I read an article this weekend that featured commentary about proposed drastic reforms in the United States Mortgage Market. In a nutshell, Congress is talking about reforming the system in such a way as not to incent the sale of suspect loan products with confusing loan terms and higher than market rates to consumers. Specifically, the Congressional bill would directly prohibit compensation programs for Loan Officers that increase with the interest rate and terms of a loan.
Wall Street got themselves in this recent fiancial mess by incenting its folks to do just what this new proposal seeks to prohibit. With business practice(s) such as these, is it any surprise that many banks and financial institutions are in the trouble that they are in? This bill will seek to create minimum standards and guidelines for mortgages, ostensibly funding mortgages that are of the 30 year variety with rates that are what the market dictates; mortgages that require borrowers to fully document income and assets in order to prove that they can afford the loan they are getting.
Sounds like common sense to me.
I, for one, hope that this Congressional proposal has some teeth and substance. It will be good for the long term health of the financial AND Real Estate industries, and should put some much needed safeguards in place to protect financial institutions and borrowers from being sold/obtaining mortgage and loan products they really have no business being in.
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