While there may have been many changes over the years to make a difference to the mortgage market in the USA, the latest one that should see a lot happening in the industry is the impact of deregulations that have been introduced by the new president.
While this period is not expected to be as harsh or hard hitting as the financial crisis, people will have not only to watch out for the impact caused by the new changes in rules and regulations, they will also need to keep themselves prepared to adapt if and when required.
Let us have a look at some of the changes that are expected to take place:
If Trump goes ahead with his proposed changes to financial regulations like Dodd-Frank, one of the most positive signs to support this will be to remove the compliance costs that smaller banks need to cope with. Amongst most of the funding that is received for land development and construction loans, about 10,000 odd local and community banks are part of it. If there are fewer regulations to deal with, it opens up more avenues for these banks to venture into. They could probably process more loans which would lead to more home building activity. But without quality underwriting strategies, the same would not happen and might lead to a disaster like a bailout by taxpayers. It definitely makes a case for mortgage software solutions.
Even on today’s date, credit score plays a massive role when getting a loan approved. One of the main reasons for strict measures when granting a loan has been the fact that many of the granting institutions have been exposed to various court cases and lawsuits. This could be an ideal opportunity for the lending process to move away from strict mortgage underwriting processes. But this can only be done if the new government makes a strict distinction between what is a breach of rules and what is not. This would lead to more loans being approved off through mortgage technology which can accurately find the risks associated with each loan.
During the last government’s reign, the cost of housing had gone up quite a bit and newly constructed houses were more expensive as compared to the existing homes. Those costs were not attributed to things like cost of labor or material. Instead, it was some of the regulations in place that had caused the prices of homes to increase. If measures were introduced to lessen zoning burden for construction and regulatory land use, it would in turn decrease the cost of home building. There have been people in the past who have worked towards getting such regulations removed. Now it appears to have a higher probability with the new government working towards such proposals though jurisdictional issues.
There are many big players who may not survive if the deregulations come into place. Amongst them, the two most prominent names are Freddie Mac and Fannie Mae. Ghosts from the past could come back to haunt them! Back in the day, they had made a horrible mess of things, which included getting swayed by various political parties, making internal hedge funds and buying subprime mortgages. Such activities which had been undertaken without much knowledge or foresight ultimately led to lots and lots of taxpayer dollars being spent to crawl out of the hole.
The industry’s position thankfully is nowhere close to where it was. They have relied on technological advances to eliminate many issues and transform workplaces effectively. But the technological stance remains vital in coming years.