Summary
The financial meltdown has had its positive effect - that of transforming markets and making corrections. The new regulations aim at curbing leverage and encouraging pre-payments. These regulations will ensure that the mortgage market does not lose in significance and at the same time both lenders and borrowers are protected. The mortgage market can also take a cue from the factor market wherein the factor who buys the debt of another does a thorough review through the network of factors worldwide. The factor also tries to involve himself with the other party even before the receivables are generated. Similar degree of caution and protection is required in the mortgage market.
Analysis
Lending is certainly going to get tougher. There will be no formulae to apply to judge the financial solvency of the borrower. A lot will depend on reasoning and arriving at decisions with no previous base to depend on. Under these circumstances, the new regulations that are being contemplated are somewhat of a helpline to the bankers.
