Tennessee State Representative Joe Pitts recommends changes to Mortgage Industry

Written by Joe Pitts
Tennessee State Representative, House District 67

Nashville, TN – By now we have had our fill of economic instability, stimulus, downturn, volatility or insert word here, enough to last a lifetime. The old joke about economists having predicted nine out of the last three recessions rings hollow, but true especially if you are one of the unemployed, or underemployed, trying to avoid a fiscal cliff of your own.

So let’s turn the page and change the subject. It is time for different ideas. Somebody, somewhere in Congress needs to offer something different. While members of Congress discuss tax cuts another idea is being overlooked.

If we want to put our money to work for us, let us revisit the strangulating regulations placed on home mortgages by the over-reaching changes to the financial industry. The revisions have created an environment where those who are fortunate to have a job and want to re-finance are finding themselves in a fix when the appraisal comes back below realistic market values.

The rules imposed on appraisals in order to satisfy the underwriting requirements have vexed the mortgage industry and now, formerly qualified applicants are no longer qualified because of appraisal dysfunction.

Further, the threat of a mortgage put back, or requiring a bank or investor to repurchase a mortgage if the documentation was faulty or the appraisal was misrepresented, creates a paralysis that is at the heart of most lending decisions. These two factors, among many, are now more prominent due to the change in the regulatory environment.

Think about our community. A family of four with a mortgage balance of $175,000 finds their basic monthly payment in the neighborhood of $993.00 per month. With rates at historic lows, re-financing that mortgage at today’s rates frees up more than $200.00 per month in the family budget. That $200.00 per month will instantly find its way into the economy.

The middle income family will spend, or invest, that money for necessities like clothes, food, and transportation. They might even put some of that money in a savings account, if they have one, to use for other items like home improvements or a college education for their children. Instant stimulus.

Another benefit, albeit longer term, to addressing the mortgage impasse, is with rates so low, families just might be able to shorten the term of their loan and pay off their home sooner. That pay off frees up the entire monthly payment, maybe at just the precise time they need it for retirement, or perhaps putting that final child through college.

So while we discuss cliffs, and watch the political theater unfold, let us challenge our elected officials in Congress to delve into relaxing some of the more onerous regulations that stymie the mortgage industry. You might think this will return us to the days of pre-2008 when lax standards and negligence in the mortgage industry caused the meltdown. This is no time to abandon common sense.

Banks and legitimate mortgage companies want to make mortgage loans. Real estate companies, homebuilders, and all those employed by these related industries benefit. Thousands of jobs are at stake.

It might be an oversimplification to think one idea is the “silver bullet.” It may not be the fix but it is worthy of a change in the conversation. Or it might be just a simple solution to an over correction to make life a little easier for families. That notion alone is worth a look.