In his State of the Union address on Tuesday night, President Barack Obama added his name to the list of people concerned that mortgage-lending standards might be at least a bit responsible for holding back the housing market.
During the market’s boom years, lenders extended credit widely, and common-sense practices such as verifying a borrower’s income often went out the window.
But now many in the mortgage industry and in government have been worried that the pendulum has swung too far back amid a slew of rules designed to prevent reckless loans. Critics claim that qualified borrowers are currently being shut out of the market.
“Right now, overlapping regulations keep responsible young families from buying their first home,” Obama said in his State of the Union Address on Tuesday night. “Let’s streamline the process, and help our economy grow.”
Critics are likely to see no small irony there, given that many of the rules were mandated by Obama’s signature Dodd-Frank financial overhaul of 2010.
But there are more rules at issue than just the Dodd-Frank set, from appraisal restrictions to mortgage “put-backs” from investors to new rules for loan servicers, all of which are being hashed out by different regulators.
The remarks suggest that the White House, over the coming year, will make a bigger issue out of reducing barriers to credit for new buyers, as it has already tried to do for those seeking to refinance.