Simpler rules: How complexity for the industry is hurting consumers

by 21 May 2015
By David Lykken
Special to MPA

As regulators have gotten more involved in the mortgage industry since the recession, there have been many benefits to the industry. I'll be the first to admit that self-regulation failed in the mortgage industry. We got carried away, and we ended up shooting ourselves in the foot. Our industry needed reform and, while I wish we could have done it on our end, I'm glad that much of it has happened one way or another. Being held to a higher standard is good for the industry.

There is one thing, however, that troubles me about the new emphasis on regulation. While many regulators have argued that the home buying process needs to be simpler for consumers, excessive regulation has done just the opposite.

In the May 11th episode of the Lykken on Lending radio broadcast I host, David Stevens of the MBA brought up a really good point: by applying different standards to different organizations in the mortgage industry based on what they're called or their business models, regulators are simply causing confusion for the very consumers they are trying to help.

People don't care whether they're dealing with banks or non-banks when they're looking for homes. They don't care what the organization calls itself or how it's structured. They only care about getting the mortgage.

Applying different standards across the industry makes it difficult for consumers to compare apples to apples. If we really want to make it easier for consumers, we've got to have greater standardization. Complexity is the enemy of movement. If we want to get the industry – and the economy – moving again, we've got to make it simpler. 


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