The Dodd-Frank Act

In 2007-2008 the US went into a recession, a financial crisis that has since then taken five years to rebuild. During that time millions of Americans were unemployed and faced many economic struggles which negatively impacted the real estate market causing a multitude of foreclosures. The reason for this recession was because there was no authority over banks and they were not being monitored properly. Banks were able to gamble with the finances of millions of people with no consequences towards their actions. The Dodd Frank Act Wall Street Reform and Consumer Protection Act of 2010 was put into place to make sure that nothing like this ever happened again; The Dodd Frank Act implemented and set laws into place to make sure that banks and financial

Named after the United States senator Christopher J. Dodd and the United States Representative Barney Frank, the Dodd–Frank Wall Street Reform and Consumer Protection Act was signed in to federal law by the president Barack Obama on July 21, 2010 in an attempt to prevent the events that led to the 2008 financial crisis of occurring again. Commonly known as the Dodd-Frank, the act brought the biggest changes to regulations on financial institutions since the reforms on regulations that followed the Great Depression. The act creates regulatory agencies for financial institutions, as well as an oversight council that is in charge of assessing systemic risk. The council also has the power of restraining the growth of large financial institutions

In these days of economic upheaval, rising unemployment, increasing bankruptcies, and car and credit card loan defaults, perhaps nothing is more frightening than the rising rates of home foreclosures. Owning a home has long been considered the cornerstone of the Great American Dream, and now for many that dream has turned into a nightmare, from which there seems no escape. The combination of predatory lending practices and consumers who have for to long lived beyond their means has created an escalating problem. Unfortunately, there are no easy answers.

The united states is currently the proprietor of nearly nineteen trillion dollars in debt, and that number continues to increase to by 2.53 billion per day. With close to three hundred million people in the united states each shared citizen’s debt would be around sixty-one thousand dollars. (debt calculator website). In 2008 at the end of the George bush administration the country was said to be in the worst economic recession since the great depression. The current president of the united states, Barack Obama and his administration proposed a bill to congress in 2009, that was believed to assist in the prevention of another recession. This bill was titled “The Dodd Frank initiative and consumer protection act.” It was named after the two legislators who created it, Chis Dodd and Barney Frank. This initiative was, and continues to be, considered a “massive” piece of legislation. (quote). Although introduced, It did not pass in congress until July 21, 2010. In addition to assisting with the economy, this act was created to help insure that consumers would not be easily taken advantage of by major financial agencies and corporations. All of us, no matter age, gender, or financial status are consumers. This act has put checks and balances in place that will protect all families from making financial decision that might cripple them into a situation that may make it impossible to get out

The Glass Steagall Act was passed on 1933, which is also known as The Banking Act to tighten regulation on the way banks did their business. This act was written as an emergency measure when about 5,000 banks failed during the Great Depression. Banks mostly failed because of the way they would invest with money. The act prohibits banks from investing money on investments that turn out to be risky. Banks could no longer sell securities or bonds. The act also created Federal Deposit Insurance Corporation (FDIC) to protect the deposits of individuals, which is still used to this date. The FDIC in this era insures your deposits in your bank up to $250,000. This gave the public confidence again to deposit their money in the bank. In 1933

In 2008, the United States encountered a financial crisis that left millions of Americans unemployed and resulted in trillions of dollars lost. The financial regulatory system was the main reason for the cause of the financial crisis by allowing financial institutions to operate with little or no supervision. It also allowed for lenders to use hidden fees and fine print to take advantage of consumers (Wolin, 2011). President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act in response to the crisis on July 21, 2010, the intention of this act is to prevent another major collapse of the financial institution industry and geared to protecting consumers with rules to keep borrowers from abusive lending and mortgage practices

I was unlucky enough to be front and center working for a homebuilder at the time of the real estate crisis. The mindset of sellers, realtors and mortgage brokers before the “bubble burst” was something that was very obvious to me as a lack of care for the long term homeowners and their financial welfare. While the banks like Countrywide Home Loans and Bear Stearns (JPMorgan Chase Bank) were making billions of dollars on mortgages, they were ridiculous in thinking that this would not come back on them tenfold. How can you purchase a loan and approve it through underwriting without first verifying the documents were accurate? How could I get a home loan when I was 21 and had a credit score of 1? Well, this definitely happened. I had a cosigner, of course, but still, the qualifying standards back in 2005 were relaxed to a fault. I liked to think that I was responsible enough to have this investment in a property to call my own, but we bought at the height of market in Orlando, and only gained in equity for about 6 months. In 2007, our house was worth $40,000.00 less than what we purchased it for.

One of the current topics in financial news concerns regulatory legislations and specifically the Dodd-Frank act that was enacted after the 2008 financial crisis. As with most regulatory legislations, there are both pros and cons with proponents to each side. I find the current arguments similar to the issues surrounding the Sarbanes-Oxley Act of 2002 that was enacted after many financial accounting scandals in the late 1990s. While many believe both pieces of legislations make the financial markets safer and more transparent, there needs to be a balancing act to allow capitalism to also flourish in a free economy.

The home financing process effects by the Dodd-Frank Wall Street Reform and Protection Act of 2010 will be the topic of this study. Prior to the legislation associated with this Act there were few legally binding regulations to protect consumers in the home purchasing market. Legislation created during the adoption of the Dodd-Frank Act may help the average homebuyer due to residential loan improvements seen with further resultant benefits to the economy with more qualified

With the emergence of technology, conflict minerals have become a growing and pressing issue in the 21st Century. Conflict minerals are those that fuel civil wars, specifically in Central Africa. There are very few regulations placed on conflict minerals and they are an integral part of most of the supply chains for technology companies. In 2011 the United States of America issued the Dodd-Frank Act, which regulates the use of conflict minerals to a certain degree. The problem, however, lies in the effectiveness and the real world consequences of the Dodd-Frank Act, thus alternative solutions must be explored in order to regulate the current and future use of conflict minerals.

Present terms and conditions of home mortgages are regulated by industry and federal government policy. Mortgage regulations are defined and enforced by a variety of acts such as the: Truth in Lending Act, Fair Housing Act, and the Real Estate Settlement Procedures Act, as well as the Equal Credit Opportunity Act, Home Mortgage Disclosure Act, Community Reinvestment Act, New Homeowner’s Protection Act and the Gramm-Leach-Bliley Act, just to name a few. Although defined differently, the preceding acts were all created to protect the interests of the consumers, especially those who may not be as well informed or completely misinformed and protecting consumers from discriminatory limitations and unethical nondisclosure of specific terms. These acts each have a dual purpose, collectively these acts also protect the mortgage lender from problems and liabilities that could arise from noncompliance by establishing a set and

The Dodd-Frank Act has allowed for more leniency when it comes to whistleblowing but this legislation was implemented after this story began. There are several industry protection programs for whistleblowers and the Security and Exchange Commission (SEC) even promotes whistleblowing by giving out monetary rewards for certain cases. The Sarbanes-Oxley Act (SOX) was supposed to make whistleblowers believe that they would not be retaliated against. However, making the determination of whistleblowing after hearing Tony Menendez’s story will make the weak squeamish and the strong possibly reconsider.

As a Licensed Realtor in the state of Texas, research shows that in 2007, a major wave of defaults on home mortgage loans threatened the health of not only the original mortgage lenders, but of any financial institution that had made such loans or invested in such loans either directly or ‘indirectly” (McConnell, Brue, & Flynn, 2012). A vast majority of these defaults were on subprime mortgage loans. Subprime mortgage loans are loans that are given to people that have poor credit ratings that are high interest. Banks were justifying this type of move, and as a result, when the people couldn’t pay back their loans, the banks had to dip into their reserves to write off these debts as unrecoverable.

Even those with good paying jobs and credit scores still find it difficult to get a mortgage. Government-backed Fannie Mae and Freddie Mac are still serving as the anchor of mortgage finance in this country. Most loans are guaranteed by the housing giants, and lenders are scared of selling anything but the most flawless loans to them out of fear that the agencies will force lenders to buy back the loans if they fail. At the same time, heightened regulatory scrutiny has forced mortgage originators to spend far more time on each mortgage they underwrite, to the point that the average lender is processing one-sixth of the mortgages per month they were doing back in 2001.

(Kirchhoff, Block, 2004) These home loans came with higher than usual interest rates and due to stressful periods in people’s lives; paying high lawyer fees during divorce proceedings or extensive medical bills due to prolonged illness, people signed for the loan anyway. (Knowledge@Wharton, 2008) With an inflated rate of return, in a few years these loans became unserviceable. Why did financial institutions lend a product with such high interest knowing that some people would eventually default? They proceeded because it made them money from loan fees when initially writing the loan. (Knowledge@Wharton, 2008) The lenders would make their money on fees and then sell the mortgages to other Investment banks like Fannie Mae and relinquish full responsibility. (Knowledge@Wharton, 2008) If the loan went into default, it would be the Investment banks problem not the original lenders. (Knowledge@Wharton, 2008) To avert the snide practice of predatory lending in the future, the U.S government implemented legislation to curtail it. (Kirchhoff, 2004) Once again, why would lenders complete such practices if not for greed? Lenders took advantage of vulnerable individuals, during a crisis point in their lives and weak financial regulations, passed by Government. (McLaughlin, 1999) However, predatory lending was just spot-fires in a much larger problem.