Change is not always easy. Sometimes we choose to change and other times we are forced to change. The Great Recession forced massive change to many aspects of our lives – mostly financial. Many found themselves out of work because of the recession, and many home owners lost their homes to foreclosure; while the rest of us searched for ways to cope. It’s Mr. Trump’s housing market now.
As a result, the Dodd–Frank Wall Street Reform and Consumer Protection Act was quickly pieced together and signed into law in 2010. “Dodd-Frank”, contained over two-thousand pages of regulations and rules, many of which were to be created at a later time by many agencies and unelected bureaucrats. Dodd-Frank also created the Consumer Financial Protection Bureau, which took over RESPA, lending and consumer finance markets enforcement responsibilities. The CFPB created the “Qualified Residential Mortgage” and “Know Before You Owe” rules that significantly impacted the mortgage and housing industries.
The purpose of Dodd-Frank and the CFPB was well intentioned as Congress sought a solution to prohibit future crises. In the uncertain financial atmosphere that ensued, consumers wanted accountability from Wall Street and mortgage lenders. While some continue to generally blame Wall Street and the mortgage industry for the financial crisis, the reality is that the dynamics that created the financial crises were complex. And one can surmise from the many hearings, books, dissertations, and working papers that the crux of the financial crisis was widespread fraud that took advantage of a hot real estate market and easy money.
Six years after Dodd-Frank, the rules and regulations keep coming. Writing for the US Chamber of Commerce’s “Above the Fold,” J.D. Harrison pointed out that Dodd-Frank has created over 27,000 new federal regulations by thirty-two federal agencies impacting many industries (Dodd-Frank’s Regulatory Nightmare in One Rather Mesmerizing Illustration; uschamber.com). Compared to the previous Wall Street reform in 2002, which had two agencies issuing regulations to only five industries. Harrison stated that the Sarbanes-Oxley Act “basically sought more corporate transparency and accountability.”
Many have associated Dodd-Frank with the ongoing slow economic recovery, citing increased consumer costs and restricted lending – which effects the housing market, home buyers and sellers.
An example of increasing consumer costs is the CFPB’s TILA-RESPA Integrated Disclosure. The Mortgage Bankers Association (mba.org) recently reported that compliance with TRID costs on average $210 per mortgage, some of which is recouped from the consumer. The rule is also responsible for “slower application to closing times.”
A recent appellate case highlighted some of these Dodd-Frank outcomes. The CFPB sought fines against a mortgage lender for their years of compliance with HUD’s interpretation of a rule; the fines were imposed retroactively for not complying with a new CFPB reinterpretation of the same rule. Additionally, the court focused on the CFPB’s unilateral ability to impose rules and fines without oversight.
Repeal and Replace is a talking point that is not exclusively for the Affordable Care Act. Shortly after Donald Trump’s election as the forty-fifth President of the United States, many industry insiders and pundits are already anticipating the future of Dodd-Frank and the CFPB. Mr. Trump’s plan for financial services is posted to the President-Elect’s site (greatagain.gov) stating: “The Dodd-Frank economy does not work for working people. Bureaucratic red tape and Washington mandates are not the answer. The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”
Copyright © Dan Krell
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.