House Votes to Abolish Dodd-Frank - Your Thoughts?
Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votesHouse Votes to Abolish Dodd-Frank - Your Thoughts?
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Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
9yAs 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?
76 Replies
- Flipper · Buffalo Grove, IL · Member since 2017 · 3 posts · 1 vote9y
I meant MLO.
- San Diego, CA · Member since 2017 · 78 posts · 42 votes9y
I don't think it's going to pass in Senate. The GOP majority is much smaller in Senate and some of the moderate senators think the bill would be destabilizing and prefer rolling back aspects of it: http://www.newsworks.org/index.php/local/politics/104772-on-radio-times-dodd-frank-overhaul-remains-trickier-for-senate-republicans
- Broker · Phoenix, AZ · Member since 2015 · 351 posts · 273 votes9y
Originally posted by @Ron Flatt:
It hurt many people who could not for various reasons obtain a loan. I was selling several houses a year on owner finance, these were properties under $40K.
After Dodd Frank I scaled back and do only 3 per year. The rest have to keep renting. Also made it where I was able to get a larger down, because there was demand for owner finance. Many banks do not want to loan on small loans, especially under $50K.. I understand that it takes the same amount of time to do a 200K deal as a 35K deal, but there is definitely a demand for these structures.
I would be willing to do more if regulations were eased, and the foreclosure process needs to be streamlined. This has not been a problem in the past, this year have 2 unfortunately.
I agree. When the government tries to protect people from themselves by not allowing them to take on risk, the unintended consequences are that it also takes away any opportunity for these people to better their situation.
- Investor · Spokane, WA · Member since 2012 · 71 posts · 24 votes9y
Seems like one of those "good for me, maybe not good overall" scenarios.
Opening up lending with less regulations will almost certainly result in market improvements as banks can get more money out to people via easier purchases, refinances, creative lending, etc. That boosts the market. That helps all of us investors who already own property, because the market will go up. It also helps us investors trying to do creative deals right now.
However, that creates the risk/possibility of risky or predatory loans hurting people. Which could result in a crash later down the line- but us buy and hold investors will be fine if we used the window to get a lot of good long-term financing.
I don't support/not support the bill. I don't know the banking industry well enough to have a truly expert opinion on whether it's overall for the best or worst. But, it'll definitely at least be a short term positive for most of us investors, regardless of whether it ends up positive or negative long term for the country.
- Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes9y
This is definitely a nuanced question as:
-Dodd Frank is broad, huge, and bloated and as such
+Helps regulate in a positive way in many cases
+Helps regulate in a negative and stiffling way in many cases
+Uses way too many colors to paint a very confusing picture, which must be hung on the wall both of the small lender, as well as the largest of instutions.
Repealing it will both harm and help. The more challenging, and infinitely more useful question is, how in broad strokes do we both categorize different types of lenders, as well as effectively regulate them.
- Investor · Culpeper, VA · Member since 2016 · 20 posts · 5 votes9yI think it's a good idea , I think they should still be able to have a no doc loan for self employed people with 720 score and up. When the Dod Frank came those guys didn't know the first thing about mortgages.
- Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes9yI believe, if passed, this will do more harm than good. I feel real estate is already starting to see signs of being overheated. Even with the recent memory of the Great Recession, I think most people find self-regulation difficult (just look at the national savings rate as an indicator). Even the a repeal of this bill would make things easier for RE investors like myself, I hope that it doesn't pass :/
- Chesterfield, SC · Member since 2017 · 142 posts · 73 votes9y
Originally posted by @Joseph Hennis:
@Chris Martin You've got it right. +1 from me. The repeal of the glass-steagal act in the 90's is what lead to the financial crisis of 2008. The dodd-frank bill put some of those regulations in the glass-steagal act back in place (in different ways, since the genie was already out of the bottle and couldn't be totally put back in).
If we get rid of the dodd-frank bill, expect a return to 2008. The current over-heated market would heat up even more and shine brightly, then burn out.
Honestly, there is a greedy part of me that would welcome a return to 2008... I made a lot of money buying those cheap homes... But the harm it caused isnt worth it. Also, it was a very dangerous time... Things could have gotten worse... Much worse...
That the house even passed a repeal of D-F just shows how crazy, and/or greedy, the house of representatives really are.
Although I'm totally for less regulation from our government, if you kill FD it's going to result in a boom in new construction. The economy will look great for about 6 years then boom. Housing markets follow a cycle anyway but this will speed the process. Anyway it's very interesting to me and my investing.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jonathan Damon thats an interesting point.. how do you think repealing DF is going to create a boon in new construction???..... construction loans are not impacted by DF .. its really up to the banks to decide what their concentration in new construction loans is going to be and most after going through the GFC are self regulating themselves IE they are not going to get over their ski tips.
The issue in many areas with the lack of new construction is simply lack of land to build on.. and government regualtions to bring said land to market.. if govmit wanted to create more affordable housing they have to step into the local land use rules... and associated cost for building permits and system hook up fees or developement fees thats what is really hurting.
in our market here in Portlandia before you move a spade of dirt your going to pay 50 to 70k in permits.. then you have to buy the land.. Now in Charleston were we build.. permits all in are under 10k. big difference.. but Charleston as you probably know has no land.. its like San Fran .. surrounded by water on 3 sides... so its the lack of buildable lands and affordable building that will keep new construction restricted in many parts of the country nothing to do with DF in my mind
- Chesterfield, SC · Member since 2017 · 142 posts · 73 votes9y
Originally posted by @Jay Hinrichs:
@Jonathan Damon thats an interesting point.. how do you think repealing DF is going to create a boon in new construction???..... construction loans are not impacted by DF .. its really up to the banks to decide what their concentration in new construction loans is going to be and most after going through the GFC are self regulating themselves IE they are not going to get over their ski tips.
The issue in many areas with the lack of new construction is simply lack of land to build on.. and government regualtions to bring said land to market.. if govmit wanted to create more affordable housing they have to step into the local land use rules... and associated cost for building permits and system hook up fees or developement fees thats what is really hurting.
in our market here in Portlandia before you move a spade of dirt your going to pay 50 to 70k in permits.. then you have to buy the land.. Now in Charleston were we build.. permits all in are under 10k. big difference.. but Charleston as you probably know has no land.. its like San Fran .. surrounded by water on 3 sides... so its the lack of buildable lands and affordable building that will keep new construction restricted in many parts of the country nothing to do with DF in my mind
I know I'm probably going to regret responding to you from our last exchange. I feel this is just another attempt at attack, but I will respond.
How they repeal DF will greatly effect how it plays on the housing market and where. If they totally roll back all of DF it will allow banks to go back to letting higher risk applicants get dangerous loans. On the good side a housing boom will happen because millennial are looking to buy but pay is depressed right now. We are also seeing a sellers market in many area of the country. So with a enflux of new loans and low inventory we should see a new construction boom. Still many variables come into play. Like how much will the Fed raise interest rates? What will be rolled back in DF? What does the rental market look like in the us? So to respond to your retort, you are correct but it's not what I'm pointing out.
- Investor and Property Manager · Mount Pleasant, SC · Member since 2016 · 24 posts · 21 votes9y
@Jay Hinrichs I agree, DF doesn't effect the bigger players, it's the individual consumer and investor it hurts most.
I hope they get rid of it or at least dial back some of the nuances of it that are most restricting, such as the 2 years of income history, since most employees these days only stay in a job for about a year or two, also if there was anything we learned from the recession, it was that just because you work in a job 10 years doesn't mean you will have a job tomorrow.
Simultaneuosly, I hope that foreclosure processes are sped up to enable a recoup of collateral faster for bad loans. The problem is the foreclosure process is very different from state to state, so I don't think DF or national regulation or deregulation will help this much, I could be wrong.
If foreclosure was faster, lenders could take on the risk more comfortably, which ultimately helps the lower income folks that are paying high rents right now.
We have tenants paying rent rates for 1 and 2 bedroom places in lower income neighborhoods that could easily match the same mortgage amount for a $200,000 home. So ironically, the DF act continues to help investors with cash and penalize those that could benefit most from debt.
Who knows, we have to make money no matter what Washington does :)
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jonathan Damon those are good points. however from my point of view I dont see secondary buyers of mortgage paper going back to buying liar loans and poor credit loans etc. I could be very wrong about this.. these lenders may have the right to do it but the market may not accept that kind of high risk paper.. and for me personally the mantra that its every Americans right to own a home i flawed one still must qualify and so the fiscal responsibility other wise that's why we have rental property. CRA Community reinvestment act was one of the worst things Clinton ever did.. forcing banks to loan into known terrible situations created all sorts of bad debt.
even before the GFC foreclosures were rampant in those areas.. I know I bought them and I funded those that bought them... you ask anyone in the foreclosure business today and they will tell you defaults are WAY down.. and that is because of lending having gotten realistic you have to actually qualify to own a home not just way you want one because its your American right to own one.
The other point I like to make is that in some markets you still wont have a new construction boon.. simply because existing homes sell for far less than replacement value.. you can have some new construction but it wont be to the extent it was 20 years ago.. .. you look at big swaths of the country were median home prices hover in the 150k range.. and you simply can't build and make a resonable profit building new.. at least the bigger builders are not going to .
but other areas new construction is booming.. West coast.. your state.. Vegas has bounced way back same with PHX.. but your not seeing it all across the board.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Robert Seed your correct DF has nothing to do with the foreclosure process.. its all state specific and in some instances county specific..
Like in GA you can start to finish in 90 days or less same with MS.. I have foreclosed out borrowers in both states that quick.. or you can lend in NY and by the time my grandkids graduate collage you can get your collateral back.. its up to the lender to take on those risks.. you see alot of talk about buying NPN here on BP and many will only buy in trust deed states or quick foreclosure states.
I agree I always lamented about the renter paying 1,200 for a house when that same amount would easily buy a home.. well in many parts of the US>. were you have NO appreciation.. I think a lot of folks look at homes as a liablity and why own it.. let someone else maintain it.. other than a litlte write off and some equity pay down... they simply don't want to own even though they could.
then you have the other side of the coin.. were folks simply cannot manage debt.. you see it in your profession no matter what they make or do.. they simply cannot manage debt.. and when they cant manage debt or have very unstable family situations.. the banks take the brunt of it when they don't pay.. So for me.. folks need to prove they can manage debt and the way they do that is by having decent incomes stable jobs and for better or worse good fico's... other wise they are better off renting safer for everyone..
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes9y
@Robert D-F has virtually no impact on GSE (Government Sponsored Entity, like Fannie Mae) underwriting. 2 years of documents... that's a GSE underwriting policy and really has nothing to do with D-F.
The main areas D-F impacted underwriting were changes to the Truth in Lending Act (“TILA”) to require creditors to determine that borrowers have a “reasonable ability to repay”. The D-F annual stress tests (does the entity have adequate capital if adverse economic conditions arise), regulation of swap transactions (credit default swaps, and securitization generally), and securitization Risk Retention are not something everyday customers see, but GSEs need to implement to help curb 'systemic risk'. Details are in the .
- Investor · Anchorage, AK · Member since 2017 · 45 posts · 9 votes9y
@Andrew Syrios your comments are right on the button. Communities throughout the mid-west in particular will have a very difficult time recovering without local banking services. While the number of small banks in the US has been shrinking for years, Dodd-Frank has significantly added to the burden.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Ron Healy 450 community banks went under in the GFC in Georgia alone.. why over subscribed to real estate debt. REgulators are just not going to let the small commercial banks get way over their ski tips into real estate again.. at least thats what my community banker tells me.. they can no longer have more than about 30% of their portfolio in Real estate.. ( and they don't make homeowner mortgages) just commercial construction short term stuff. Thats why its been dog tough to get a construction loan unless your top shelf borrower.. at least in most markets..
- Lindale, TX · Member since 2016 · 9 posts · 1 vote9y
IF it passes, it'll be a recipe for the next financial disaster and market collapse, aka 2008. Few industries can police themselves. There are always predatory members that get too greedy and think they don't have to follow sound logic, any rules, any ethical codes of conduct (Madoff, Kenny Lay, many others). Look at the latest transgressions and fiascos with Wells Fargo... and this was inside the Corporate structure ! Sadly we NEED some regulations to be sure ALL are playing by the same rules. SO if they remove the Wall St- Banking restrictions, look for another big crash 2-5 years down the road. However, we might not recover from this one (last one was VERY close)... people are fed up bailing these bastids out and NO one going to jail over it. We did it in 1987 with the S&L scandal - one reason we had and stiffened regulations. The Great Depression gave us the Glas-Stegal Act to prevent future crashes. It was repealed in 1999- and it took about 7 years to give us the mortgage institution - housing crash of 2008.... WHY are these fools going down this road again? Think they've been bought off? Why are people electing these FOOLS?
- Chesterfield, SC · Member since 2017 · 142 posts · 73 votes9y
Originally posted by @Jay Hinrichs:
@Jonathan Damon those are good points. however from my point of view I dont see secondary buyers of mortgage paper going back to buying liar loans and poor credit loans etc. I could be very wrong about this.. these lenders may have the right to do it but the market may not accept that kind of high risk paper.. and for me personally the mantra that its every Americans right to own a home i flawed one still must qualify and so the fiscal responsibility other wise that's why we have rental property. CRA Community reinvestment act was one of the worst things Clinton ever did.. forcing banks to loan into known terrible situations created all sorts of bad debt.
even before the GFC foreclosures were rampant in those areas.. I know I bought them and I funded those that bought them... you ask anyone in the foreclosure business today and they will tell you defaults are WAY down.. and that is because of lending having gotten realistic you have to actually qualify to own a home not just way you want one because its your American right to own one.
The other point I like to make is that in some markets you still wont have a new construction boon.. simply because existing homes sell for far less than replacement value.. you can have some new construction but it wont be to the extent it was 20 years ago.. .. you look at big swaths of the country were median home prices hover in the 150k range.. and you simply can't build and make a resonable profit building new.. at least the bigger builders are not going to .
but other areas new construction is booming.. West coast.. your state.. Vegas has bounced way back same with PHX.. but your not seeing it all across the board.
I tend to have a pessimistic outlook when it comes to the financial sector doing the right thing. I get what you say about new construction but I really don't see it at max capacity for the future. Honestly we are at a pendulum right now so I really can't say anything with certainty. You could be totally correct with how it plays out. Just very interesting right now. I look at what is happening in Illinois and think we might have two Detroits on our hands if things go this way and how will that play out. As you said new construction in West SC has grown and both the mid lands and Charleston have good cap rates as of now but are we looking at a saturated market? You can jump to Florida and see new construction in Miami and the Chinese/Russian money being thrown around and what impact will that have? I could honestly go on all day but right now as a whole in the real estate market we are either going to face a depression or collapse in 3 to 5 years depending on interest rates and policy.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes9yNot directed at you, Jay, specifically. Just commentary. The financial world changed after the GFC, much like our country changed after 9/11/01. Lots of things changed besides the regulatory environment. Business practices, company internal controls (and, collectively, corporate governance) all while interest rates were headed to 0. The perfect storm for a meltdown. I found this from a Fiscal Year End 2008 bank annual report:
Originally posted by @Jay Hinrichs:
@Ron Healy 450 community banks went under in the GFC in Georgia alone.. why over subscribed to real estate debt. REgulators are just not going to let the small commercial banks get way over their ski tips into real estate again.. at least thats what my community banker tells me.. they can no longer have more than about 30% of their portfolio in Real estate.. ( and they don't make homeowner mortgages) just commercial construction short term stuff. Thats why its been dog tough to get a construction loan unless your top shelf borrower.. at least in most markets..
"The interest rate environment over the past 15 months has had a significant impact on the Company’s net interest margin. Beginning on September 19, 2007, the Federal Reserve (the “Fed”) began cutting short-term interest rates. The most recent cut, which occurred on December 17, 2008, was the tenth such reduction and placed the total interest rate cuts at 500 basis points.... large portions of our funding liabilities are subject to repricing over some length of time. Many of the Company’s borrowings and all time deposits carry a fixed rate of interest to a fixed future maturity date. The rates on those fixed rate, fixed maturity instruments become subject to change only at maturity. Therefore, it takes a longer period of time to realize decreases in our cost of funds.... These factors resulted in a decline in the net interest margin for 2008."
Time was not on their side. Within about a year, that bank was taken over. The U.S. Department of the Treasury received enough warrants to try to eventually recoup its 'investment' from the suitor company, that's how these deals played out.
At that point, very few were in the mood to start a bank. Instead, ... buying banks like many here on BP buy cheap houses;) - 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Chris Martin Rialto ( lennar hedge fund) got 5 billion of tarp money and started buying up these little banks and subsequent debt.. I was brokering some of hte bad debt my little bank had.. and met with these boys in Portlandia .. govmit gave them 5 billion to go buy this stuff with our money.. then when they got the banks or assets they started hammering the borrowers. They made a killing no doubt.
- 9yRobert GuilfoylePro MemberMount Laurel, NJ · Member since 2012 · 125 posts · 36 votesThis is a good read on Dodd Frank by a well respected credit analyst on Wall Street https://app.hedgeye.com/insights/59969-regulation-is-the-issue-in-housing-finance
- 9yCole StarinPro MemberRental Property Investor · Kansas City, MO · Member since 2016 · 26 posts · 10 votesh. l
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes9y
Originally posted by @Ron Healy:
@Andrew Syrios your comments are right on the button. Communities throughout the mid-west in particular will have a very difficult time recovering without local banking services. While the number of small banks in the US has been shrinking for years, Dodd-Frank has significantly added to the burden.
I think the problem is that Dodd Frank makes it almost impossible to start a new community bank, so as long as it's in place (at least in the way it is now) there's no way they can recover which puts a huge damper on small business since most small businesses get their loans from community banks.
- General Contractor · Palm Desert, CA · Member since 2016 · 193 posts · 79 votes9y
I want to repeal anything Nancy Pilosi supported
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