Rapid change in the home mortgage and home equity lending industry raises fundamental issues about fairness and levels of risk, Federal Reserve Governor Mark Olson said on Wednesday.
Olson did not address the outlook for the U.S. economy or interest rates in comments to a Federal Reserve Board public hearing on the home equity market.
The Chicago hearing will be the first of four to be staged over the next month, and Olson noted it has been four years since the Fed last held such hearings.
"In those four years it is hard to believe so much change has taken place in the industry," he said.
The growth in nontraditional loan products such as adjustable rate mortgages "certainly is the most significant change that has taken place in the marketplace and it has raised some real issues," Olson said.
The central banker said the rise of the secondary mortgage market has created a "voracious appetite" for loan products and that "it is not clear we have the same checks and balances, and that underwriting is done as carefully."
The fundamental asymmetry of knowledge between mortgage lender and recipient also creates "a real responsibility for mortgage lenders not to be abusive of that process," he said.
"Every time I have sat down to close my own mortgage loan I have felt at a disadvantage in terms of my understanding; so I can imagine what a first time buyer must feel," Olson said.
Source: Reuters
