WashU Expert: Looser mortgage lending rules, regulation will destabilize financial system

April 24, 2026 - 22:53

A sweeping executive order signed by President Donald Trump is poised to weaken the stability of the U.S. financial system by loosening mortgage lending standards and dismantling key regulatory oversight, according to Brittany Lewis, an assistant professor of finance at Washington University in St. Louis’ Olin Business School.

Lewis argues that the order, which targets decades-old rules designed to prevent predatory lending and excessive risk-taking, could recreate the conditions that led to the 2008 financial crisis. By reducing requirements for down payments, income verification, and debt-to-income ratios, the policy encourages lenders to issue riskier mortgages. “When you remove the guardrails, you invite a race to the bottom,” Lewis said. “Lenders will compete for volume, not quality, and borrowers will take on debt they cannot afford.”

The professor also warned that rolling back oversight from agencies like the Consumer Financial Protection Bureau (CFPB) removes a critical check on abusive practices. Without robust enforcement, she explained, financial institutions may prioritize short-term profits over long-term solvency. “The financial system is only as strong as its weakest link,” Lewis added. “Looser rules for mortgages mean more defaults, which ripple through banks, investors, and ultimately, taxpayers.”

Lewis emphasized that while deregulation can spur economic growth, the current approach lacks the necessary safeguards to prevent systemic risk. She called for a balanced strategy that encourages lending without sacrificing the protections put in place after the 2008 collapse. “We are repeating history’s mistakes,” she concluded. “The cost of instability is far greater than the short-term gains from looser credit.”