I’m sure you’ve heard the stories and seen the news reports that the Trump Administration is making changes to the Dodd-Frank Act. The House has already passed a plan to reduce some of the powers of the act. The Senate is set to vote on it soon. I bring it up here because the propsosed legislation would reduce some of the rules lenders have to adhere to in order to offer new home financing.
Fmr. Congressman Barney Frank and Fmr. Congressman Chris Dodd
After the mortgage crisis in the early 2000’s the Obama administration signed into law the Dodd-Frank Act of 2010. The legislation was the most sweeping financial regulation since the Great Depression. There are lots of twists and turns in the legislation, but perhaps the larger highlights of the act are:
- Created the Consumer Financial Protection Bureau (CFPB)
- Created rules governing 38 “too big to fail” financial institutions
- Increased the federal reporting requirements
Naturally, banks and lenders have complained to their congress people and created lobbying strategies since implementation. It looks like the complaints have finally found audience.
If you’ve worked with me, or we’ve had a conversation and we’ve discussed the documentation requirements for a new home loan, you’ve probably heard me say “if it’s too much, you should call your congress person and complain that the implementation of Dodd-Frank is too oppressive.” I generally don’t pull that line out until someone exasperatingly says “that’s too much information, “‘ or “I cant find that document.” The loan officer and their team usually receive the ire of buyers at some point during the process. Looks like I may be able to retire that statement.
The latest legislation seeks to reduce the burden on smaller banks and banks that lend to one another, not direct to consumers. The Senate passed the bipartisan bill in March, now we are just waiting for it to become law. Once it does, it’s expected that:
- The threshold for mandatory tough bank oversight would be increased to $250Million in assets managed from the current level of $50M in assets managed.
- Regulation on small and community banks would be reduced.
- More options will be made available for new consumer protections after the Equifax data breach last year.
President Trump said he will sign the version of the bill that comes to his desk. Among the concerns about the reduced legislation, opposition highlights:
- The legislation could open taxpayers to more liability if the banks fail.
- Reduced regulation may lead to banks discriminating once again in how they lend to homebuyers.
We are all awaiting what happens next.
As always, if you or someone you know is in the market for a new home loan, don’t hesitate to contact me.