Is Everyone on the Hook for Finance Reform?
While entrenched in the annals of mortgage law for the state of Connecticut recently, I was pleasantly surprised. I realized that they have some very positive laws focusing on the reform that Washington has been attempting to enforce on a national level.
Make no mistake, I was not reading Connecticut mortgage law during my light reading time. It was part of the material that is required for the SAFE exam. The exam is to ensure that loan officers who are licensed in Connecticut, understand the state and national laws that apply to our industry.
In reviewing the study material, I was excited to read that the state banking commissioner can impose a $500 penalty to loan applicants if they do not disclose accurate information. Furthermore, the commissioner can also impose a civil penalty of up to one year in prison for the same.
I found this verbiage to be particularly interesting because it shows that the ‘powers that be’ recognized that the downfall of our real estate markets was not entirely the fault of the professionals involved.
I am happy to say that many of those non-scrupulous brokers are out of business or in jail, far away from hurting the economy and more home owners.
Needless to say, those players had clients who wanted to sidestep the rules as well, by purchasing properties as straw buyers with little regard to their incomes being insufficient to carry the new debt. So they, too, were guilty participants in the nationwide scam.
I can appreciate that Connecticut lawmakers have placed the onus on everyone involved in a transaction. At the very least, it may make someone pause before attempting to deceive a bank.
Although these laws are in place, I don’t honestly believe that someone will be prosecuted — at least not until the next cycle of inflated real estate values and less restrictive underwriting policies.
I hope that all states look to Connecticut for reform that we all need to protect our future real estate values. We need to be careful, however. If we pull the reigns in too tightly, we might lose everyone – including the big players.