President Signs Sweeping Reform Into Law, Implementation Left to Regulators

President Obama signed the the Dodd-Frank Act, the most sweeping financial reform since the Great Depression on Wednesday.

“With this law, we’ll crack down on abusive practices in the mortgage industry,” said the President during the bill signing ceremony.  “We’ll make sure that contracts are simpler, putting an end to many hidden penalties and fees in complex mortgages so folks know what they’re signing.”  Adding, “the law is designed to make sure that everybody follows the same set of rules, so that firms compete on price and quality, not on tricks and not on traps.”

Wednesday marked the official end of a hard-fought legislative battle, but just the beginning of implementing the new law.  The American Bankers Association argues that it contains a tsunami of new rules and restrictions for traditional banks that had nothing to do with causing the financial crisis in the first place.

Advertisement

“Implementation of this legislation will be challenging for regulators,” said Edward L. Yingling, ABA president and chief executive officer of the ABA.  “The result will be over 5,000 pages of new regulations on traditional banks and years of uncertainty as to what the massive new rules will mean. The impact of these rules will be very real and will be felt not only by banks, but by consumers, businesses and the broader economy.”

The law creates the Consumer Financial Protection Bureau, which has the independent authority to write and enforce rules for consumer lending in mortgages, credit cards and other financial products.  The Bureau has the authority to issue regulations, orders, or guidance that apply to reverse mortgage products.

The new Bureau is required to conduct a reverse mortgage study to determine any deceptive practices and figure out whether suitability standards are necessary.  It will also determine whether additional safeguards are needed to protect consumers from being sold reverse mortgages to fund inappropriate annuities, investments, and other financial products.

The broad language of the bill makes it very difficult for the industry to anticipate what is coming.  When the new regulations will be implemented isn’t clear, but some estimate it could take as long as 18 months.

“MBA will work to ensure that the new rules are workable for lenders, don’t stifle innovation and do not negatively impact the ability of qualified borrowers to secure mortgage credit,” said Robert Story Jr, Chairman of the Mortgage Bankers Association.  “We also look forward to helping members of the House and Senate identify issues and fixes for a technical corrections bill.”

The National Reverse Mortgage Lenders Association didn’t respond to our request for comment.

Join the Conversation (3)

see all

This is a professional community. Please use discretion when posting a comment.

  • The one provision directly affecting our industry is much different than the “industry infamous” McCaskill amendment which failed to be picked up in the Dodd-Frank Act. The name of the Act as it appears in the reconciled Act is the “Dodd-Frank Wall Street Reform and Consumer Protection Act” which many are now shortening to the “Dodd-Frank Act.”

    The reverse mortgage provision was sponsored by Representative Dina Titus (D-NV). Peter Bell did a superb job in explaining why NRMLA believes this provision is the about the best we could have expected. It requires a study rather than mandating a regimen of new regulations, and the study is to be performed under the oversight of the Fed which is considered by many to be among the best in providing regulation but avoiding overregulation. So while less than perfect, it is better than it might otherwise have been expected.

    As with most major bills where compromise was rampant, the Act is full of “divide and conquer.” For example, most state chartered mortgage bankers and brokers like Section 4404 which removes automatic preemption of certain nationally chartered financial institutions from compliance with certain state consumer laws. Of course those who lose the benefit of such preemption are not as pleased.

    Even though the MBA took the high ground, there are many provisions where their membership is greatly divided. NRMLA is wise not to take a generalized position on the bill. There seems to be general agreement that this bill needs a lot of work through amendments and in fact there may need to be more than one technical corrections bill. A general repeal of this Act is extremely doubtful. As Atare Abgamu has previously stated, after the failure in the mortgage industry what could we expect?

  • My colleagues,

    In my opinion I feel this bill will be the ruination of our financial system as we once knew it. I see small community banks failing and merging into larger banks. Small businesses will find it very difficult to stay afloat. I see our capitalistic society that is failing as it is, becoming completely socialistic.

    The consumer protection bureau will be disastrous to the reverse mortgage industry and lending as a whole. We will all be at the mercy of bureaucrats that will have only their political agenda on their minds, not that of the American people.

    NRMLA may be wise not to take a position on this bill, however, I will not take that approach, I will speak out, loud and clear! I tell all of you that this bill will haunt us for the rest of our lives unless it is repealed or revoked. We MUST start all over again with a new bill. We can not afford to amend this bill to death like every other bill seems to go through. When are we going to say, enough is enough folks!

    I am not saying we don't need financial reform, we do. What we need is a bill that makes sense and will protect the American people with out giving the federal government all the power this bill gives them. The power this bill gives the federal government has the power to rule our entire financial security and our lives.

    I know I may sound radical but I do not feel I am. Their is a lot in the 2,346 pages of this bill that is very ambiguous. It is a dangerous bill the way it is written.

    Have a good weekend,

    John A. Smaldone

  • My colleagues,rnrnIn my opinion I feel this bill will be the ruination of our financial system as we once knew it. I see small community banks failing and merging into larger banks. Small businesses will find it very difficult to stay afloat. I see our capitalistic society that is failing as it is, becoming completely socialistic.rnrnThe consumer protection bureau will be disastrous to the reverse mortgage industry and lending as a whole. We will all be at the mercy of bureaucrats that will have only their political agenda on their minds, not that of the American people.rnrnNRMLA may be wise not to take a position on this bill, however, I will not take that approach, I will speak out, loud and clear! I tell all of you that this bill will haunt us for the rest of our lives unless it is repealed or revoked. We MUST start all over again with a new bill. We can not afford to amend this bill to death like every other bill seems to go through. When are we going to say, enough is enough folks!rnrnI am not saying we don’t need financial reform, we do. What we need is a bill that makes sense and will protect the American people with out giving the federal government all the power this bill gives them. The power this bill gives the federal government has the power to rule our entire financial security and our lives.rnrnI know I may sound radical but I do not feel I am. Their is a lot in the 2,346 pages of this bill that is very ambiguous. It is a dangerous bill the way it is written.rnrnHave a good weekend,rnrnJohn A. Smaldone

string(119) "https://reversemortgagedaily.com/2010/07/22/president-signs-sweeping-reform-into-law-implementation-left-to-regulators/"

Share your opinion