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ALL IN 

adjusted, rather than just the lower starting rate. It warned lenders that low-
documentation loans should be “used with caution.” 
Immediately, the industry was up in arms. The American Bankers Association
said the guidance “overstate[d] the risk of non-traditional mortgages.”  Other mar-
ket participants complained that the guidance required them to assume “a worst case
scenario,” that is, the scenario in which borrowers would have to make the full pay-
ment when rates adjusted.  They disputed the warning on low-documentation
loans, maintaining that “almost any form of documentation can be appropriate.” 
They denied that better disclosures were required to protect borrowers from the risks
of nontraditional mortgages, arguing that they were “not aware of any empirical evi-
dence that supports the need for further consumer protection standards.” 
The need for guidance was controversial within the agencies, too. “We got
tremendous pushback from the industry as well as Congress as well as, you know, in-
ternally,” the Fed’s Siddique told the FCIC. “Because it was stifling innovation, poten-
tially, and it was denying the American dream to many people.” 
The pressures to weaken and delay the guidance were strong and came from
many sources. Opposition by the Office of Thrift Supervision helped delay the mort-
gage guidance for almost a year.  Bies said, “There was some real concern about if
the Fed tightened down on [the banks it regulated], whether that would create an un-
level playing field . . . [for] stand-alone mortgage lenders whom the [Fed] did not reg-
ulate.” Another challenge to regulating the mortgage market was Congress. She
recalled an occasion when she testified about a proposed rule and “members of Con-
gress [said] that we were going to deny the dream of homeownership to Americans if
we put this new stronger standard in place.” 
When guidance was put in place in , regulators policed their guidance
through bank examinations and informal measures such as “voluntary agreements”
with supervised institutions.
It also appeared some institutions switched regulators in search of more lenient
treatment. In December , Countrywide applied to switch regulators from the Fed
and OCC to the OTS. Countrywide’s move came after several months of evaluation
within the company about the benefits of OTS regulation, many of which were pro-
moted by the OTS itself over the course of an “outreach effort” initiated in mid-
after John Reich became director of the agency. Publicly, Countrywide stated that the
decision to switch to the OTS was driven by the desire to have one, housing-focused
regulator, rather than separate regulators for the bank and the holding company. 
However, other factors came into play as well. The OCC’s top Countrywide exam-
iner told the FCIC that Countrywide CEO Angelo Mozilo and President and COO
David Sambol thought the OCC’s position on property appraisals would be “killing
the business.”  An internal July  Countrywide briefing paper noted, “The OTS
regulation of holding companies is not as intrusive as that of the Federal Reserve. In
particular, the OTS rarely conducts extensive onsite examinations and when they do
conduct an onsite examination they are generally not considered intrusive to the
holding company.” The briefing paper also noted, “The OTS generally is considered a