Senate passes Dodd-Frank reform bill

Written By: Joel Palmer, Op-Ed Writer

Efforts to reform the Dodd-Frank Act took a major step forward last week, as the Senate passed S. 2155, the Economic Growth, Economic Growth, Regulatory Relief, and Consumer Protection Act.

But it may be months, if not longer before a final bill makes its way to the President’s desk.

The House and Senate have both passed measures to scale back Dodd-Frank, which included a host of regulations meant to combat conditions that lead to the 2008 financial crisis.

The problem is there is a wide gap between the two versions. The House bill, dubbed the CHOICE Act (Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act), would have, among other measures, stripped the authority of the Consumer Financial Protection Bureau (CFPB).

The CHOICE Act received no Democrat support when it passed last June. At the time, political watchers predicted it had no chance of passing the Senate, where Republicans have a much slimmer majority.

So instead, the Senate drafted a less controversial version of Dodd-Frank Reform, which helped it gain approval from moderate Democrats and independents.

There is virtually no chance of those Democrats supporters of the Senate bill accepting the House version. Therefore, attempts to bring the Senate version more in line with the stricter House version will ultimately fail.

The question becomes whether House Republicans can compromise enough on legislation and how that compromise occurs. They may try to add amendments to the Senate bill, which will likely meet defeat. There could also be a conference committee of both chambers to try to resolve differences and draft a combined bill.

What would ensure some reform measures actually occur is if the House voted on the Senate version without changes. But Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, has said he’s not ready to “rubber-stamp” the Senate bill, despite President Trump already stating that he would sign the Senate version. 

“The President looks forward to discussing any further revisions the House is interested in making, with the goal of bipartisan, pro-growth Dodd-Frank relief reaching his desk as soon as possible,” said a statement from the White House.

S. 2155 raises the threshold for Dodd-Frank regulatory standards from $50 billion in assets to $250 billion in assets. This is designed to shield small lenders from regulations that were aimed at large banks and Wall Street firms.

Other provisions of the bill include: 

•    An exemption from a CFPB rule that requires lenders to collect certain data under the Home Mortgage Disclosure Act. The exemption applies just to the new reporting requirements mandated by Dodd-Frank, not all reporting requirements. Furthermore, it applies to banks and credit unions that originate less than 500 open-ended and 500 closed-end mortgages. Critics argue this provision makes it easier for lenders to discriminate. 

•    The ability for lenders to waive appraisals for certain transactions in rural areas valued at less than $400,000 if a certified appraiser cannot be found in a timely manner.

•    An exemption from the Volcker Rule for banks with total trading assets and liabilities not exceeding 5 percent of total assets.

•    Removal of a restriction on credit union member business loans that required them to be secured by a primary residence. This would enable credit unions to make loans on construction-to-permanent loans.

•    Removal of the three-day waiting period required under TILA-RESPA mortgage disclosure when a creditor extends a second offer of credit with a lower APR.

•    A provision that permits manufactured-home companies to steer borrowers to their preferred, affiliated lenders.

•    A provision that requires VA lenders to demonstrate “material benefit” to borrowers looking to refinance.

About the Author

As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.

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