The Government Whiffs, Again, on Mortgage Servicer Abuse
Since the foreclosure crisis began six years ago, homeowner advocates advanced two priorities: accountability for the fraud and abuse that took place, and safeguards to ensure it never happens again. There has been little if any progress on the former, but a spate of new rules from the Consumer Financial Protection Bureau represent a serious attempt at the latter. New rules governing mortgage lenders (also called mortgage originators), which create a standard 30-year “qualified mortgage” based on the borrower’s ability to pay, and use various incentives to discourage riskier loans outside the QM model, have been lauded by many analysts. A separate rule bans “steering payments” to mortgage brokers and loan officers, which were used in the bubble years as bonuses for pushing borrowers into riskier, higher-cost loans. Severing the link between mortgage originator compensation and the terms of the loans they originate really gets at the bad incentives that drove the housing bubble and led to the crisis.