Ron Henderson President & Broker of Multi Real Estate Services in Los Angeles. It’s October 19, 2012 and as a Gov’t Affairs Chair for the California Association of Mortgage Professionals (CAMP), I’m very involved in the implementation of the mortgage provisions Dodd-Frank Wall Street Reform Act.
There’s a lot going on in the background. The CFPB (Consumer Financial Protection Bureau) asks for guidance from seasoned professionals within the industries that will be dealing with these new regulations. At times it seems like they are listening, but not hearing what we are saying.
Dodd-Frank with its 849 pages is only an outline. The regulators are required to finalize individual regulations within specific deadlines. Of the 398 total new regs that have to be generated, 237 have passed there deadlines. 145 (61%) missed deadlines, 92 (39%) met the deadlines with finalized rules.
The CFPB is hearing from consumer and industry groups, and are concerned about bringing the housing industry to a halt. There’s been assumptions made, and some lack of economic homework. Already some of the completed regulations are being modified because of unintended consequences.
January of 2013 is the deadline for the QM (Qualified Mortgage) which dictates the ability of borrower to repay criteria & the QRM (Qualified Residential Mortgage) or what the guidelines a loan will have to be meet for the secondary money market (Risk Retention). It’s been determined the QM has to be in place first, before they can generate the QRM. Due to the complexity of these regulations, it’s a probability that the QRM deadline will be extended a year.
Unfortunately, lenders are paranoid about making a loan that doesn’t meet the criteria of a loan parameter that hasn’t been determined yet. They are over compensating and tightening their existing underwriting guidelines, so they don’t get their hand slapped by the gov’t in the future. This is making the qualifying for a loan these days very difficult, especially if you’re self employed.
There’s no doubt toxic loan product was a major cause of the financial crisis in 2008. Loan Originators didn’t create this product. It was Wall Street and the Gov’t.
Those of us that are hands on with these regulations, question if they will accomplish what they’re intended to do, or just add layers of complexity, and costs to the consumer, and the economy as a generality.
Obviously, this is to be continued…