Government regulation is ramped in our country currently. I think most Americans are under the assumption that greed caused our current turmoil. As this is partially true, the majority of the issues were stemmed from government intervention. How can regulation on such magnitude be written and approved in such a short time without repercussions? It only makes sense that businesses are built on the quality of service they provide to their customers. Logic would only show that those whom allow greed to take place will result in the failure of that particular company. The media, politicians, and government regulators would like you to believe regulation is the solution to the current economic downfall which they claim was the result of greed. Why all the sudden is greed only in one sector, the credit sector?
Here is the problem with government regulation that is really not necessary. Recently there was a bill passed that will dictate how much a mortgage originator can make on a loan. This bill is 74 FR 43232. In a nut shell this is government saying hey, we don’t want you to make what you were making anymore. You can now make only x amount of dollars per transaction.
Example of what this bills says.
The final rules, which apply to closed-end loans secured by a consumer’s dwelling, will:
- Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms. Compensation that is based on a fixed percentage of the loan amount is permitted.
- Prohibit a mortgage broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person.
- Prohibit a mortgage broker or loan officer from “steering” a consumer to a lender offering less favorable terms in order to increase the broker’s or loan officer’s compensation.
- Provide a safe harbor to facilitate compliance with the anti-steering rule.
In the past a lender could make money on the interest rate sold and fee’s charged on the good faith estimate. If the customer did not like the fees being charged, they could shop for a better deal. Does that sound so bad? Well that is what we call a free market where companies can set there own fees based on what the market will allow. Since the government has recently got involved, the free market for lending has been trampled on. This intrusion will result in the borrowers paying higher rates so the banks, mortgage brokers, and loan officers can make money.
So in a nutshell when the government interferes with the profits of a company, the cost is passed on to the consumer in some other form or fashion.
Author: Mike Clover
CreditScoreQuick.com
