“Dodd-Frank, the 2,300-page financial “reform” monstrosity spearheaded by Capitol Hill corruptocrats, turned 1 this week. It made too-big banks bigger. It made too-risky incentives riskier. It made a lousy economy lousier. Billed as a “consumer protection” act, Dodd-Frank has succeeded phenomenally – in protecting and stimulating the business-stifling business of government.”
Michelle Malkin has said ‘Happy 1st Birthday’ to Dodd-Frank by observing that only 12% of its rules have been issued. Even though the math of it leads us to expect that by the end of 2018 we might expect the bureaucracy to have completed its issuance of rules, in fact there is little hope that this monstrous bill will ever be fully implemented. If God is gracious to us, it will not.
The effect of Dodd-Frank on divorcing clients is the same as it is on all homeowners and borrowers: disastrous. But, it’s difficult to explain all of it especially when no one person knows or understand the entire bill.
It’s a bit complicated and the comment period is just closing on the matter but the basic reasoning is that if borrowers have more “skin in the game” default is lessened by that same degree of “skin.” Also, the rule doesn’t put direct limits on mortgage originating and lending. Rather it requires banks to retain a certain risk in its portfolio of loans if they do not meet the standards. It’s a back-door way of setting loan standards.
The effect of the QRM rule could be that maximum LTV (Loan To Value) ratios in most loans will be limited to 80% for purchases and 75% for refinances. At least, that’s what the current bureaucratic banter is about.
You’re right – I’m reading your mind right now – that would kill the housing market. The “skin-in-the-game” argument only sounds plausible. It really doesn’t hold water. No research has shown that greater down payments decrease the likelihood of default. Loss of a job is still the #1 trigger for foreclosure. Second to that seems to be divorce, of all things! It’s amazing and a school child could figure it out – when people don’t get paid, they usually cannot make their house payments. The amount of money they put down on the house doesn’t factor into this inability to make the mortgage payments.
Other than calling your congressman and senator and telling them to repeal Dodd-Frank, there’s not a lot one can do other than cross one’s fingers – not a good strategy, is it. 3 There are bills in both houses of Congress that seek to repeal Dodd-Frank. My fear is that a Republican House will piece-meal its repeal by trying to fix it; and the Democrat Senate will tinker around a bit with it and perhaps make it more incomprehensible and harmful.
1 Text of Dodd-Frank can be accessed at: http://docs.house.gov/rules/finserv/111_hr4173_finsrvcr.pdf
2 Michelle Malkin’s article can be accessed at: http://www.creators.com/opinion/michelle-malkin/the-beltway-industry-full-time-employment-act.html
3 H.R. 87 in the house and S. 746, S. 712 and an amendment (S.AMDT.394) to the Economic Development Revitalization Act of 2011 on June 7 to repeal the law.