Despite S&L Debacle Decades Ago, Most Hard-Hit States Didn't Amp Up Regulation
Despite the savings and loan meltdown that hit the country some 20 years ago, many states at the center of that maelstrom apparently didn’t learn the obvious lesson: Regulation is needed to keep dubious mortgage lending practices in check.
Now, many of the same states that suffered the most from the S&L crisis are among the hardest-hit by the current subprime mortgage meltdown, Bloomberg reports. However, there’s one exception: Texas, which ratcheted up regulation after seeing its failed thrift institutions lose some $45 billion in the 1980s and 1990s.
“We had no regulation of mortgage brokers before 1990, and now we have some of the most robust requirements in the country,” commissioner Doug Foster of the Texas Department of Savings and Mortgage Lending tells the news agency.
Nevada, California, Arizona and Florida are the hardest-hit by the current crisis, according to Bloomberg, and Florida newspapers have been having a field day in recent months reporting on how mortgage brokers and loan originators there apparently took advantage of state regulatory loopholes and lax lending oversight by financial institutions.
Another issue is a lack of enforcement of existing rules. In response to Miami Herald coverage, the state legislature recently enacted amped-up criminal background check requirements for those licensed as Florida mortgage brokers, reports the Tampa Tribune. However, no licensing is required for loan originators, who do much the same work as mortgage brokers.
Additional coverage:
ABAJournal.com: “1000s of Criminals Worked in Florida Mortgage Industry”
ABAJournal.com: “FL Expects Surge of Mortgage Fraud Cases”
