One-size-fits-all enforcement: Why it's not a good idea

by 18 May 2015
By David Lykken
Special to MPA

In the past couple of years, I've spent a fair amount of time defending regulators. I know there are a lot of good people working in regulation that care about the mortgage industry and are genuinely trying to make it better. I also know that we who work in the industry are in many ways responsible for the excessive regulation that has come to fruition as of late. I know that, in many ways, we've brought it upon ourselves.
However, I do agree that there are some cases in which it has gotten out of hand and regulators are hurting the very people they're trying to help by stifling the industry. On the May 11th episode of the Lykken on Lending radio show, I received the opportunity to interview David Stevens of the MBA – and he shared some interesting insights with me.
In many cases, regulators are making no difference between failures in compliance when it comes to enforcing the rules. Organizations that commit minor mistakes are being held equally accountable to those who are committing egregious ones. Moreover, those who fail to be in compliance by accident are being held to the same standard as those who deliberately break the rules.
Should it be this way? Is that fair? I don't think it is, but I certainly don't believe it's smart.  I think that if regulators are going to be effective at rebuilding the industry for the good of consumers, they are going to have to work with those in the industry who are actually trying. Judgments should be made on a case-by-case basis. Most of us in the industry really are trying to do what's right. In many cases, we need the help of regulators to change--not merely condemnation for staying the same.



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