A: The portions of the Dodd-Frank legislation coming into effect in 2014 that will most impact consumers have primarily to do with mortgage lending rules. These are referred to generally as the Ability-to-Repay rules and the Qualified Mortgage rules. They are theoretically designed to prevent the alleged abusive practices leading up to the mortgage crisis that began in 2008 and to ensure that home loan applicants are, indeed, able to repay the loan for which they are seeking approval. The new rules are designed to prevent low or no-documentation loans that hide the true costs or risks of a mortgage. There are also new rules coming into effect that have to do with protections for borrowers facing foreclosure and compensation for loan originators.
Q: How will these changes impact the loan process from the perspective of the bank and the consumer?
A: Banks will continue to have to adapt to a changing set of rules that are growing in volume and complexity. Implementation of the new rules by the relatively new
Q: What impact will these changes have on the banking industry, in general?
A: The Dodd-Frank legislation in general has created headwinds for all financial institutions with wave after wave of new regulations. The larger state and national banks will adapt to the new environment and have the resources and manpower to deal with the changes, albeit at great cost. Smaller community banks may be the most impacted and could bear a disproportionate burden based on size alone. With respect to the home mortgage market, some may decide to exit it entirely or to outsource their customers to a trusted and dedicated mortgage originator. The risk in all areas of banking is that the pace of lending and financial activity is slowed simply by virtue of the complexity and depth of new regulations.
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