I can’t say that I’ve had a great deal of experience working with petri dishes or examining things under a microscope in my lifetime. And yet, if you were to ask many in the lending profession now the sensation would seem vaguely familiar albeit with a twist – we’re the ones underneath the microscope. I guess this is what happens when your industry is blamed for driving the economy off a cliff into a fiery river of lava.
Since 2008 we’ve seen regulations passed that forbid Loan Officers being involved with the appraisal ordering process. We’ve seen requirements enacted limiting how much terms can change at the time of closing and a “cooling off” period when limits are exceeded. We also now have tolerances for differences between initial and final fees. Recently anti-steering rules were imposed along with changes to how Loan Officers are compensated. All the while, investors and agencies have tightened their guidelines and imposed stricter credit standards. The mad regulation scientists are partying like they are in a Far Side cartoon replete with white lab coats and crazy goatees.
If Rip Van Winkle were a Loan Officer and fell asleep in 2007, were he to awaken today he would be completely lost. The landscape of the mortgage lending world has changed so much that few would recognize it today compared with its heyday of just four to five years ago. Whoever is looking down on us from their microscope high above must be smacking their lips and wondering what experiment to try next.
My suggestion as of today’s date is to give us critters in the petri dish some time to adjust before subjecting us to a whole bunch of new changes and experiments. I understand that there is no shortage of mad scientists all with a host of ideas of how to have fun with the subjects of their study. But enough already. Give the changes some time to have an effect. The circumstances that caused so much havoc in the first place didn’t happen overnight. Regulatory changes won’t be effective overnight either.
Overall, I’d say that most of the changes enacted have been necessary. The implementation may have been awkward and the guidance confusing but overall the motivation has made sense. Refinement and enforcement will be logical conclusions and should be the focus from this point forward.
If we’re lucky, the scientists will realize that time is the missing ingredient not more experiments. Adding more ingredients is more likely to cause harm than to cure.