by Mary Kladde
Part II – in follow up to commentary by Ruth Lee
Eliminating the GSEs is like throwing the baby out with the bathwater. It is counterintuitive and ill advised. If the GSEs are eliminated the impact on the industry as whole will be severe. The days of 80% LTV were not – even if you can remember them – the “good old days” and is not a time to which we should aspire to return.
The problem that I refer to as dirty bathwater is, more literally, the legacy infrastructure and context of mortgage lending. Up to this point, our industry has been a bit, shall we say, unstructured, in many of its business practices. After all, in a non-regulated environment, there are fewer and looser “standards.”
Now, with the push for greater standardization picking up heft and the FNMA Loan Quality Initiative (LQI) providing guidance and motivation, perhaps we can get those chubby, troublesome GSEs cleaned up and on their way to health once again. And another thing – I’ve said it before and will say it again soon, I promise – Loan level review both on pre-closing side of the lender and on the pre-purchase side at investor is destined to become an industry standard, and lenders should push for it.
