Rediculousness in Regulations

Maybe I'm too cynical, but the intro paragraph to this news story really make me scratch my head (please...no jokes about this story coming from Idaho, my home state...).

"COEUR D'ALENE, Idaho, June 1 (Reuters) - As regulators in Washington hammer out a final directive on how the mortgage industry should provide hybrid products, state regulators say the regulation must also address the ability of borrowers to repay loans on their homes."

Do we really need MORE regulations? It seems ridiculously obvious that a lender must address the ability of the borrower to repay the loan. But then you look at the subprime mess and wonder how many of the subprime folks actually focused about the borrower's ability to repay their debt as they sold exotics and Option-ARMS. Maybe regulation is needed to reign in the less ethical lenders, but then again many of the less credible ones are already out of business.

But then don't you wonder about the responsibility of the borrower? Doesn't the borrower ultimately have to be responsible to repay the loan that he or she willingly enters into? Some folks might say the government needs to protect the uneducated borrower...but where does that protection end? If a borrower doesn't understand the risk and obligation in obtaining a mortgage, will the buyer need government intervention to take care of the property, to make timely payments, to manage their bank account and control future borrowing (and spending)? Yes, protection from unethical and unscrupulous lenders is important, but borrowers, sooner or later, must understand what they're doing and take responsibility for their decisions. Presently most states have decent consumer protection statutes that can protect borrowers from blatant deception and grossly unfair practices...maybe that's enough.

I believe home ownership is a wonderful privilege and I would love to see everyone in this great country own their own piece of the American dream. But ownership comes with responsibility. Borrowing hundreds of thousands of dollars is not a "right"...it's a privilege that should not be undertaken lightly. The consequences of borrowing too soon or without adequate planning can lead to years of repercussions.

So how do we balance responsible lending with responsible borrowing? How much should we allow the government to regulate lenders who are willing to risk their money on potentially irresponsible borrowers (then again, don't we all pay when the system fails)? Is education the answer? Is market self-regulation the answer?

Here's a link the article: http://www.reuters.com/article/bondsNews/idUSN0132169320070601