Moving Forward Beyond the Economic Crisis: Innovative Proposals

New Regulatory Policies

“History does not repeat itself, it rhymes”

Mark Twain

The Dodd-Frank Wall Street Reform and Consumer Protection

Act

Overview of HR Dodd-Frank Wall Street Reform and 

4173: Consumer Protection Act Subtitle A

Voting members• Secretary of the Treasury, who shall

serve as Chairperson of the Council• Chairman of the Board of Governors• Comptroller of the Currency• Director of the Bureau (CFPB)• Chairman of the Commission (SEC)• Chairperson of the Corporation

(FDIC)• Chairperson of the Commodity

Futures Trading Commission• Director of the Federal Housing

Finance Agency• Chairman of the National Credit

Union Administration Board, and• an independent member appointed

by the President, having insurance expertise

Nonvoting members • Director of the Office of Financial

Research• Director of the Federal Insurance

Office• a State insurance commissioner• a State banking supervisor• a State securities commissioner 

Key Attributes of CFPB Act• Title X : Establishes CFPB as an independent

entity - housed in the Federal Reserve• Scope of Coverage : An insured depository

institution or credit union with total assets of more than $10B and any affiliate thereof and

• A non-depository institution that:1.offers origination, brokerage, or servicing of loans

secured by real estate• is a larger participant of a market for other consumer

financial products or services • offers or provides to a consumer any private education

loan• offers or provides to a consumer a payday loan 

Transfer of functionsTo be transferred between January 21, 2011 and July 21, 2011

• Board of Governors

• Comptroller of the Currency

• Office of Thrift Supervision

• Federal Deposit Insurance Corp

• Federal Trade Commission

• National Credit Union Administration

• Department of Housing and Urban Development 

Amended Acts• Inspector General Act of 1978• Privacy Act of 1974• Alternative Mortgage Transaction Parity Act of 1982• Electronic Fund Transfer Act• Equal Credit Opportunity Act• Expedited Funds Availability Act• Fair Credit Billing Act• Fair Credit Reporting Act and the Fair 2003• Accurate Credit Transactions Act of 2003• Fair Debt Collection Practices• Federal Deposit Insurance Act• Federal Financial Institutions Examination Council Act of 1978• Gramm-Leach-Bliley Act• Home Mortgage Disclosure Act• Homeowners Protection Act of 1998• Home Ownership and Equity Protection Act of 1994• Omnibus Appropriations Act of 2009• Real Estate Settlement Procedures Act of 1974• Interstate Land Sales Full Disclosures Act• Right to Financial Privacy Act of 1978• Secure and Fair Enforcement for Mortgage Licensing Act of 2009• Truth in Lending Act• Truth in Savings Act• Telemarketing and Consumer Fraud and Abuse Prevention Act• Paperwork Reduction Act• United States Code 

General Powers of BureauPurpose:  to ensure that all consumers have access to markets and that markets are fair,

transparent, and competitive

Title XII – Improving Access to Mainstream Financial Institutions

Purpose:  to encourage initiatives for financial products and services that are appropriate for the unbanked

1. Enable low-and moderate-income individuals to establish one or more accounts in a federally insured depository institution that are appropriate to meet the financial needs of such individuals and

2. To improve access to the provision of accounts, on reasonable terms for low-and moderate-income individuals, including small-dollar value loans 

Title XIV – Mortgage Reform and Anti-Predatory Lending Act

• To take effect between July 21, 2012 and July 21, 2013o Residential mortgage loan origination

Purpose is to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive or abusive.

• Places restrictions on mortgage originators, how they conduct business, and how they are paid (bans ysp)

• Establishes liability for violations

Subtitle B – Minimum Standards for Mortgages

No creditor may make a residential mortgage loan unless the creditor makes a reasonable and good faith determination based on verified and documented information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan, according to its terms, and all applicable taxes, insurance and assessments.

Specifies the criteria for a qualified mortgage

Doubled the amount of civil money penalties

Mortgage contracts will be easier to read and understand

Subtitle C-High Cost Mortgages loans

• Amends HOEPA and expands its coverage to home purchase loans o Repealed Prepayment Penalty Provisions o No Balloon Payments

Establishes Office of Housing Counseling

Program emphasis in areas with a

GAPS

1.Intermediaries that remain Out of Scope2.The CFPB cannot pass a policy on its

own3.Regulators-not regulations-were the major

cause of the subprime meltdown4.There continues to be too many

regulators5.Auto dealers and Insurance products are

exempt

6. No CRA rulemaking or supervisory authority1.Much to be done to tentacles

• FNMA and Freddie MAC • Rating agencies• Securitization market• Proprietary trading

GAPS

Conclusion

• Minimum standards for mortgageso Banned loans with predatory features

• Eliminated yield spread premiums• Increased transparency• Streamlined mortgage documents• Established financial liability for mortgage

originators• Downside – left in place a fractured regulatory

regime