The Many Horrors of Dodd-Frank Act

An Act Containing Too Many Horrors

This monstrosity of an Act of the U.S. Congress is so full of horrors that a cabinet would not suffice to describe them.

So I just pick one here from source. This well written article titled “Dodd–Frank Mortgage Rules Unleash Predatory Regulators” (Emphasis added) published by the Heritage Foundation is very recommendable!

It is a great myth that a deregulated financial sector is the cause of the Great Recession or financial crisis of 2008.

“Ability-to-Repay Rule

The cornerstone of the mortgage regulations finalized on January 30 by the CFPB is a lender obligation to “make a reasonable and good faith determination based on verified and documented information that the consumer has a reasonable ability to repay the loan according to its terms.”[20] This ability-to-repay provision is more than a procedural requirement. It is the basis of an expansive new consumer right to sue lenders for miscalculating their financial fitness for a loan.

Under the new regime, a borrower may sue a lender within three years of an alleged violation, such as improperly documenting income or assets, or incorrectly calculating the borrower’s financial obligations. Those who prevail may recover damages equal to the sum of all finance charges and fees paid—potentially tens of thousands of dollars.

A borrower may also assert a violation of the ability-to-repay requirement as a defense against foreclosure—even if the original lender sold the mortgage or assigned it to a servicing firm. (The lawsuit may ensnare an assignee or holder of the mortgage, as well.) If successful, the borrower may recover all mortgage finance charges and fees paid[21] in addition to actual damages; damages in an individual action or class action; and court costs and attorney fees.” (Emphasis added)

Intentional Consequences

Low and modest income People will be denied mortgage loans, because no lender will risk to be sued. Of course, in this scenario federal government will sue lenders on the basis of cooked up charges of discrimination. A beautiful catch 22 situation created by big government.

The costs of mortgage lending will go up paid for by borrowers.

Banks are becoming like utility companies run by big government in Washington

Dodd And Frank

I have said it before, that this law is named after these two jokers is almost poetic justice. Senator Chris Dodd was a special friend of the CEO of Countrywide Financial, Angelo Mozilo. Thus, Senator Dodd preferred not to run again for the U.S. Senate to avoid scrutiny.

Representative Barney Frank was not much better. E.g. his absolute refusal to reign in the Fannie Mae and Freddie Mac when there was still time to prevent the meltdown in the residential real estate market speaks for itself.