1999 Banking Reform Contributed to Mortgage Underwriting Decline

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The Gramm-Leach-Billy banking reform bill was drafted by the Federal Reserve. The Office of the Controller of the Currency (OCC), was in charge of examining loans made by national banks. They routinely examined around one third of the loans made by the banks as part of their regulatory function. The bill allowed the banks to create mortgage originating subsidiary's and it excluded the OCC from examination of mortgage loans made by the subsidiary's. The Fed was given the role of regulating the subsidiary's and, under Alan Greenspan, it refused to take actions against the subsidiary's when information about the decline in lending standards, and accusations predatory behavior was brought to its attention.