If they are tightened, less spending produces less income. The main reason for imposing mortgage credit controls is to smooth out the flow of consumer spending to keep the economy from inflating. Among all of the selective controls, mortgage credit controls have had the shortest life. They were imposed in 1950 at the start of the Korean conflict and suspended in 1952. The Fed no longer maintains mortgage credit cotrols.
Regulations apply also to convertible bonds and short sales.
If the price of a security declines after the loan is made, the law does not require the borrower either to put up additional collateral or to reduce his indebtedness. But the lender, on his own, may require additional collateral. The main reason for imposing margin controls is to reduce fluctuations in stock prices caused by the extension of unregulated credit for securities purchases. As stabilization tool, however, margin requirements have broader effects. As margin requirements are lowered, the demand for securities increases and securities prices rise.