Newsletter - February 2018
A bill headed for the Senate floor would significantly loosen rules imposed by the Dodd-Frank Act, making it easier for homebuyers to get approved for a mortgage and offering much-needed relief to community banks and credit unions.
And unlike last year’s sweeping House bill (the Financial Choice Act, which would have gutted the Consumer Financial Protection Bureau), this one has bipartisan support —and a legitimate chance of passing.
A group of Senate Democrats have joined Republicans in backing the legislation, which was brokered primarily by Republican Sen. Mike Crapo of Idaho.
Here’s the deal:
Currently, banks with assets of $50 billion or more are considered “systematically important” and are governed by stricter rules as dictated by Dodd-Frank. The new bill would raise that threshold to $250 billion.
Banks with assets between $50 billion and $100 billion would be freed of those requirements immediately. Institutions with assets in the $100 billion to $250 billion range would be released from the tougher rules after 18 months (though the Fed would retain the power to reapply those standards to those banks.) Giants like Goldman Sachs and J.P. Morgan would see few, if any, changes.
In addition, the bill would change the law so that institutions with less than $10 billion in assets (e.g. credit unions and community banks) are able to offer mortgages outside the Qualified Mortgage rule (which requires that your debt does not exceed 43% of your income), as long they keep the mortgage in-house and don’t sell it.
“Lenders, particularly retail banks, have just stopped taking on any risk at all,” said Rick Sharga, executive vice president of online real estate marketplace Ten-X. “Getting those smaller lenders back into the game could have a material impact on the housing market.”
Of course, the bill still faces opposition, particularly from progressive lawmakers like Elizabeth Warren and Sherrod Brown, who say it goes too far.
“This bill increases the risk of another taxpayer bailout, and I will continue to challenge supporters of this bill – from both parties – to explain why they stand on the side of big banks instead of working families,” Warren said.
The Senate is expected to vote on the bill within the next few weeks. Stay tuned!
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