Dodd Frank Mortgage Make You Harder To Get Home Loan!

by Dori Tery on December 20, 2013

The Dodd Frank Mortgage Reform Will Make It More Difficult To Secure A Loan

The Dodd Frank mortgage reform bill is also known as The Dodd-Frank Reform and Consumer Protection Act. It is also known by some other less than flattering names, but in a nutshell, it became law in response to the recession and financial devastation that hit the United States in 2008. This law contains some of the most drastic changes to how financial institutions are regulated since the regulations that were put into place after the Great Depression. The law was proposed by President Obama in 2009 and was signed into law the next year.

The law was crafted by a democratic that held a seat in the House (Barney Frank, D-Mass) and one that held a seat in the Senate ( Chris Dodd, D-Conn.). These two men also once held positions as the Financial Services Committee Chair and the Banking Committee Chair respectively. The Dodd Frank mortgage law was marketed as a way to prevent banks from approving questionable loans to risky customers. This way the rate of foreclosures would be reduced and banks would no longer be eligible for bailouts due to making bad business decisions.

However, the law has not worked the way that proponents claimed that it would. The law contains a lot of wording that correlates to certain things that helped to start the recession in the first place. The government is still heavily involved in many financial decisions in the mortgage industry, and special interest groups have figured out loopholes in the law.

Many large firms such as Hedge Funds lost out when the new law was put into place. These firms must now submit over 192 pages of a form that can cost upwards of $100,000 for the firm to complete.

Fannie Mae and Freddie Mac appear to be winners after the new law were put into place. These two institutions were responsible for approving many of the risky mortgages that precipitated the financial crisis; however these two institutions were given some of the largest bailouts in 2008.

The Dodd Frank Mortgage Law Monitors All The Financial Banking Institutions Now!

The Dodd Frank mortgage law created several new government agencies, and these agencies have oversight over non-banking institutions as well as banking institutions. Almost 400 new rules were written so all parts of the law could take effect. Taxpayers will foot the bill to ensure that these new government agencies continue to run.

The law is extremely harsh towards mortgage brokers and loan officers. As a result, many of these professionals may have to close their doors because of the new rules. Loan officers are now required to be:

  • Qualified
  • Licensed
  • Registered

They must also have a unique identifier assigned to them. They are restricted on how much they can charge on a loan origination, and this reduce the banks the ability to offer average sized loans of $100,000 to $150,000.

Because of the financial crisis of the late-2000s, the Dodd Frank mortgage law was passed. The law appears to be good on the surface, but still fails to address some of the issues that caused the financial meltdown to occur in the first place.

dodd frank mortgage

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