February 25, 2025
The Consumer Financial Protection Bureau was created by the Dodd-Frank Act in the wake of the financial crisis which spawned the Great Recession of 2008. Unlike the pandemic-induced recession of 2020, the recovery of the economy from the Great Recession was long and painful, especially within the real estate industry which is this commentary’s main focus. Housing prices fell significantly and took years to recover. The secondary market for mortgages collapsed and the Dodd-Frank Act put regulations in place, such as verifying the ability to repay a mortgage, in order to restore faith in these markets which serve to make sure that money to finance homes is available.
Another factor affecting real estate during this time was the government take over of the giant mortgage agencies – Fannie Mae and Freddie Mac. Though this move was intended to be temporary, they exist today, some 15 or so years later, under a government conservatorship after repaying billions of dollars back to the government to repay the cost of bailing them out. Today we face the real possibility of a curtailed or even eliminated CFPB and a re-privatization of these mortgage agencies. The question is—what would that world look like? What happens to the regulatory aspects of the CFPB? How would the government assure that there would not be another bailout of the agencies?
Of course, we don’t have the answers to these questions. Nor do we have a crystal ball to see where these entities will land and what shape they will be in when they do land. We do know that confidence in the secondary markets is essential. The interest rate spread between mortgages and treasuries is wider than it has historically been for the past few years. Whatever changes are made need to make sure the spreads don’t widen, but narrow to help ease the real estate affordability challenges we currently face.
Source: Origination Pro
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