress. Mortgage fraud could have been reduced greatly if existing regulations had been enforced.

I am glad there is finally a national license for mortgage originators, unfortunately like most legislation targeting an industry it is half-assed and will have a net negative impact. Excluded from the licensing requirements are those who work for federally chartered depositories (Bank of America, Chase, Wells Fargo...). Essentially the bright minds in Congress and the regulatory bodies who created the SAFE legislation feel there is no fraud or deceit among mortgage originators in federally licensed institutions. Right, and they will also take your three dollar bill.

The overall purpose of the SAFE Act, combined with many of the provisions in the financial reform bill about to be passed is to eliminate independent mortgage originators. The legislation eliminates many mortgage products and options, or limits their use to direct lenders. Selfishly the legislation helps our company by eliminating competition. But elimination of competition and products does not benefit the consumer/home owner. It does benefit the major banks, of which there are becoming fewer and fewer.

Also benefiting the big banks is the Federal Reserve policy limiting the ability of small banks to lend to small businesses. In meetings this week a top Fed auditor admitted they are discouraging community banks or the seven hundred plus small banks on their "watch list" from lending to small companies as they do not want them taking on the risk. Restricting capital flow, revenue flow, credit extension hurts small businesses and communities and drives business from small banks to major banks. Eliminating competition increases costs and fees, and creates an environment where the federal government can more easily control our banking system.

And that is what all the legislation from this Congress and Administration is all about, more control. Restrict the number of companies and firms in the private sector and allow for more regulations that allow government take-over and control. Once passed it will not shock anyone to see a path towards nationalized banking, to go with our health care.

Exempt from the financial reform legislation are Fannie Mae and Freddie Mac, already in government trusteeship and majority ownership. The next step for the GSEs is to become part of HUD and fully under government control.

After financial reform President Obama wants to see "comprehensive immigration reform." "Comprehensive." That means a multi-thousand page bill that no legislator will read that dramatically alters our nation. The ultimate purpose could be the naturalization of tens of millions of illegal immigrants--future voters. The immediate impact will be more regulations that will be ignored by regulatory bodies and not enforced leading to the same issues and problems in the future.

Because of lack of enforcement of laws and regulations already on the books the current Congress and President have created issues that require "comprehensive" legislation. Comprehensive means elimination or restriction of free markets, more government control and intervention, higher fees and taxes and less freedom and liberty for consumers and business owners.

I would like to see one regulation passed: Government agencies or individuals who do not fulfill their duties and obligations of oversight, regulation and enforcement are subject to penalties and fines including restriction or forfeiture of their salaries, benefits and pensions.

Enforce the laws we have and see how many problems and issues get solved that way before imposing more laws that restrict our freedoms and liberties and increase the control and dominance of our government.

Happy Bastille Day commemorating when French citizens overthrew a tyrannical government.


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