If you have listened to the news about the US Economy at all in the past year you have probably at some point heard the use of the word "free market" or "capitalism" mentioned in defining it. I would like to ask you to reconsider the notion of what a free market is. While it is true that the United States is the closest thing in existence to a capitalist society; a free market so to speak, it is actually a mixture of capitalist elements with state controls. A "free" or "capitalist market" is a market that is unregulated; with a clear separation of "state and economics".

Despite that glaring distinction, capitalism has in the past been the scapegoat for government intervention into the markets with disastrous consequences. For example, the crash of 1929 and 1987 where times when loud claims were made that the "market failed" when in truth; "government policy" failed. Today, again, the "free market" is currently taking the fall for what truly is mismanagement of the US economy by our elected politicos in Washington. Speaking directly to the real estate industry, H.R. 3915 (a.k.a. "The Mortgage Reform and Anti-Predatory Lending Act of 2007") which passed the House on November 15, 2007; is just one of the latest reforms that is attempting to tighten the controls on an already heavily regulated market. The bill uses vague non-objective language; which will be left in the hands of any beaurocrat to interpret who feels like he needs a boost in the polls, some media attention to better his image, or is out for a little revenge.

H.R. 3915 uses language such as "reasonable ability to repay", "in the consumer's best interest", and worded another way later in the bill; "best interests of the consumer". If I may be so bold as to ask the House representatives who voted for this bill, what specific objective standard is set for this "reasonable ability to pay"? What specific objective standards are set so that each originator knows what is in "the consumer's best interest"?

Answer: There are none. The vagueness is intentional.

Realtors, the lenders that we so often work with will find themselves in a Catch 22 should this bill clear the Senate and be signed into law as it stands. On either side of the origination coin they will walk on tepid water. With rejection or loan approval lenders can find themselves subject to a lawsuit by any unscrupulous lawyer who wishes to attack the "evil moneylenders" for violations they concoct out of a subjective set of laws that are hovering above the lender's head. In our litigious happy society, lenders are potentially liable for any mortgage than a borrower fails to pay off. Further, since lawsuits cost money you can be certain that cost of those lawsuits will be passed directly on to the consumer in the form of higher rates and fees. Is this what Washington calls "protecting the consumer?"   

The bill has yet to go before the Senate, there is still time to throw down the gauntlet on this disastrous piece of legislation. However, be warned, if the market goes through another shakeup if this legislation passes; it won't be the free market that failed but the US government.  

Matthew P. Klein, REALTOR®, http://www.ohioreoexperts.com/

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