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The controversial Dodd-Frank Wall Street Reform and Consumer Protection Act just passed its five-year anniversary on July 21, and lawmakers and other stakeholders have never been more divided as to its effectiveness (or lack thereof) as they have been recently, according to CoreLogic's August 2015 MarketPulse released this week.
In a piece titled "The Dodd-Frank Act Turns Five: The Lingering and Lasting Effects," CoreLogic's policy research and strategy analyst Stuart Quinn examined several new regulatory changes brought about by the 2,239-page law, including the establishment of the Consumer Financial Protection Bureau (CFPB), the new servicing rules, and the TILA-RESPA Integrated Disclosure Rule.
"The half-decade anniversary of the Dodd-Frank Act has further amplified its divisiveness, with legislators from both sides of the House hitting the speaking circuits to either magnify the blemishes or tout the progress," Quinn wrote.
The CFPB is the most notable of the agencies established by Dodd-Frank; others include the Office of Financial Research at Treasury, Office of Housing Counselors at HUD, and the Office of Credit Ratings. The CFPB, which opened in July 2011, now has approximately 1,537 full-time employees. One camp in Congress has championed the CFPB as a necessary entity in order to protect consumers from predatory financial practices, particularly in the mortgage industry, where the Bureau has handed out billions in fines and penalties. The other camp views the Bureau as unaccountable and overreaching and has questioned the legitimacy of the appointment of its director, Richard Cordray, a process that took two years.
"The half-decade anniversary of the Dodd-Frank Act has further amplified its divisiveness, with legislators from both sides of the House hitting the speaking circuits to either magnify the blemishes or tout the progress." — Stuart Quinn, CoreLogic policy research and strategy analyst
The CFPB's mortgage servicing rules, which were enacted in January 2014, contained provisions similar to those in the 2012 National Mortgage Settlement between 49 states (all but Oklahoma) and the District of Columbia and the federal government with five banks and/or mortgage servicers (Bank of America, Citi, JPMorgan Chase, the ResCap Parties, and Wells Fargo).
"The cost of servicing, particularly non-performing servicing, has continued its upward trajectory and foreclosure timelines in specific jurisdictions remain protracted despite large declines in volumes since 2010," Quinn wrote. "Five years later, the question remains whether true national servicing standards have been attained and if they are even a realistic goal? The divergence between performing and non0performing servicing continues to beg the question of whether the appropriate compensation is in place."
Many of Dodd-Frank's rules have either not been finalized or not yet taken effect, such as the TILA-RESPA Integrated Disclosure (TRID) rule, which reconciles the differences between two forms completed by borrowers in the closing of a mortgage loan (the Loan Estimate form and the Closing Disclosure form) into language that is easy for the borrowers to understand. Many industry stakeholders have expressed no small amount of concern over being compliant in time for TRID's effective date, which was originally scheduled for August 1. The CFPB pushed the date back to October 3 due to an "administrative error."
"And while mortgage reforms continue to be implemented, the results are difficult to measure doe to the absence of a true private-label securitization market, inaction on GSE reform, GSE credit policy changes, and the pristine credit quality of originations in the post Dodd-Frank era," Quinn wrote.
