Bureaucrats do away with mortgage underwriting standards, risking new meltdown

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  • 09/21/2022

Last week, six regulatory agencies tasked by the Dodd-Frank Act with developing a prime mortgage bowed to political pressure from all the interests—the realtors, homebuilders, banks, community activists, and the Obama Administration—and adopted a rule that completely did away with any serious underwriting standards for mortgages. It’s almost unbelievable that, six years after the mortgage meltdown and the
financial crisis, the government is going back to the same lenient mortgage standards that were responsible for the crisis. The final rule—published simultaneously by the Fed, the FDIC, the SEC, the Office of the Comptroller of the Currency, the Federal Housing Finance Agency, and HUD—succinctly made clear that what they were interested in was not a stable market but making sure that low income and minority borrowers could get loans. In a 527 page rule, here is the key point: “The agencies are concerned about the prospect of imposing potential additional constraints on mortgage credit availability at this time, especially as such constraints might disproportionately affect [low and moderate income], minority, or first-time homebuyers…”

Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute.

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