The Dodd Frank Act

The Dodd Frank  Act is a monumental piece of legislation set in place to govern and regulate the mortgage industry in January 2014.  It is comprised of 8 rules set forth by the government in response to the Mortgage and Real Estate meltdown in the early 2000’s. 

Why Dodd Frank?

The purpose of Dodd Frank is to govern mortgage lenders and to ensure that they are following practices and procedures that protect consumers.  Dodd Frank addresses issues from Loan Officer compensation to appraisal regulations and underwriting standards to homebuyer homeownership educational requirements.  The goal of the bill is/was to protect consumers from predatory mortgage lending and to help make sure lenders are originating mortgage loans that homebuyers can afford.

The Dodd Frank Act is one of the most complex pieces of bills ever drafted by our government.  The Dodd Frank Act was drafted in response to an environment in the early 2000’s where mortgage lenders were irresponsibly lending to nearly anyone that applied for a home loan.  Since that time and prior to the issuance of the bill years later the mortgage industry had self-corrected.  This self correction made underwriting guidelines much more stringent to avoid the problems created in the early 2000’s.   As a result, much of Dodd Frank requirements mirrored and affirmed what mortgage lenders were already doing in 2014.

How Does Dodd Frank Impact You?

One of the most important and significant sections of The Dodd Frank Act is the Ability to Repay Rule.  This rule has had the largest impact on homebuyers applying for a new home loan.  However, the impact that the Ability to Repay Rule and the overall Dodd Frank Act has had is not as significant as many feared.   One of the primary reasons is that there is a 7 year “transitional provision” within the Dodd Frank Act that allows lenders to stick to many of the same guidelines they used in the pre-Dodd Frank era.

The 8 Dodd Fank Rules:

1. Abitlity to Repay
2. 2013 HOEPA
3. Loan Originator
4. ECOA Valuations
5. TILA HPML Appraisals
6. TILA HPML Escrows
7. Servicing TILA
8. Servicing RESPA

Click here for more information on each of the 8 Dodd Frank Rules

The Ability to Repay Rule

By Jeremy House


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