In a market that has shown some obvious lack of regulation, US Treasury Secretary Henry Paulson has stepped in with a new plan (the ‘Blueprint for Regulatory Reform’) for better regulations toward the mortgage industry.  Paulson has many recommendations on how to improve on the system we currently have in place.  Paulson said:

“We should and can have a structure that is designed for the world we live in, one that is more flexible, one that can better adapt to change, one that will allow us to more effectively deal with inevitable market disruptions and one that will better protect investors and consumers…the challenge is to evolve to a more flexible, efficient and effective regulatory framework – and that is the purpose of this blueprint.”

Here are the main topics of the proposed changes (quoted from Paulson and HousingWire):

Federal Oversight of Mortgage Brokers

“We are recommending retaining state-level regulation of mortgage origination practices, but we are also recommending creating a new federal-level commission,”…“Legislation should either set forth or task this Commission to establish minimum standards which should include personal conduct and disciplinary history, minimum educational requirements, testing criteria and procedures, and appropriate license revocation standards.’

This may sound extremely familiar if you’re in Iowa.  We already have some of the most strict licensing requirements in the country.  Background checks are already required and we’ve weeded out some of the ‘bad actors’ by implementing this system.  I think it was a good move and I’m 100% behind raising the bar in the mortgage industry.

Merging Regulators

In summary the blueprint would establish three distinct regulators that would focus exclusively on financial institutions: a market stability regulator, the Fed; a new prudential financial regulator, combining the OCC, OTS and NCUA; and a new business conduct regulator, combining the CFTC and SEC, and some roles of bank regulators.

Some interpreted this blueprint along with what Paulson’s been heard saying recently as our current financial system is broken.   I’m sure we’ll see changes made to this blueprint before we see it put into action, but we’re sure to see some changes ahead.

Here’s the short(er) fact sheet regarding the Blueprint and what it outlines.