From Financial Crisis to Recovery (Collection)

9. As the Regulatory Cycle Turns

No part of the nation’s economic life has more legal and regulatory oversight than housing and mortgages. Federal and state government agencies have a say in nearly every stage of mortgage lending, from determining whether a loan is appropriate to deciding how to foreclose on a defaulting homeowner. Yet regulatory supervision all but disappeared during the housing boom. Where were the regulators?

It wasn’t as if regulators didn’t understand subprime lending’s risks. They had dealt with the issue in the mid- and late 1990s, when home equity lenders—that period’s subprime pioneers—were aggressively making loans. Many of those home equity loans defaulted, and many of those lenders went belly-up by the end of the ...