House Votes to Abolish Dodd-Frank - Your Thoughts?

Buying & Selling Real Estate Discussion 76 Replies

As long as you believe that industry groups will correctly practice self-regulation, there is no issue. Enron comes to mind. But think about it. Banks would never loan to people who aren't qualified. Right?

Originally posted by @Mindy Jensen :

Of course, it still has to pass the Senate - and it faces an uphill battle there - but the House of Representatives has voted to abolish Dodd-Frank .

What are your thoughts? 

 60 votes are needed and 52 Republicans are in the Senate.  It's unlikely that 8 Dems will vote against this bill.  Even if the 2 Independents voted for it, it's still very unlikely that it will pass.  

Updated 4 months ago

I meant to say it's unlikely that 8 Dems will vote for the bill. The Dems want to keep Dodd Frank up and running.

Shaun Weekes, Innovation Lending Solutions | [email protected] | 949‑610‑3126 | https://shaunweekes.advisorprofiles.com/ | CA Agent # 0L51686

I am a new investor who is briefly familiar with DODD-FRANK.  From what I understand the major areas of concern under DODD-FRANK are those of us who LEASE TO OWN our properties.  If this is correct, will the abolishing of DODD-FRANK not relieve some of the regulation off of the real estate investor using this strategy? 

I realize this opens the door for predatory slum lords, but I have never been a fan of placing more regulations and laws on law abiding citizens in an effort to punish the few predators.  These predators will find a way to make an easy buck despite the law, thus only hampering small business by levying burdensome regulation upon us.

Please, feel free to correct me if I am incorrect in my understanding of DODD-FRANK. 

what end of the "spectrum" is what I think would determine how you would feel if you're ok with the regulations going away.

I imagine most investors with lots of knowledge could use the weakened regs to their advantage, while those less informed investors and borrowers would be "hurt " in the event that weakened regs lead to another housing crisis.

Makes me want to search some threads from the housing crisis time frame to see folks thoughts.

@Chris Martin well if the Feds didn't either mandate those loans, artificially, backstop those loans, or bail the banks out than what would be your bernie bro beef? As far as I see the taxpayers got screwed not the borrowers.

In other news we have our local regulatory idiot, jeff Merkley acting like his work on Dodd-Frank, pages 2976-2988, will solve all our problems. Here's one weird trick they don't want you to know - when you have 9756 pages of regulation your implicitly writing loopholes into the law VIs-a-vie regulatory capture.

Main points of the Financial Choice Act are that they are going to de-reg banks to a certain extent, but with the increased freedom they will not have any bailouts in the future, so banks will have to police their own risks.  Its also going to reduce governing power of the CFPB and put it under an executive branch instead of being a stand alone.  I haven't read all 500+ pages of it, but I'm sure its not going to affect lease to hold.  CFPB doens't really govern real estate investment.  Its the Consumer Financial Protection Bureau.  You're an investor, not a consumer.  You fall more under SEC guidelines.  

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These two points alone would be worth it if it passes:

"Prohibit the use of the Exchange Stabilization Fund to bail out a financial firm or its creditors.  

Repeal the FDIC's authority to (1) bail out creditors of "solvent" banks, and (2) bail out creditors other than insured depositors of "insolvent" banks that are in receivership."

I'm actually amazed at how long it took for the mortgage crisis of 2008 to happen.  Let's think about it for a second - imagine you're a mortgage broker and there's no law on the books saying you need to vet your clients.  Wouldn't you be selling to anyone with a pulse who wanted a mortgage?  Are we surprised that they did?

No matter how much regulations government put in place - the market will find a way to win.  

I look forward to the day in the next few months / years when the auto-loan crisis hits so I can say 'told ya so' and more importantly, utilize the opportunities it'll present.

Then several months after the bottom the government will pass the "Who's his face, and What's his name Act" that will clamp down on those "evil auto loan sellers".  Then, all will be well once again ... until the next crisis.

I would love to see the Dodd Frank regulations go away that keep small investors like us from; selling with financing, rent to own etc. 

The reality is we need regulations. Sadly what we will get is over burdensome and counter productive regulations.

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

The scary thing about Dodd/Frank was the huge size and number of rules.  It was so vast not many folks will ever be able to know what they can and cannot do.  Even enforcement has been spotty as the regulators do not really know it all.  It was at least phased in for many parts like requiring every person who ever touched a mortgage file to have a licensing number.  Virtually every person in every bank and savings and loan had to get a number and post it in the file when they handle it.  That regulation alone in its own way made private loans nearly illegal.  I literally have no idea of what all of it says and was amazed that only one of a dozen attorneys I asked even knew about the law.

I think that the onerous rules and regulations from Dodd-Frank made it almost impossible to start a new community bank, which took a beating in the crash. There have been very, very few new bank starts since the crisis and the passing of Dodd-Frank. And community banks are key for small businesses. Just check out this chart:

Now most of this was the recession and not Dodd-Frank, but I suspect Dodd-Frank is keeping new charters depressed by making the costs of entry so high. One banker I talked to who actually sort of did start a new bank had to buy an old charter and said it wouldn't be possible to become profitable until they reached a billion in assets. Another said they don't do consumer loans because the regulations are too onerous.

I particularly think the endless disclosures are basically useless. No one reads them. The audits are important, but seem to frequent and Dodd-Frank left too-big-to-fail in place. The thing they really needed to do, in my opinion, was to make teaser rates and stated income loans illegal. And further to make the originators of loans responsible in some way if they sell junk on the secondary market. At least better disclosure on that side. So I wouldn't want them to just repeal it and leave it as it was pre-crash.

And of course the government shouldn't be keeping interest rates at 1% for seven years while the economy is growing, they shouldn't be pushing subprime loans through Fannie or Freddie and they shouldn't be pressuring banks to reduce lending standards. 

Medium apartment logoAndrew Syrios, Stewardship Investments | http://www.StewardshipProperties.com | Podcast Guest on Show #121

@Mindy Jensen @Chris Martin @Steve B. @Joe Kim @Jerry W.

I have to admit that I don't even know what the heck Dodd-Frank bills says. I have heard a lot of talk around the real estate investor community about Dodd-Frank but may be because we just do simple fix and flips, cash flow refi rentals and wholesales never really ran into Dodd-Frank. 

From what I understand Dodd-Frank deals with seller financing. Not really sure. Not even sure how big is this bill and how much it covers. 

I don't know how many people understand the bill really. It's amazing that our congress and legislators don't seem to understand some of the stuff they pass how are mere mortals like us expected to wrap our brains around it. Yet we have to live by those rules. 

Andrew Holmes, Chicago REIA | 847‑303‑5011 | http://chicagocashflow.com

Originally posted by @Steve B. :

Chris Martin well if the Feds didn't either mandate those loans, artificially, backstop those loans, or bail the banks out than what would be your bernie bro beef? As far as I see the taxpayers got screwed not the borrowers.

In other news we have our local regulatory idiot, jeff Merkley acting like his work on Dodd-Frank, pages 2976-2988, will solve all our problems. Here's one weird trick they don't want you to know - when you have 9756 pages of regulation your implicitly writing loopholes into the law VIs-a-vie regulatory capture.

Taxpayers got screwed.

Let's take a look. All this regulation came about after the financial crisis. And from the 'mandate those loans' and 'bail the banks out' clauses you used it appears you feel like taxpayers paid with taxpayer money and 'got screwed', meaning the government took from us (taxpayers) more than they "gave" to banks. Fortunately for taxpayers, that is false.

When the meltdown happened, I really believed we as a country were in big trouble. And while the $700B pledge from the Bush administration seemed absolutely shocking at the time, without it the country would have suffered serious consequences. I won't get into that history, it's here on BP and elsewhere if you look.

But here's reality. The banks and GSEs paid back way more than they 'took' and that's well documented. Fannie Mae received $116.1B. They paid back $154.4B (graph on page 8.) Wells Fargo

'took' $25B and paid back $131.9B within 90 days. JP Morgan Chase, Goldman Sachs, Bank of America, and Citigroup all paid back before year end 2009 with many billions in excess paid to Treasury. All in all, taxpayers got more than they put in.

Regarding D-F, it is one of many regulations governing financial institutions. You can see a list of regulations and regulatory agencies from your community bank's K-1 filing. And Steve your Bernie reference is laughable. I am a capitalist. I'm not a bank, so D-F doesn't impact me much. I can follow the rules for seller financing, of which I have done 2 transactions this year. Most people are exempt. The relaxed SEC rules and the CF part of the JOBS act has much more impact on small players, IMO.  But eliminate all regulations and expect an Enron. Is D-F too much? Probably. Just like other legislation after a crisis (think 2001).

Regarding the number of banks, why would anyone start a bank in a 0% interest rate environment? Besides, the industry has been consolidating for decades. If you didn't know the year that Dodd-Frank was instituted, the average person would say 1986 or 1987.

My 2 cents

Despite not having the votes in the Senate, they may require to use budget reconciliation to cram these changes through. As someone who works on Wall St. and has felt the pain of some onerous parts of the regulation first-hand, I'd love to see the bill fixed. Gutting it will not fix it though. One part of the regs that's under fire is one that we actually need. The rules and regs around ordely wind downs of failed Banks is one of the most logical parts of the bill. This week Europe implemented it's first successful "orderly fail" when Banco Popular burned through €4b in 2 days in a run. Without their version of it, Spain's banking security would've plunged back into 2011 territory. In the US, the OMB has estimated that this part of D-F costs tax payers a decent amount of money so Congress may try to use it as ammunition to use budget reconciliation and cut the legs out of the regs. This just sets us up for the 2Big2Fail sequel, 2Bigger2Failer. Also as retail investors everyone should be fighting to keep the fiduciary rule in place. It's a simple rule that fixed the long broken inventive structure around financial advisors.

I fail to see why giving banks self policing authority will prevent the next banking/economic crisis from happening. It doesn't matter if the banks eventually paid back the tax payer money that kept them alive. These banks created the harshest recession since the early 1930s and brought serious misery to hundreds of million people around the globe. In fact, many of us are still feeling hardship while the decision makers in those banks recovered their bonusess to pre recession levels pretty quickly. I find it a foolish notion to believe banks wouldn't risk the house when they know that bailouts are hard to come by.

Dodd Frank is as clumsy as Obama Care. Nevertheless, improve it, don't throw it overboard. My 2 cents.

@Andrew Holmes I'm not 100% certain.  Seller financing isn't regulated by Dodd Frank if you do 3 or less of them annually.  At least that's what I remember reading.  Its under the definition of mortgage activities in Reg Z.  Anyways, most of investment and commercial is governed by SEC law as far as I understand it.  CFPB and Dodd-Frank have little governing rules other than defining whether you need a license to broker your own loan in that state with seller financing for investment props.

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Like most other things, it's a double-edged sword. it added complexity to real estate transactions, but the cool-down effect can help market stability. Remember, it was enacted for a good reason, although it can be argued that it was an overreach.

Originally posted by @Joe Kim :

Main points of the Financial Choice Act are that they are going to de-reg banks to a certain extent, but with the increased freedom they will not have any bailouts in the future, so banks will have to police their own risks.  Its also going to reduce governing power of the CFPB and put it under an executive branch instead of being a stand alone.  I haven't read all 500+ pages of it, but I'm sure its not going to affect lease to hold.  CFPB doens't really govern real estate investment.  Its the Consumer Financial Protection Bureau.  You're an investor, not a consumer.  You fall more under SEC guidelines.  

 How does it propose to prohibit bailouts?  There was no bailout guarantee in 2008, except by hubris.  To kill the parasite you risk killing the host.

Originally posted by @Mindy Jensen :

Of course, it still has to pass the Senate - and it faces an uphill battle there - but the House of Representatives has voted to abolish Dodd-Frank .

What are your thoughts? 

There is regulation and then there is persecution... if you are/were in financial services, there are elements of dodd frank that just seems was meant to cripple certain facets of the sector. Overregulation can be a very detrimental.

@Larry T. It proposes to prohibit bailouts by explicitly stating its bankruptcy and no bailouts and gives criteria and steps.  You can read the summary here.  https://financialservices.house.gov/uploadedfiles/2017-04-24_financial_choice_act_of_2017_comprehensive_summary_final.pdf  (page 20).  

714‑559‑2987

The Seller Finance Coalition is working to alter Dodd Franks to allow smaller investors to up to 24 of their own homes each year and not be subject to the banking regulations of Dodd Frank. Charles Tassel and Jeff Watson of the National Real Estate Investors Association have been working very hard on this and several other anti real estate investor legislation bills. As one of the local leaders of National REIA I went as a representative of Illinois REIA with them in March to Washington DC. Not sure what I can post here about that without violating protocol. We made good inroads and had a great time there as well. We also met with our representatives about renewing the National Flood Insurance Program, giving investors 120 days to cure before an equal access lawsuit could be filed and other important issues as well.

Medium illinois reia logo w background  2 George Skidis, Illinois REIA | [email protected] | 618‑520‑8999 | http://www.ilreia.com

For seller financing, the applicable Act for people in NC (and most other states) is the S.A.F.E Act, and that part is not regulated by your Commissioner of Banks. The key is to look for your SAFE Act exemptions. In NC, for instance, selling your own home with seller financing is permitted by NCGS 53-244.040(d)(3) as is any investor, via NCGS 53-244.040(d)(8), "who, as seller, receives in one calendar year no more than five residential mortgage loans as security for purchase money obligations..."  Other states... check you statutes. D-F probably doesn't apply if you are not 'in the business'. If you aren't sure or don't know how to look up your state law, consult with an attorney.

@Andrew Holmes yes I wouldn't feel bad as congress doesn't understand D-F either.

Keeping these legislative and regulatory acts untenable lengthy, nebulous, and complex serves two major harmful functions.

1. The government, crusading lawyers, and sundry aggrieved can choose one of 50,000 regulatory subsections to sue or fine various party's under based solely on the political climate and ability of their layers.

2. Interested lobbyist and vested financial entities can hide all the loopholes and exemptions they like in an unreadable bill.

In both cases we still are in a situation where we have added so many rules that we effectively have no rules

I just want to be able to trade spot gold and contracts for difference without and offshore brokerage.

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