Weighing the Pros and Cons of the Financial CHOICE Act

Newsletter – June 2017

After passing through the House Financial Services Committee last month, the Financial CHOICE Act is headed to the House floor, where lawmakers could vote on it as soon as this month.

We thought now would be a good time to weigh both sides of the bill.

The CHOICE Act was introduced by Texas Republican Jeb Hensarling as a replacement for the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which was created in response to the financial crisis of 2008.

Republicans argue that Dodd-Frank has created costly regulations that have suffocated economic growth by crushing small banks and limiting the little guys’ access to capital.

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Newsletter – May2017

Striking a Regulatory Balance in the Battle over Dodd-Frank

When Donald Trump met with a group of CEOs early last month, he addressed once again his plans to dismantle at least some of the Dodd-Frank Wall Street Reform and Consumer Protection Act:

“We want strong restrictions,” he told the group. “We want strong regulation, but not regulation that makes it impossible for banks to lend to people that are going to create jobs.”

Trump complained that the regulators, not CEOs, are running the banks. Bank CEOs are “petrified of the regulators,” he said. “They’re petrified. They can’t move.”

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Newsletter – April 2017

Are FHA Loans the Canary in the Coal Mine, or Sounding a False Alarm?

Potentially concerning news:

From Q3 to Q4 in 2016, delinquency rates among all types of mortgages increased, marking a hike from the lowest overall level since 2006.

But at the center of the trend are FHA loans, with a delinquency rate increase of more than twice that of VA or conventional loans.

Typically issued to lower-income or first-time home-buyers, FHA loans allow for down payments as low as 3%.

FHA loans made up 22% of all single-family home purchases in 2016, up from 17.8% in 2014.

This is at least partly because home prices are increasing faster than wages, leaving few buyers able to afford a 20% down payment. (Home prices have been increasing about 5% a year since 2014.)

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Newsletter – March 2017

Are Nonbank Lenders the Future of the Mortgage Industry?

Around this time last year, you may remember, we wrote about a thought-provoking article by Christopher Whalen of Kroll Bond Rating Agency titled Why Nonbank Lenders are the Future of Mortgages.

The premise of the article was this:

Big commercial banks, feeling strangled by Dodd-Frank regulations, are originating and servicing fewer residential mortgages, and nonbank lenders (like Quicken), which are regulated less heavily, are picking up the slack.

But he ended with this prescient tidbit:

It is very possible, however, that some of the Dodd-Frank law will eventually be modified when demands for economic growth again outweigh the voices of caution.

With the Trump administration well into its second month · and dismantling Dodd-Frank high among their priorities · it seems like a good time to revisit the topic.

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Newsletter – February 2017

What Would Happen if Dodd-Frank Were Repealed?

That ringing sound you hear may be the death knell for the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Donald Trump entered the White House swinging, handing down executive orders on immigration, energy, health care and trade within his first week. And Vice President Mike Pence confirmed that Dodd-Frank very much remains on the chopping block.

Speaking before the Congressional Republican Retreat last month, Pence explained that the administration’s plans include “dismantling Dodd-Frank’s laws and overbearing mandates so that well-capitalized well-regulated banks can meet the needs of small businesses.”

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