How a liquidity crisis could derail the housing market

http://www.msn.com/en-us/money/realestate/how-a-liquidity-crisis-could-derail-the-housing-market/ar-BBw0uIj


We do have a significant amount of legislation and monetary policy that is meant to keep the market going in the positive direction however sometimes too much can backfire.


Regulation is up, rates are down, and widening credit spreads suggest a lack of demand in the market on which mortgage lenders depend. Even as homes sales surge to nearly a nine-year high, Whalen said a combination of unnatural monetary policy and restrictive regulations could critically wound the mortgage market, at a time when central bankers are left with few levers to pull in order to sidestep a crisis.

"While many aspects of the 2010 Dodd-Frank legislation were well-considered and necessary, KBRA is concerned that the cumulative effect of monetary policy actions, and prudential and consumer regulations, may be creating the circumstances for a future liquidity crisis," the KBRA report said.