Mortgage And Banking Regulations & How It Affects Borrowers

This BLOG On Mortgage And Banking Regulations & How It Affects Borrowers Was UPDATED On April 6th, 2019

Mortgage And Banking Regulations created financial responsibility.

  • When investors tried to sell the American dream of homeownership and put the pressure on banks and lenders to change responsible regulation in order to sell more, that caused the imbalance. 
  • People who normally wouldn’t qualify were now qualifying without proof of income.
  • Mortgage lenders qualified home buyers for far more than they could actually afford.
  • Lenders put home buyers in products that they didn’t understand such as Adjustable Rate Mortgages and teaser rate mortgages
  • Also called negative amortization mortgages where the initial payment might be $1,000 per month and once the adjustment period begins, it can jump to double the original amount or more. 

Creation Of New Mortgage And Banking Regulations

These mortgage products were the initiation of the mortgage meltdown in this country where foreclosures spread like wildfire starting in early 2007.

  • The frenzy feed the vicious beast and people didn’t care because they thought the good days would never end
  • Many made money flipping homes in 6 months or less and everyone wanted in on the action until it all came to an end
  • There were areas in Chicago and other parts of the country where new construction property changed hands more than a dozen times before the end purchaser purchased it at a high premium
  • Real estate prices were appreciating double digits in most parts of the country and every vacant parcel was being developed
  • Wanna be real estate investors were purchasing any property that came on the market and tearing them down and rebuilding in hopes of selling them at double-digit profits
  • Folks who got started in the flipping game early on became instant multi-millionaires until the real estate and credit meltdown of 2007

Understanding New Mortgage And Banking Regulations

Understanding what goes on behind the scenes is a complicated web.

  • Everyone from the consumer to the government was making huge money during this time and that is why the government was so slow to make changes
  • Regulation failed and now to correct the mistakes, the government swings too hard the opposite way to correct

Overhaul Of Mortgage And Real Estate Industry

New Mortgage And Banking Regulations have been created and implemented and now all mortgage loan originators need to get licensed and undergo strict criminal and financial background checks.

  • The SAFE ACT was created and many government regulatory agencies were created to minimize fraud in the mortgage industry.

Gustan Cho NMLS 873293

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