The Dodd-Frank Act: Too Little Too Late?
We're still uncovering the fraud perpetrated by the mortgage meltdown and have yet to deal with
the more than 95 million securitized mortgages that have yet to adjust. We have seen tremendouse changes in the industry as new laws and regulations are changing the way the industry does business. In the January issue of Los Angeles Lawyer, Beth S. DeSimone, James D. Richman and Tengfei (Harry) Wu of the firm Arnold & Porter, LLP wrote an in-depth article entitled, "Down Payment: The Dodd-Frank Act takes aim at the primary abuses uncovered during the mortgage meltdown." I think the changes in the law are nothing more than a little bit of "CYA" by our government's "turn the other cheek" approach to regulating industry. I mean really, it's only the largest single debt you'll ever enter into in your life, why shouldn't the industry make a little money?
So, from the mortgage meltdown, we have a new government agency called the Bureau of Consumer Financial Protection (CFBP); don't you feel better now?; and perhaps the most important change is the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law by Obama on July 21, 2010. The Dodd-Frank Act changes the way mortgage lenders, brokers, appraisers, settlement service providers and other industry participants will conduct business. It doesn't change the past and may not do enough in protecting consumers, but it sure does make our absent minded government seem interested in the issues. What I really like about these new rules is that a violation is an assertable defense for a borrower in a foreclosure action, without regard to the statute of limitations under Section 1413.
Another important point is that there is a safe harbor for lenders making a qualified mortgage loan that provides seven characteristics under Section 1412.
1. The loan must no permit negative amortization, or subject to certain exceptions, deferred principal;
2. Subject to certain exeptions, it must not require any balloon payment;
3. The income and assets relied on to qualify the borrower must be verified and documented;
4. Underwriting must be based on the full amortization over the loan term;
5. The debt-to-income ratio must not exceed certain guidelines to be set by regulation;
6. Total points and fees must not exceed 3 percent of the total loan amount; and
7. The loan term must not exceed 30 years, subject to certain exceptions.
"Down Payment" provides more detail into the new regulations and features of the Dodd-Frank Act and is a must read for those practitioners helping consumers with their mortgages and real property. Consumers reading this article should take note of the safe-harbour characteristics outlined above because I believe that these should be consumer guidelines when shopping for a mortgage loan.
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asserted by their mortgage lenders and/or servicers. When debtor's counsel produce clear records of creditor's failures to document the chain of custody and assignments of promissory notes debtors will successfully knock out these claims. Debtors counsel must cross-examine witnesses; propound opposing parties for admissible evidence and demonstrate the creditor's failure to follow the CCC.
