President Signs Dodd-Frank Reform into Law

Written By: Joel Palmer, Op-Ed Writer

The U.S. House decided to compromise on its plan to reform the Dodd-Frank Act, voting last week to approve the Senate’s less controversial version.

President Trump subsequently signed S. 2155, the Economic Growth, Economic Growth, Regulatory Relief, and Consumer Protection Act, into law.

“Since its passage in 2010, Dodd-Frank has dealt a huge blow to community banking.  As a candidate, I pledged that we would rescue these community banks from Dodd-Frank — the disaster of Dodd-Frank — and now we are keeping that commitment,” said President Trump during the signing of the bill. “Dodd-Frank’s complex and costly regulations gave large banks an unfair competitive advantage at the expense of neighborhood banks all over the country.”
The House had passed its own version of Dodd-Frank reform last year, dubbed the CHOICE Act (Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act).

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But with reform proponents holding a much slimmer margin in the Senate, its version of the bill needed approval from moderate Democrats and independents. S. 2155 passed the Senate with two-thirds approval in March. One of the major measures the House gave up on by passing the Senate version was stripping the authority of the Consumer Financial Protection Bureau (CFPB).

For all the new law lacks, it was praised by those representing mortgage lenders.  

The Mortgage Bankers Association said the law will “protect consumers and provide greater access to mortgage credit.” MBA pointed out the following provisions of the law:

•    SAFE Act amendments that provide mortgage loan originators with 120 days of transitional authority to originate when moving from a federal depository to a non-bank (or across state lines)

•    Subjecting Property Assessed Clean Lending (PACE) or property retrofit loans to Truth In Lending Act consumer protection

•    Protections to U.S. veterans who use the VA Home Loan program 

•    Clarifying the High Volatility Commercial Real Estate rule to help promote sustainable construction and development

•    Targeted TILA/RESPA Integrated Disclosure fixes

Independent Community Bankers of America (ICBA) President and CEO R Rebeca Romero Rainey added: “This landmark law signed by the president today unravels many of the suffocating regulatory burdens our nation’s community banks face and puts community banks in a much better position to unleash their full economic potential to the benefit of their customers and communities.”

**WEBINAR: Dodd-Frank Roll Back - "New Rules Defined" - Click to Enroll now >>

In its summary of the law, ICBA pointed out the following provisions that should help mortgage lenders, mortgage underwriters and mortgage processors:

•    Raising the threshold for Dodd-Frank regulatory standards. Institutions with assets of $50 billion to $100 billion are exempt from Dodd-Frank enhanced prudential standards. Those with assets of $100 billion to $250 billion will be exempt from Dodd-Frank enhanced prudential standards other than stress testing 18 months after the date of enactment, however, the Federal Reserve will have discretion to apply the prudential standards to these banks).

•    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.

•    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.

For all the praise and criticism of the legislation, the Brookings Institution points out that the newly signed law “leaves intact the core Dodd-Frank framework: increasingly tougher regulation on larger banks, new authority and discretion for the Federal Reserve, enhanced authority for the federal government to unwind a failed financial institution, and the creation of new federal regulators, including the Consumer Financial Protection Bureau (CFPB).”

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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