It's shaping up to be a solid year in the U.S. housing sector. New mortgage originations are up over last year's total of $1.6 trillion in new credit. Some analysts are even predicting that new mortgage volumes could get close to $2 trillion in 2016 due to a modest surge in mortgage refinancing. Furthermore, default rates are continuing to fall on one- to four-family mortgages, mirroring the generally benign credit environment across the banking industry's $9 trillion in total loans.

But beneath this calm surface, the U.S. mortgage industry is facing a crisis. Kroll Bond Rating Agency outlined some of the issues regarding liquidity and profitability in a report last month. The basic problem, however, comes down to over-regulation.

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