It’s been over two years since the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by the President and the rules governing mortgage loans are starting to effect the way lenders are doing business.
One of the major implementations of the law was the establishment of the Consumer Financial Protection Bureau (CFPD), an independent federal agency tasked with regulating consumer protection in regard to mortgage loans. The law and agency came about following the subprime mortgage crisis of 2008, where large banks and hedge funds (known as shadow banks) issued loans to borrowers with poor credit histories and thus had a higher risk of defaulting on their mortgage. This triggered millions of foreclosures nationwide and many analysts put the monetary losses in the trillions.
In its most basic terms, the Dodd-Frank Act places extreme restrictions and regulations on mortgage lenders to ensure that such cavalier lending practices don’t continue. The bill itself is hundreds of pages long and contains 16 major reforms for consumer protection going forward.
The idea of “too big to fail” is one of the main focuses of the act as it establishes the Financial Stability Oversight Council that can decide whether a bank is too large for its own good. Large banks must have a plan in place for a fast shutdown should they be determined too big by the counsel.
Another large implementation that recently went into effect in July of last year was the Volcker Rule, which prevents banks from owning or investing in hedge funds or private equity firms. This will help consumers by stabilizing the market and forcing banks to focus more on their core services instead of making billions through ridiculous financial schemes and shady investments.
Part of the reason the financial crisis occurred in the first place was because banks saw opportunities to boost their profits through other means and they lost focus on their primary objective; to keep our money safe. CEO’s saw massive, six, seven and even eight figure bonuses while ordinary Americans were losing their life savings. The Volcker Rule ensures that kind of behavior from big banks is a thing of the past.
Above and beyond all else, Dodd-Frank and the CPFD aim to protect consumers from the “unscrupulous business” practices of big banks. Adhering to the rules and regulations has always been a primary focus at Ace Mortgage Loan in Coral Springs, FL. Smaller home loan companies like Ace place a unique focus on representing the best interest of their clients, not how much money they can make using half-baked financial gymnastics. Ace Mortgage Loan is committed to providing the best customer service and support in all of South Florida, including Boca Raton, Delray Beach and many more. Call today and speak with one of our mortgage loan experts!