Congress voted to roll back parts of the Dodd-Frank Act on Tuesday, and though it certainly means changes are afoot in the industry, the average American home buyer isn’t likely to feel its effects — as long as they’re careful about how they shop.
Verify your new rateThe background
The Dodd-Frank Wall Street Reform and Protection Act passed in 2010, on the backs of the housing crisis and the Great Recession.
Intended to protect consumers from the risky lending practices that caused the crisis in the first place, the Act set out to improve oversight of financial institutions, banks, hedge funds and other entities. It included a variety of new regulatory and reporting requirements, as well as annual stress tests for institutions.
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Opponents of the bill — and financial institutions themselves — said it added too much red tape, increased compliance costs and held back competition in the industry. And now, it seems those concerns have been taken seriously.
The Senate passed Dodd-Frank’s replacement bill back in March. On Tuesday, the House passed it as well. The only step left is a signature from President Trump.
What’s changing
The new bill will mean two major changes to Dodd-Frank’s provisions. First, it will raise the threshold for what’s considered a “too big to fail” institution. This means fewer banks and lenders will be subject to the stringent reporting and regulatory standards of Dodd-Frank. It could also open the door for smaller lenders and more competition.
For home buyers, that means more options when it comes to shopping for a loan.
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The other major change makes it easier for mortgage lenders to discriminate against potential borrowers. The new bill scales back a detailed reporting requirement designed to root out predatory and discriminatory lending — specifically against minorities.
As alarming as it sounds, the change doesn’t necessarily mean lenders will discriminate against minority buyers. However, it does drive home the need for more diligence when shopping for a loan.
Buying under the new bill
Buyers can protect themselves by comparing rates and applying for their mortgage online.
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Convenience and cost savings aside, shopping online removes the potential for discrimination based on gender, race, mannerisms or any other physical feature a lender could pick up in person.
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