The Law of Unintended Consequences striking again?

Whenever governmental action takes place, about the only thing
you can be sure of it that the Law of Unintended Consequences
will have its say.  Nowhere is this more true than in the world
of housing finance.

We all know that lending standards have tightened considerably
since 2007, but is mortgage money going to be even more
difficult to get in the near future?

From the blog of Mathew Ferrara comes these happy tidbits:

Interest rates remain low and flat. The Fed’s interest rate targets are having unintended consequences. By keeping spreads low, banks see little profit in lending to a shaky housing sector. By promising to keep them low for the next two years, they encourage banks to look for better investments for the long term. Big Banks – currently 50% of all housing lending in America – can easily make money in higher return sectors around the globe, with less risk of political witch hunts, too.

Major banks are exiting the mortgage market. Bank of America is trying to shed its correspondent lending business; GMAC/Ally did it last year in Massachusetts. MetLife exited the forward home loan business earlier this year. Credit unions and local banks are not ready to step into that space.

The Consumer Financial Protection Bureau is about to regulate the mortgage industry at unprecedented levels through its “Nonbank Supervision Program.” Essentially, the regulatory burden for mortgage brokers is about to get more complex and bigger. That means new costs for compliance, and guess who pays for those? Consumers, of course. Add in forced settlements for pseudo-scandals like robo-signing, and banks have less and less reason to make housing lending a priority.