Commentary September 17, 2017

Government Regulation of the Housing Industry, Top & Bottom

The following post is a reprint from this day in 2010 and is as fitting today as the day I wrote it. 

One of the biggest ironies of government solutions to housing problems is how heavily regulated the foot soldiers (agents, loan officers) have become while the executives in the glass tower can build billion dollar Ponzi schemes and get away with it. 

I can’t have a discussion about where a church is located, school districts, crime and many other things without being accused of steering or a fair housing violation. Agents have been heavily fined, suspended or lost their license over things like this. Many times, it has been deserved. We can’t go there. 

If I write a bogus lease to help a borrower qualify for a mortgage, it is bank fraud. I can’t go there. 

HOWEVER: If I came up with a scheme to loan billions in bad mortgages, fund them with worthless mortgage-backed securities I sell to institutional investors like pensions and retirement funds, then the whole thing falls like the house of cards it is, I can retire to the Caribbean. 

I’m not saying the guys in the field shouldn’t be regulated the way we are; I am saying that those up top in the corporate Ivory Tower who destroyed the economy ought to be held accountable for their wrongdoing as well. 

If the regulating authorities examined the complete unsustainability of the mortgage products being hawked from 2003-2007 and spent a little less time measuring the font of my name compared to that of my company, we’d all be far better off. Regulate the guys on the bottom; fine. But keep your eye on the fellows at the top too, please Uncle Sam?