Friday, February 17, 2017 / by Nicole Solari
Unless you’ve been living under a rock, you know anything mentioning the president’s name is going to cause back and forth between Democrats and Republicans.
This column is not intended to be political in any way, but rather my own commentary on the Dodd-Frank legislation, its effects and why doing away with it will be a positive for our industry.
Love or hate the Donald, keep the comments focused on this topic, please.
President Trump recently signed orders to begin scaling back regulatory measures put in place after the tragic financial meltdown of 2008, most of which were a part of one giant piece of legislation known as Dodd-Frank. The Dodd-Frank bill placed an enormous burden on the mortgage and real estate industries, increased costs for consumers and lenders alike, and made getting a loan about as pleasant as getting a root canal. That much cannot be disputed.
Included in Dodd-Frank was the Home Valuation Code of Conduct, or as real estate professionals know it, the action that placed appraisers in ivory towers where no one could speak to them or reach them, and allowed some unqualified and terrible appraisers to begin doing tons of work out of areas they were familiar with.
Also in there was the Secure and Fair Enforcement for Mortgage Licensing Act, which is one I do actually agree with – those doing mortgages should be licensed and regulated to make sure the (most) shady characters from the mid-2000s stay gone. However, as with most other things the government does, the implementation and rules governing law are extremely lacking.
Then there is TILA-RESPA Integrated Disclosure – go back to the end of 2015 and beginning of 2016, and you’ll find countless examples of TRID impairing consumers more than helping them, confusing them instead of making things more clear, and again raising costs by increasing the compliance levels that every lender has to achieve.
Ability to Repay and the lovely Qualified Mortgage were also parts of Dodd-Frank that have made the mortgage industry move from light’s speed to a snail’s pace when it comes to funding loans.
Dodd-Frank was (this is fact, not opinion) a hasty move for Congress to have the ability to say “we did something” in reaction to the financial crisis. They should have done something, but probably not Dodd-Frank. The Home Valuation Code of Conduct made business miserable for appraisers – long-standing relationships between consummate professionals were destroyed overnight, with appraisers left to pick from the scraps offered them by the resulting Appraisal Management Companies.
TRID was an effort to simplify disclosures, enlighten borrowers and ensure lenders were compliant in uniformity. The problem with TRID is exactly what we all knew the problem with TRID would be. Simply, you can’t legislate financial smarts, and you can’t force someone to read disclosures that are put in front of them. Whether you provide documents to someone three days before a settlement, five days before or two hours before, you can’t force them to read and understand them. TRID was a waste of time, and a grossly expensive one.
So far into his presidency, Donald Trump is walking on a very slippery slope. Rolling back Dodd-Frank is, in my opinion, a great idea, but replacement regulations – offered largely from those most familiar with the industry – need to be created or for the decent ones, remain in place.
Democrats will politicize the scaling back as an attack on consumers and a gift for Wall Street, but they’ll fail to mention it was a Democratic government that repealed the Glass-Steagall Act, which allowed banks to make risky investments and offer the risky products that led to the market crash. Republicans will hail this as jump-starting the economy, undoing the anti-business climate created by the previous administration, and will pursue further deregulation as they often do.
My hope is that our president knows how slippery of a slope he’s on, continues to get rid of pointless regulations that have helped no one while recognizing the need for regulation and the vital importance of keeping scam artists and fraudsters away from the housing industry and all consumers.
The final outcome will remain to be seen.
One thing I’m certain of, scaling back Dodd-Frank and replacing it with common-sense measures will reduce loan costs for consumers, reduce unfair compliance burdens that delay the loan process for borrowers and allow much-needed products back into the marketplace.