And Your First Born

Today's tight credit environment continues to prevent people from getting loans.  I remember the refinancing headaches I had in Sept. 2011 with the volumes of documentation required.  Yesterday I received the inch thick confirmation letter that the bank is required to send "In accordance with the Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act) of 2008. 

With the consumer protection packet came MLO Registration Number, Credit Score Inquiry, Insurance disclosures, and about 12 state specific forms, housing counseling agency, and other Consumer Financial Protection Bureau (CFPB) stuff.

You can see first hand. the burden of regulation and over protection that government mandates when they feel guilty about being "asleep at the switch" during the big housing crash.  This layer of inefficiency has not improved the risk of lending - it has impeded the process.

The banks are doing business reluctantly with fear of liability.  The volume of documentation they require is an indication of government mandating how they do business - which assumes government knows how to measure quality credit risk.  Instead of increasing quality and judgment, government is eliminating business judgment.

Don't be surprised when the next lending form will be promising your first born as collateral.