President Trump’s executive order that repeals the 2010 Dodd-Frank Act is in the works. The idea is that, without the Act’s restrictions, financial companies will be given the opportunity to grow. Yet, the act was created to protect low to middle-class, retirees and market investors. If you are in the process of looking for a mortgage, here is how the Acts repeal could affect you both positively and negatively.
Unstable Financial Protection
The 2008 recession was largely a result of unregulated financial markets. The Dodd-Frank Act is responsible for the creation of the Consumer Financial Protection Bureau (CFPB). The CFPB is a strict enforcer of laws regarding the consumer’s protection that applies to mortgage lenders, credit card companies, banks and other financial firms.
This could affect you in both ways. With the order of repealing the act, consumers and investors would be more vulnerable to being led to make bad financial decisions. At the same time, if you have bad credit or not a strong candidate for loans, you might be able to get approved now with the more open lending guidelines.
Easier Mortgage application
Another thing that the Dodd-Frank Act gave birth to is the Volcker Rule: restricting banks to lend risky loans that may result in huge losses of the bank’s money. With the undoing of the act, banks can now lend to riskier borrowers at higher interest rates. This will allow creative mortgage products for new homeowners, real estate investors, and low credit homeowners.
Restoration of the Fed’s Authority
Repealing the Act will also restore the authority of Fed’s ability to provide funds to large financial companies that are about to go bankrupt. That assurance gives banks and lending institutions the ability to lend more freely, knowing their business is protected by the government.
It seems that if you have bad credit or have not been able to qualify for a loan, the repeal of Dodd-Frank is to your benefit. In reality, the nullification of the Dodd-Frank Act can’t be done by just a simple sign of a pen. There are complicated congressional steps that could take years to undo. Still, if you are considering taking a loan, or perhaps refinance in the future a current loan, you must acknowledge the pros and cons of the possible new U.S. financial markets to come.