By David Lykken
Special to MPA
On the May 11th episode of the Lykken on Lending
Internet radio broadcast I host, I got the opportunity to discuss
regulatory issues with David Stevens of the MBA. During our discussion,
David brought up an interesting term to describe how the industry has
become post-regulation. Rather than proactively pursuing home owners,
many organizations have shrunken back in fear. Many in the industry have
become "defensive lenders."
Rather than helping people get mortgages, the industry has become more
about keeping people from getting mortgages. Due to the amount of
regulation that has been placed on the industry, most organizations are
more worried about compliance than anything. While I believe that much
of the focus on compliance is a good thing and that the industry
certainly needed a wake-up call, I've begun to wonder if the pendulum
has swung too far in the other direction.
Making lenders afraid to lend isn't going to help the industry – and it
isn't going to help the economy. You can't really go anywhere when
you're backed into a corner. And that's how many organizations in the
industry feel right now – that they’re backed into a corner fighting for
survival. There's no time for thinking about progress when you're
fighting for what little you have left.
Much of the regulation that has occurred recently was necessary. But if
regulators don't find a way to work with organizations change this
mentality in the industry, we aren't going to get anywhere. The economy
needs the mortgage industry to succeed. And we need to feel like we have
the freedom to do so. We need to feel like we can gain new ground again
– rather than simply defending the ground we have left.