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Mar 15, 2017

Trump vs. Dodd-Frank And The Down-Payment Myth

Sponsored Content provided by Patrick Stoy - Mortgage Consultant/Owner, Market Consulting Mortgage

The reports about President Trump taking on Dodd-Frank may be a bit confusing. Who is this guy anyway, and why is he so unpopular? Did they get the order of his name wrong?

Dodd-Frank actually refers to the Dodd–Frank Wall Street Reform and Consumer Protection Act, a bill that was created in response to the financial crisis. It was named after Barney Frank, former chairman of the Financial Services Committee, and Chris Dodd, former chairman of the Senate Banking Committee, to recognize them for introducing the bill to the House and for their involvement in getting it passed.

The bill had lofty goals: promoting financial stability by improving accountability and transparency; ending financial bailouts of large institutions; and protecting taxpayers from abusive financial practices.       

Both sides of the aisle tend to agree on the noble aims of the Consumer Financial Protection Bureau (CFPB), established by Dodd-Frank. Turns out most constituents are likely to turn a favorable ear towards an idea that is based on the importance of protecting them. Go figure.

So, what’s the problem?

The CFPB has simplified the paperwork associated with real estate transactions, and it has established regulations aimed at protecting consumers from predatory lending practices, such as payday loans.

But many have criticized the CFPB and Dodd-Frank for imposing burdensome regulations and reducing the availability of credit to small businesses. This appears to be one of President Trump’s main issues with the bill. In an article by CBS News, Trump said he has friends with ‘nice businesses’ who can’t get the money they need because of the banks’ forced compliance with Dodd-Frank regulations.

A largely unforeseen side effect of the bill is that it has put many smaller lending institutions out of business, as a result of the added man hours required to comply with the increased regulations. Many also don’t like the CFPB’s lack of accountability to Congress.  

This is why President Trump has asked Steve Mnuchin, Treasury Secretary, to lead a review team and find out if Dodd-Frank should be left alone, modified or scrapped.

Mnuchin, by the way, has no political experience and was formerly the chief information officer at Goldman Sachs.
For those who don’t remember, Goldman Sachs paid $5.1 billion in April 2016 to settle a lawsuit centering on the financial crisis. Part of the lawsuit stipulated that Goldman had to sign a statement admitting it had misled investors about the risks involved with the mortgage-backed securities it was selling.

As far as the mortgage industry is concerned, not much is expected to change. Dodd-Frank created anxiety in the beginning about the additional paperwork and regulations, but that is in the rearview, things are running smoothly again and it’s unlikely that anyone would want to throw a wrench in the machinery.

An important point to make before I close is, a recent survey conducted by the National Association of Realtors found that 87 percent of non-homeowners believe you must have a minimum of a 10-percent down payment to buy a home.

This is hard to believe, considering the speed at which it’s possible to communicate information these days, and the fact that there are many options available that allow for a down payment that is substantially less than 10 percent, such as one- and three-percent conforming loans, Home Possible and Home Ready loans, 3.5-percent FHA loans, and no-money down loans through the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture. 

If you have questions about the options that may be available to you, please contact me at the number below.    

Patrick Stoy (NMLS Numbers 39527 and 39166) has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit Patrick can be reached at [email protected] or 910-509-7105.

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