Mortgage financing has long been a staple of traditional banks, but in the United States, during the decade following the 2007-08 global financial crisis, many banks retreated from this once-lucrative business. What are some of the factors that have made servicing mortgages more onerous and less attractive to banks, and what can be done to rectify the situation—for the benefit of banks, mortgagors and mortgage market as a whole?
Dodd–Frank Wall Street Reform
When considering the robustness of banks in the United States today, it may be a challenge to recall how perilously close many of them came to falling into the abyss a decade ago. Most of these banks are soaring above their international peers and bolstering national growth. What factors have most contributed to their recoveries—causing them to not just survive but excel a few short years after the Great Recession?
In March, the US Senate reformed the 2010 Dodd-Frank Act by loosening its tight regulations on smaller financial organizations, welcome relief for those firms that have been struggling for eight long years with requirements targeted for larger, systemically important institutions during the aftermath of the 2008 financial crisis. Most are upbeat about the Senate bill, but how will it fare in the House of Representatives?
It cannot be denied that we learn from mistakes of the past, and so the 2007-08 financial crisis is a lesson that keeps on giving. Ten years later, most banks are in stronger positions, but only because the crisis has changed all the rules on liquidity provision and has led to much tighter relationships between central banks, governments, funding markets and financial institutions.