Richard Koss, Columnist

The Mortgage Market Is Moving Into the Shadows

Regulators should pay closer attention to the boom in non-bank lending.

February 23, 2018 at 11:00 AM UTC

Richard Koss is an economic and real estate consultant and adjunct professor at the Carey School of Business at Johns Hopkins University. Previously, he was head of capital markets research at Fannie Mae.

A costly outcome.
Photographer: Joe Raedle/Getty Images

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The last financial crisis occurred in part because unregulated lending in the mortgage market got out of hand. Believe it or not, it’s starting to happen again, and could ultimately precipitate another disaster unless regulators get their act together.

Make no mistake, regulators have done plenty to rein in the mortgage business since the 2000s. New rules require that lenders carefully assess borrowers’ ability to pay, and that mortgage servicers -- which process payments and manage other relations with borrowers -- give troubled customers plenty of opportunity to renegotiate their debts before resorting to foreclosure. The Federal Reserve performs regular stress tests to ensure that banks have enough capital to weather defaults.