The war over regulation of financial markets has been heated for many decades. And, according to Brian Ofsie, President of Vanguard Funding, one of the New York tri-state area’s leading mortgage banking firms, even the Wall Street collapse and its aftermath haven’t brought the issue closer to a definitive conclusion.
Few people have seen both sides of the coin, so to speak, regarding government regulating the markets. Even for a man with Mr. Ofsie’s near quarter-century of industry experience, the answer isn’t a clear-cut one. “Financial regulation is both good and bad,” insists Ofsie, “both for business and consumers. Having insufficient or ineffective regulations helped lead to the financial crisis and collapse in 2008, hurting everyone. However, when they’re too restrictive, it hurts businesses and can cause costs to rise and passed on to consumers. It’s somewhat of a ‘tightrope’ that’s very difficult to navigate.
“Obviously, there were abuses and criminal activities in recent years that demanded action,” Ofsie continues. “Agencies responsible for oversight and enforcing existing regulations were too lax, allowing rampant fraud and malfeasance from the low end of the mortgage loan process, the originator, to the highest echelons of power. For years, investment bankers and the insurers rubber-stamped loan approvals virtually without question. There were terrible abuses on every channel for so long, it became the accepted
Brian Ofsie believes the situation was so out of control, that when the inevitable collapse finally came, the wave of regulation it brought on was hardly a surprise. “There was a great deal of political pressure,” Ofsie points out, “because so many people lost everything. As a result, the ‘pendulum’ swung from one end of the spectrum practically all to the way to the other…kind of a 180-degree turnaround. While it’s an understandable reaction, it too has a serious downside.”
While the public-at-large supports greater regulation following the past abuses, Mr. Ofsie warns that they often come at a cost. He points to the fact that increased regulation raises the cost of doing business, which means companies have to charge more.
the degree of compliance required — as well as the number of people it takes to remain compliant and their salaries — can result in higher fees to consumers. So what does Brian Ofsie see as the answer?
“A well-defined middleground needs to be found,” Ofsie states. “Right now, the paper [loans] being written is the best I’ve ever seen. Today’s technology makes it possible to pick up on any possible fraud or misrepresentation. In the case of appraisals, it allows for a far superior evaluation. Together with all that’s changed since the economic disaster in 2008, the loan markets are rebounding well.”
So well, in fact, that Mr. Ofsie is confident the middleground he ‘seeks’ is not far away. “It always takes a while after a calamity like that for things to ‘settle out’,” he notes. “I truly believe that sometime in the next two-to-three years, the pendulum will move towards the middle of the regulation spectrum. Exactly where in the middle — which covers a lot of ground — remains to be seen.”