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Mortgage reform — a balancing act

By: 22 May 2011 One Comment

We’ve already seen a number of reforms from the federal government which were put in place with the intention of avoiding the high loan default rates and so-called credit crisis with which the real estate industry has struggled for about four years.

Don’t think for a second that we won’t see more reforms in the months and years to come.

When it comes to mortgage reform, all parties involved appear to be engaged in a kind of balancing act. It’s important to make sure that safeguards are in place to protect lenders against taking on too much risk in making loans but it’s also essential to make sure that those who deserve mortgages get them.

That all comes down to a balancing act – one that both government officials and groups connected to the real estate industry are dealing with at this point in time. The public would do well to pay attention to the mortgage reforms that are floating around the nation’s capitol. The trick, of course, is to work to prevent financial meltdowns while not making lending requirements so restrictive that millions of Americans who can handle the responsibilities that come with mortgages are unable to take out loans.

The national Mortgage Bankers Association is – not surprisingly – watching the reform efforts closely. The group released a white paper earlier this month identifying areas of concern and has promised to study the associated issues and come up with some recommendations that, ideally, will keep mortgages available to people who deserve them while avoiding the financial collapse from which housing markets are still recovering.

Here are three things the Association announces it plans to do in the months to come:

* Review existing lending standards and practices, especially in the areas of foreclosure, loss mitigation and loan modifications.

* Evaluate the legal issues related to the foreclosure process.

* Analyze proposed changes in servicer compensation.

Those are three major areas reduced so mere bullet points, but those issues lie at the heart of reforms that the federal government will certainly examine in the months to come. Reforms in those areas could result in either a more stable credit market or one that’s so restrictive that few people can take out mortgages.

And keeping credit accessible to people wanting to purchase homes is important. According to the National Association of Realtors, the median price of existing homes across 19 metro areas in the U.S. in March was $160,500 – down considerably from the median of $169,500 reported for the same month last year, but still a considerable amount of money.

Most consumers simply don’t walk into a real estate office and buy a house with cash. The mortgage market exists so that deserving, responsible consumers are able to take out credit and purchase homes. Making sure that people who are given mortgages are able to pay them back is a great idea, but ramping up credit requirements to the point where deserving Americans are frozen out of the housing market should be avoided.

Again, it all comes down to a balancing act. We’ll see in the months to come what actions the government takes to make mortgages available to consumers while curbing practices that lead to foreclosures and defaults.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email =

One Comment »

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