Opinion: Should Dodd-Frank be amended?

by 09 Feb 2017

By Sam Khalil

If you turned on any news channel or logged into social media this week, you have heard that President Donald Trump has signed an executive order to replace, repeal, or amend Dodd-Frank.  But what does that mean for consumers?  Is he right?  

Dodd-Frank was the 2010 legislation that was passed to protect consumers from predatory lending and was put in place to avoid another real estate crash caused by subprime lending.  Among many other regulations, the bill called for the creation of the Consumer Financial Protection Bureau (CFPB).  The bureau’s job is to enforce the regulations in the bill, protect borrowers from loans they do not understand and cannot afford, and lower the costs for consumers.  But is it working?  Does Trump know what he is saying?  Should it be repealed?

In my opinion, the 2,300-page Dodd-Frank bill has both helped and hurt consumers.  The problem is that over-regulation can backfire.  Too often laws are written by attorneys who do not understand the technical details of the industry.  Persuaded by a small group of lobbyists who represent a fraction of the business, they miss a lot of details, making it cumbersome to stay compliant. 

Don’t get me wrong, the financial services and banking industries need to be regulated.  However, if these regulations are not thought out, it can end up hurting the consumer.  For example, under Dodd-Frank, if a loan officer, mortgage broker, or branch manager wanted to waive all or part of his commission to lower the APR for a consumer, he is not allowed.  He must be paid his pay even if he does not want it, and even if it increases cost for the consumer.  That is just one example of an unintended consequence of a bill that was meant to protect the consumer.  On the other side of the coin, required background checks, testing, and increased net-worth requirements to be a banker were some of the changes that helped raise the barrier of entry and add more professionalism and education to originators and brokers.

So in my opinion, Donald Trump is right.  Although the only thing he stated is that his friends are not getting loans, and has probably not read the 2,300-page legislation himself, his gut is leading him in the right direction on this one. Dodd-Frank and regulatory oversight are needed, but this bill should be amended to make it easier for lenders to lend, and allow consumers to benefit from lower rates and fees.

Sam Khalil is the chief executive officer of First Alliance Home Mortgage.


  • by Drain the swamp! | 2/9/2017 11:52:30 AM

    DF absolutely has to be amended! I have over 25 years in this business and it is a total log jam today: consumers are frustrated.
    First thing: get rid of the Amc's. Every appraiser is licensed and capable of scheduling their work week. Amc's bring nothing to the table except for high priced appraisals and red tape. People need to understand that you only get one shot at an fha appraisal, and if an incompetent one gets the order, that seller is in trouble, for I believe 6 months. The appraisal goes with the property, the buyer can pick up and walk away.
    The next thing to get rid of: the 72 business hour rule from CD to closing. When you add in weekends and holidays it can be nearly 100 hours... people don't read documents on less chaotic days like weekends and some holidays?? What's reasonable? Not 72 business hours.
    Lastly, get rid of all the redundancies, we are AMERICA!!
    Let's keep all the safe harbor stuff to keep the bad people out of our business, which other industries in our country should adopt asap... like realtors.

  • by Bigly mortgage company | 2/9/2017 11:58:02 AM

    The irony of Gary Cohen from Goldman Sachs standing over Trump with an order to dismantle Dodd Frank is something to behold, the same Gary Cohen who was at the helm of Goldman during the last housing crash that almost brought the world economy to its knees. The wolf is now guarding the hen house.

    The standard of Mortgage mortgages right now is very good. Don't try to tell me that FHA or VA needs to lighten up, 580 ficos to 96.5% LTV with average credit and little to no money left in the bank after closing, is already scraping the bottom of the barrel.

  • by Realist | 2/9/2017 11:59:23 AM

    Drain swamp comment below is spot on!! Realtors often are a huge part of the problem! But I won't go there now. Dodd Frank has done nothing but increase cost, time to close and cause everything to be a mess


Should CFPB have more supervision over credit agencies?