The Dodd-Frank Act was Congress' attempt to show voters they were getting tough on lenders. Dodd-Frank was a Trojan horse diversion to make it appear that big banks were being regulated.
When the Dodd-Frank Act was passed to regulate the financial industry it did so by placing crippling and unnecessary restrictions on independent financial professionals to the benefit of the large banks. Congress was able to say “look we reformed the financial system” but all they did was make it even easier for big corporations to dominate the market and more expensive for the American consumer. The part of the law that pertained to regulating big banks was watered down due to the influence of the banking lobby.
My opponent voted for the Dodd-Frank Act and the President signed it. Not only was this a poorly conceived piece of legislation, but the instability caused in the mortgage markets during the anticipation, assimilation and implementation of the Dodd-Frank Act delayed the recovery of housing markets and with it our country's economic recovery.
Dodd-Frank required non-bank mortgage professionals to preselect a particular level of compensation and apply that to every loan, regardless of loan size. The independent broker cannot negotiate a reduced fee structure whether necessary to keep business or to give a price break to a good customer. This scheme of price fixing was not applied to banks, it was only foisted upon small independent businesses.
This is not the American Way!
This has made it harder for brokers to offer the lowest cost structure to consumers. It makes it tougher for these companies to hire and compensate their employees and harder compete with big banks. For brokers who preselect a low fixed percentage it makes doing small loans unprofitable. On large loans where brokers could previously afford to reduce the percentage of compensation, Dodd-Frank Act will not allow this.
Appraisal Independence Requirement
A further disadvantage for independent financial professionals vs. banks was that Dodd-Frank codified the “Appraisal Independence Requirement.” Since the appraisal in a loan transaction takes time to schedule, execute and deliver, it must be ordered at the start of the process. Previously a broker could begin working on the loan package prior to choosing which lender to use. Once ready to submit for underwriting the broker could choose the lender offering the best pricing on that day. The Dodd-Frank requirement that the appraisal be ordered through the lender forces homeowners to choose the lender at the start of the process rather than being able to take advantage of future price fluctuations. Longer lock periods required also increase the costs to the consumer.
A different solution to perceived appraiser malfeasance would have worked much better such as enforcement of fraud laws already on the books or instituting an appraiser black list that could have still allowed brokers to better serve their intended function of placing their clients loans with the best priced lender.
The Appraisal Management Companies that sprang into use also increased the cost of appraisals to the consumer and reduced the pay of qualified appraisers and put many out of business as AMCs distribute appraisals to the lowest bidder rather than to best qualified appraiser in the local market. Many lenders started their own AMCs creating a new profit center and ensuring the lenders refused to accept appraisals from other AMCs even though they could under the Act. All this turmoil resulted in many qualified appraisers leaving the business and the remaining appraisers with less experience were willing to work for less and do whatever the Appraisal Management Companies asked.
The banks pressured appraisers to use distressed bank owned and short-sale properties as comparable sales making it more difficult for homeowners to get financing. This served to hold the market back even once conditions had started to stabilize. This stifled the housing recovery, and our countries overall economic recovery.