The largest issue facing the mortgage industry this year is regulation. Nobody wants it but ost people view some regulation as inevitable. But how much is too much?

The Consumer Financial Protection Bureau is the current bad guy, replacing the Dodd-Frank Act that was last year's nightmare scenario (although you can't have CFPB without Dodd-Frank). It's uncommon that two opposing positions can claim to be right but in this case, the CFPB does appear to be bringing the guns to bear on the mortgage business, especially the servicing side.

But it is difficult to recall a time where regulations by themselves caused a market rout (although they may have contributed) and it wont likely work out that way this time either.

It's important to remember that this government and just about all the previous administrations for the last 100 years have been in support of housing as a social policy objective. Their right to regulate comes primarily due to the fact that finance is seen as viatl to the health of individuals as well as the nation. It comes secondly from the mechanisms the government has put into place in order to subsidize housing.

These mechanisms include the mortgage interest deduction, mortgage insurance on FHA mortgages, the “discount” of 25 basis points or more in mortgage rates based on the workings of Fannie Me and Freddie Mac, deposit insurance for depositories, the mortgage insurance deduction and others.

Some in the business may be willing to get rid of many or even all of those subsidies for a reduction in regulation. But it's doubtful this or any government would agree to that kind of deal.

To learn more about Fannie Mae, please visit: http://www.californiamortgagedirect.com/Fannie-Mae

For more information about current lending regulations, please go to: http://www.federalreserve.gov/bankinforeg/reglisting.htm