Fed’s top banking cop looks to unveil new regulations, with focus on mortgage lending

Core Viewpoint - The Federal Reserve is planning to introduce revised bank regulations aimed at enhancing mortgage lending by the end of March, as stated by Fed Vice Chair of Supervision Michelle Bowman [1][2]. Group 1: Regulatory Changes - The Federal Reserve has reached a consensus with other regulators on Basel III, which will involve retooling capital requirements to encourage traditional banks to re-enter the mortgage lending market [2][5]. - Bowman emphasized the need to adjust the Basel approach specifically for residential mortgage lending to facilitate banks' return to this sector [4][7]. Group 2: Impact of Previous Regulations - Post-financial crisis regulations, particularly the Dodd-Frank Act and rules from the Consumer Financial Protection Bureau (CFPB), have led to many community banks exiting the mortgage lending business, negatively impacting consumers [3][6]. - Bowman highlighted that the current regulatory framework imposes burdensome requirements and significant penalties on banks for errors in mortgage applications, which further discourages participation in mortgage lending [6]. Group 3: Future Considerations - The Fed, along with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), plans to propose adjustments to bank capital requirements that will ensure appropriate risk weightings while preventing the excesses seen during the financial crisis [5]. - Bowman advocates for a holistic approach to re-engaging banks in the mortgage space, suggesting that changes to capital requirements can be made without compromising the safety and soundness of the banking system [6][7].