May 5th, 2017 10:30 pm PST
Today, in Washing D.C., the House Financial Service Committee approved the Financial CHOICE Act 2.0. The Financial CHOICE Act may be great for Wall Street, but it’s not so great for consumers. The Dodd-Frank Act protected American taxpayers from funding bail-outs for big banks. The Financial CHOICE Act removes this protection. Wall Street is no longer held accountable if there is another housing market crash like the 07-08 market crash.
The Consumer Financial Protection Bureau (CFPB) was enacted to protect consumers from predatory lending and loans that are structured in a way that is detrimental to consumers. The Financial CHOICE Act 2.0 removes the power of the CFPB. In fact, the CFPB will no longer exist, it is now named the Consumer Law Enforcement Agency.
The Financial CHOICE Act 2.0 effects on the Consumer Financial Protection Bureau
- The CFPB is now required to get Congress approval before taking action against any financial institution.
- Restrictions placed on the CFPB’s ability to regulate lending institutions.
- The CFPB can no longer restrict arbitration
- Complaints from consumers about financial institutions will not be made public.
- CFPB will not have oversight over the payday lending industry.
- Donald Trump can fire the CFPB director at will.
- CFPB will now be named the Consumer Law Enforcement Agency.
- Requirements under the Durbin Amendment PDF that guide the amount credit card networks can charge businesses for processing credit and debit card transactions.
Many consumers and small businesses owners are opposing the bill’s approval. Several financial analyst believe this is the wrong move for consumers. It protects big banks and Wall Street’s interest, not the interest of American People.
What does the Financial CHOICE Act 2.0 mean to the real estate and mortgage markets?
The Dodd-Frack Act of 2010 placed several restrictions on financial institutions protecting consumers from predatory lending and unfair loan terms. While the Dodd-Frank Act made it more difficult to obtain a mortgage due to stricter requirements lenders must follow. High risk loans were not nearly as common as they were prior to the 2008 housing market crash. The Financial CHOICE Act will remove many of these restrictions on big banks so they can make more risky loans.
The Financial CHOICE Act will reduce minimum mortgage requirements by some lending institutions making it a little easier for some borrowers to get approved. This will lead to more buyers in a housing market that is low on inventory. Due to supply and demand it should lead to a strong seller’s market, increasing home prices, and interest rates. Hopefully we do not see a repeat of the 2008 housing market crash.
(See Financial CHOICE Act 2.0 details on the Government website here)