My New Blog

The National Association of Realtors (NAR) believes more needs to be done to stop abusive / deceptive lending practices, as it has eroded the public’s confidence in institutional lenders.

Specifically, they want the Federal Reserve Board to institute the following major changes:

* Eliminate prepayment penalties

* Mandate escrow reserves (taxes / insurance) for sub-prime borrowers

* Allow use of “No Documentation” or “Low Doc” loans sparingly

* Allow lenders to have flexibility for life circumstances

I have my own thoughts on this subject.

First, I believe that by taking enforcement action against lenders who have violated the laws already on the books, we will see less of the mess that’s been occurring over the last 4-5 years. Adding new regulations which also won’t be enforced is a great political move, but accomplishes nothing.

Second, I believe by requiring mortgage brokers / bankers, etc. to have the same fiduciary duties that are required of real estate agents, would have a chilling affect on those predatory lenders who realize that at this point, they can operate without penalty. By giving them a legal duty to represent the borrower’s best interests, should have a positive impact, although it certainly won’t solve the problem as is evidenced by the continued gross negligence by agents across the country. Again, only when severe consequences are experienced will certain lenders get the point

And finally, I would hate to see a government bailout of the lenders who willingly took risks that they should not have taken.  This only encourages the type of wild and loose behavior that caused the sub-prime mess we're now experiencing.  I say let the chips fall where they may and those institutions that don't survive will re-emerge later with much smarter business practices. 

What do you think?