What’s next for the mortgage lending industry, beset by deepening accusations of predatory lending and mortgage fraud?

Well, several states are considering the creation of suitability standards, similar to what stock brokers and investment advisors live with in the securities industry. If this movement takes shape, mortgage lenders might be required to furnish evidence that the loan program recommended was suitable for the client’s needs, level of understanding, and sophistication.

However, Kurt Ptotenhaur, senior vice president of the government affairs for the Mortgage Bankers Association (MBA) argues that “Making the lender responsible for determining which loan is suitable for a borrower will limit consumer choice and could deepen the slowdown in the housing market,” and may result in discrimination at worst and subjected decisions made by the lender about who should have access to certain loan programs. See the MBA’s Policy Paper for more.

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