Speaking recently at an Urban Institute seminar on mortgage servicing, Housing Finance Policy Center Director Laurie Goodman said that the current “broken” state of mortgage servicing regulations is partly to blame for the current tight lending environment.
Karan Kaul, a research associate at the Urban Institute, recapped Goodman’s remarks in a blog post on the Urban Institute’s website.
Goodman’s position, which has been documented in the past by HousingWire, is that credit is too tight and needs to be loosened.
From Kaul’s Urban Institute blog:
According to Laurie Goodman, director of HFPC, two factors – the excessively high cost of servicing non-performing mortgages and regulatory uncertainty regarding the treatment of delinquent borrowers – have made lenders extremely wary of making loans that have even a slight chance of defaulting. Other factors such as long foreclosure delays in judicial states, onerous and arcane foreclosure guidelines, and at times, contradictory servicing requirements across regulators have only compounded the access-to-credit problem further.
Earlier Tuesday, the Mortgage Bankers Association said in its new Credit Availability Index that mortgage credit availability actually rose in April by 0.5% to 122.0. The index also rose in March, climbing 2.3% to 121.4.
Kaul goes on to say that mortgage servicing regulation is a balancing act. “A regulatory regime that is inconsistent, overly prescriptive and poorly targeted also creates uncertainty and drives lenders away from those market segments that are affected most by that uncertainty – in this case low-income and less creditworthy borrowers,” Kaul writes.
Kaul adds that the recent government push to loosen the credit box by lowering Federal Housing Administration insurance premiums, adjusting the guarantee-fees charged by the GSEs, and permitting the GSEs to finance loans with 97% loan-to-value ratio are “meaningful” steps.
But Kaul said that the effects that servicing can have on mortgage credit availability are “significant.”
Again from Kaul’s blog:
It is high time regulators intensify their efforts to strike the right balance with respect to servicer regulation and servicing compensation.