The Cost of Uncertainty (excerpt from Mortgage Banking Magazine, March 2011)
The best word to describe the state of the mortgage industry since 2008 is paralysis.
Paralysis may be an odd word to describe an industry that has spent the past three years scrambling to keep borrowers in homes, complying with new regulations and finding the liquidity to keep offering loans. However, these actions have primarily been in response to events happening to the industry – subprime lenders closing, housing prices falling, government-run modification programs, new regulations and many other speed bumps.
When it comes to moving forward, however, the mortgage industry has been paralyzed by fear of the unknown. How, for instance, will the massive new financial reform law affect the mortgage lending industry going forward once all its provisions are in place? What will the secondary market look like after the government decides what to do with Fannie Mae and Freddie Mac? This fear and uncertainty has cost the industry trillions of dollars.
In response to the issues that kick-started the industry’s problems, legislators and agencies have spent the past few years completely revamping the regulatory framework that governs the mortgage industry.
While thousands of words have been written about what the reforms will mean to the industry, the biggest problem remains that the answer is often, “We don’t know.”
DocuTech’s COO, Scott K. Stucky, outlines the difference between risk and uncertainty in the March 2011 issue of Mortgage Banking Magazine. Pick up a copy today to read a breakdown on why measured risk is acceptable and uncertainty is paralyzing the mortgage industry. Look for information and advice on how to gain the knowledge needed to begin making calculated business risks.