Our readers believe the interests of lenders conflict with homebuyers, according to a recent poll. 40% of voters said lender and buyer interests are in opposition, while 31% said their interests conflict at times but not always.
Voter opinions on the matter have remained roughly the same since the prior year. However, slightly more readers now say lender and buyer interests do not conflict — 29% now hold that belief, compared to only 20% before.
Lenders vs. homebuyers
Reader acknowledgement of the innate conflict of interest between lenders and homebuyers is likely due to the economic meltdown spurred by predatory lending in the last decade.
During this period, mortgage deregulation allowed lenders to take on ever riskier lending activity and encourage homebuyers to overextend their finances to obtain credit. The flawed reasoning behind deregulation was that Wall Street and lenders would inherently look out for their own best interests by avoiding excessive risks — protecting homebuyers in the process.
However, this line of thinking overlooks their bottom line: increasing revenues. In practice, mortgage bankers and lenders are determined to produce ever greater profits — to the disadvantage of homebuyers.
As a result, the number of subprime mortgages climbed dramatically during the Millennium Boom, artificially inflating home prices and leaving many homebuyers with faulty mortgages. When the real estate bubble finally burst, many homebuyers lost all their home equity and were prevented from selling and relocating.
Lawmakers have since implemented tighter mortgage regulations to protect homebuyers from now well-known risky and predatory lending practices. For example, enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and creation of the Consumer Financial Protection Bureau (CFPB) have helped regulate and monitor lender activities to avoid another financial crisis.
Related article:
Lenders vs. owners and the real estate interest of each: 2000-2011 and beyond
Looking ahead
The current administration is determined to deregulate mortgage lending once again by dismantling Dodd-Frank and reducing the CFPB’s authority.
Of course, changes to mortgage regulation will open the door to more predatory lending, perhaps acting as an unfriendly reminder of the inherent conflict between lender and homebuyer interests. For the housing market, mortgage deregulation will mean a return to the excitement of the Millennium Boom — and the depression that followed.
It now remains to be seen just what type of changes mortgage regulations and lending practices will undergo, if any — and when.
Real estate agents can prepare by watching for signs of deregulation gone bad in their local markets. This includes watching for predatory lending and unlawful foreclosure actions.
Repeal Dodd Frank, it only protects the banks, it hurts the consumer. Dodd Frank is a fraud perpetrated by congress to protect the money men. The theives are the elected officials lining their pockets at the publics expense.
The article has a fundamentally flawed premise that mortgage deregulation [what deregulation?] led to riskier lending. No, what led to riskier lending was the simple fact that lenders could make poorly conceived and underwritten loans and sell them without recourse to securitized investors, making huge profits while offloading the risk. While in hindsight we could say a lack of regulation allowed that, that is different than deregulation. And lenders are now finding the supposed lack of recourse problematic, as investors pursue them in civil suits for the often wildly-misrepresented quality of the loans in the securitization pools.