Regulators take liberties with real estate legislation

Commentary: Policies appear to alter congressional intent

Maybe a federal government shutdown now and then would be a good idea — certainly for the current crop of financial regulatory officials. Twice in the past six months they have taken congressional mandates that significantly affect real estate transactions and home mortgages, and mangled them badly.

Cases in point: The long-awaited appraisal reform regulations that took effect April 1, and the "qualified residential mortgage" (QRM) proposals that were called for in last year’s Dodd-Frank financial legislation. In both instances, regulators took straightforward statutory language and arrived at rules that vastly altered clear congressional intent.

Personally, I think they are the most egregious examples of regulatory perversion — even nullification — that I have seen in 30-plus years of observing and writing about Congress and housing.

Take the appraisal reforms. The Dodd-Frank law said explicitly that lenders must compensate appraisers at rates that are "customary and reasonable" for their geographic markets. But what exactly is customary and reasonable? Congress wrote just two sentences of instructions to the Federal Reserve Board, which was assigned the task of writing the implementing regulations.