This prevents the efficient application of existing technology that would reduce the cost of assuring good titles to a small fraction of the cost of title insurance. Relevant existing law: Existing law allows lenders to shift to the borrower the cost of title insurance that protects the lender. Denmark has a reliable system of recording titles but no title insurance. Bringing that about would require replacement of one set of regulations with another set.Īssuring good title is necessary for an effective housing and mortgage market, but title insurance is not necessary for that purpose.
Making appraisals portable is one of the simplest and most effective ways to empower consumers. With an appraisal in hand, the shopper could invite multiple lenders to make a firm offer at a specified date and time. This lengthens the period the borrower must wait for the information needed to shop and it also means that the borrower who withdraws from the process must pay for a new appraisal and wait out the results once again.Ī better regulatory approach: If regulations obliged lenders to accept an appraisal ordered by a borrower from any approved appraisal management company, the borrower would, at last, have the capacity to shop for the best deal. While borrowers pay for appraisals, the regulations place responsibility and control with lenders, who order them after a borrower has applied. Relevant existing regulations: The regulations applicable to appraisals are a major source of the problem. For a borrower to withdraw at this point in order to begin again with another lender is difficult, costly and time-consuming, so few do it. The core problem potential borrowers face in shopping for a mortgage is that critically important information bearing on its price, including the value of the property, is not available to them until after they have applied for a loan and paid for an appraisal. I will illustrate with the two objectives and deficiencies cited above. Step 3: Assess existing and alternative regulations ■ The cost of title insurance paid by borrowers is excessive relative to the costs incurred in assessing the validity of titles. ■ Lender control of appraisals makes them non-portable and lengthens transaction periods, both of which impede the ability of borrowers to shop effectively. The agencies with regulatory responsibilities in this market include the Department of Housing and Urban Development/Federal Housing Administration, the Consumer Financial Protection Bureau (CFPB), the Federal Housing Finance Agency, Fannie Mae and Freddie Mac. This includes the market for home mortgages, which I will use for my illustrations. The objectives vary from agency to agency. Regulation is excessive when it does not accomplish its objective or when the cost of accomplishing the objective through regulation is excessive or when there is an alternative to regulation that is less costly.
To my knowledge, he has not provided any guidance to the agencies on how to do this, so I decided to do it for him in this article.Ĭounting the number of regulations is useless, what matters is whether the objectives of regulation are being achieved. President Trump believes that Federal regulation is excessive and has directed that task forces be set up at each federal agency to supervise and monitor the process of finding regulations to cut.