The new laws make mortgage fraud its own felony punishable by up to two years in prison, restrict adjustable rate mortgages and outlaw stated-income loans - so-called "liars' loans" that came to symbolize the era's lending excesses.
While housing activists cheered the regulatory crackdown, it is expected to knock out a sizable chunk of the mortgage lending business in the Twin Cities, affecting consumers and business alike. Just how much is hard to say since a sagging housing market and tightened lending standards due to the crumbling subprime mortgage market already have cut into business.
"It's going to slow the industry down," said Louis Olsen, president of River City Mortgage and Financial, a mid-sized lender in Eagan that has stopped making stated-income loans. "I think everybody has pretty much succumbed to the fact that everybody has to do business the way we did 10 years ago."