Obama Administration Considers Proposing a New Mortgage Regulator

The Federal Reserve has been under fire for failing to do a better job regulating the mortgage market
The Federal Reserve has been under fire for failing to do a better job regulating the mortgage market

The Wall Street Journal is reporting today that the Obama administration is in advanced level talks to create a new regulatory agency to oversee the mortgage industry, as well as other consumer-oriented financial products. It sounds like mortgages and reverse mortgages would both fall under its discretion.  It appears likely that credit cards will not be included.  The proposed changes come as the Federal Reserve continues to be under criticism for failing to regulate the mortgage market during the housing boom.

However, it seems dubious whether a new agency will really be able to accomplish anything beyond what the government has already been trying to do.  Currently HUD and the FHA have been overseeing the mortgage and reverse mortgage market. These agencies are already under criticism for being too far removed from the market, and the time lapse and red tape in the drafting and interpretation of the McCaskill amendment potentially help signal the validity of these claims.  Adding an additional agency will only further confuse the system and red line the structure.  I question whether it could be more effective as a regulatory body given the landscape in Washington and the organizations that already exist.

 

Reverse Mortgages and the Credit Crunch on Small Businesses

Reverse Mortgage lenders come in all sizes, big and small.  Therefore what is happening to small businesses given the recession concerns the industry at large.  The Wall Street Journal published an article on the effects of the credit crunch on small businesses. Needless to say, the picture wasn’t pretty. Since the recession began, credit card companies have been cutting credit lines and raising APRs and minimum payment fees.  Credit cards are the most common form of small business loan, and these cut backs have had an effect.  The number of businesses filing for business bankruptcy is higher than the number of individuals filing.

This does not mean that small businesses cannot flourish during the recession; many are doing quite well.  However it does mean that expenses may be tighter for some of the smaller reverse mortgage companies this year. From an industry perspective, continuing to have small lenders is a positive thing.  The increase in competition is healthy for any business, as is the prevalence of loan officers scattered throughout the country, convenient for seniors everywhere.  Reverse mortgages have been flourishing, and hopefully this diversity does not fade.

From a consumer point of view, the increase in financial trouble for small businesses has led many individuals to look into reverse mortgages. In some cases, it can help seniors raise the funds they need to keep their business.