Unsafe Loans in a Deregulated U.S. Mortgage Market | Zendy

Vincent DiLorenzo | Zendy

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Unsafe Loans in a Deregulated U.S. Mortgage Market

Author(s) -

Vincent DiLorenzo

Publication year - 2009

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.1374383

Subject(s) - mortgage underwriting , secondary mortgage market , shared appreciation mortgage , business , mortgage insurance , commercial mortgage backed security , financial system , collateralized mortgage obligation , loan to value ratio , finance , insurance policy , casualty insurance

This article explores actual market outcomes in a deregulated mortgage market to ascertain if market discipline can be relied upon to ensure safe and sound loan products. In part one of this article the bank regulators' decisions to deregulate the mortgage market are set forth. In part two the outcomes generated by such a legal environment are presented. Such outcomes reveal steadily increasing availability and acceptance of risky loan products, resulting in equity stripping due to subsequent defaults. In part three of the article an alternative regulatory approach is offered - one that imposes a minimum, required level of safety for all loan products.

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