Barriers to Market Discipline: A Comparative Study of Mortgage Market Reforms

53 Pages Posted: 8 Dec 2011

See all articles by Vincent DiLorenzo

Vincent DiLorenzo

St. John's University - School of Law

Date Written: December 7, 2011


This paper explores mortgage market reforms in the U.S. and U.K. in response to the recent mortgage market crisis. Two issues are examined. First, the paper explores the extent to which regulatory bodies have recognized behavioral barriers to market discipline on the part of not only consumers but also industry actors. Second the paper examines the varied response in the U.S. and U.K. to both market limitations and behavioral limitations to self-protection and self-discipline that led to unsafe lending practices in the period 2003 through 2007. The greater emphasis on rules-based regulation in the U.S. after 2008 is compared with the continued reliance primarily on principles-based regulation in the U.K. This difference, however, is not what will determine future outcomes. Rather, the main finding is that future compliance with safety and soundness requirements will depend on a regulatory policy and enforcement record that will alter the industry’s past conclusion that evasion, or even noncompliance, with legal requirements is a reasonable business decision based on cost-benefit evaluations. In light of that finding, the U.K.’s new enforcement policy and record is far more likely to lead to compliance than the light-touch enforcement policy and record that has continued in the U.S.

Keywords: financial reforms, mortgage market, Dodd-Frank Act

JEL Classification: D81, D78, K23, K42

Suggested Citation

DiLorenzo, Vincent, Barriers to Market Discipline: A Comparative Study of Mortgage Market Reforms (December 7, 2011). St. John's Legal Studies Research Paper No. 1969405, Available at SSRN: or

Vincent DiLorenzo (Contact Author)

St. John's University - School of Law ( email )

8000 Utopia Parkway
Jamaica, NY 11439
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics