Thoughts on the new mortgage regs

Well, we finally got the new mortgage regulations/guidelines from the major federal banking regulatory agencies (Fed, OCC, etc.). My general sense after reading through page upon page of government-ese is that the regs don't change much. There's a lot of guidance and tough talk about excessive risk-taking in the lending arena. The agencies make clear they're not happy with how lenders are doling out interest only loans and option ARMs to anyone with a pulse. And they're worried that borrowers are going to suffer a massive bout of payment shock -- that's when the initial, artificially suppressed payment on an IO, ARM, or option ARM loan resets to a higher one in order to force the borrower to start paying back principal.

But it's not like any type of loan was banned. And while more pre-closing disclosure documents warning about the risk of these "Frankenstein Financing" mortgages is nice, customers are already bombarded with page after page of disclosures when they take out a loan. Are they really going to benefit from being given even MORE?

Lastly, there's the timing issue. Everyone who follows this industry, as I do, has known for a long time that too much high-risk, B.S. lending was going on. Fraud? Rampant. Outright lying about income, assets, owner occupancy status? It's everywhere. Why is it NOW, a full year after the housing market peaked (I put that at July 2005), that we're seeing the regulators step it up? I'm not really surprised, just disappointed ... because it's too late to prevent a lot of ruined lives.

Anywhere, here's an AP story covering the regulations.