OTS chief calls for federal mortgage regulation

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WASHINGTON, DC – The US mortgage industry needs stronger federal regulation, according to director of the Office of Thrift Supervision (OTS) John Reich, speaking at the centenary convention of the New Jersey League of Community Bankers.

Reich said the current US housing crisis provides a lesson that uneven mortgage regulation at state level is a weakness to the economy, while banks and other financial institutions face tougher and more uniform federal standards.

“We must establish a level playing field with the same rules for all competitors in the home mortgage sector, so standards do not fall to the lowest common denominator,” said Reich.

The director underlined that federal oversight of the entities that fund the mortgage process is crucial to effective regulation, adding that because of its nationwide mortgage lending expertise, the OTS is best qualified to fill the federal role

Reich said: “Establishing a partnership between the states and a federal regulator to set and enforce minimum mortgage funding standards would ensure accountability, consistency and transparency throughout the mortgage lending process.”

In a separate speech on the necessity of a responsible subprime lending culture, Reich said: “Homeownership remains the bedrock of strong communities, and responsible subprime lending helps more Americans become homeowners. It is important that as we strive to prevent the abuses of predatory lending, we do not close the doors of opportunity to credit-worthy subprime borrowers and deprive them of the chance to pursue the American dream of homeownership.”