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2017-08-25 / News

The Death of Dodd-Frank?

Regional Business Analyst

Campbell Campbell January 1, 2018 marks the effective date for banks to comply with the mandatory collection of new mortgage-related data under the Consumer Financial Protection Bureau’s (CFPB) Home Mortgage Disclosure Act (HMDA) Regulation. Mortgage lenders are required to collect significantly expanded data points on or after January 1, 2018 and report the data by March 1, 2019, using the CFPB’s web- based submission tool for HMDA data reporting.

At the end of July, five national financial services trade associations sent a joint letter to CFPB director Richard Cordray, offering to assist the CFPB in developing protocols for 2018 reporting “so the year serves as a productive transition to the new data requirements for 2019.”

If the president and the GOP majority in Congress have their way, HMDA could be the last Dodd-Frank regulation to be rolled out. In June, the House passed the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act to serve as a replacement for Dodd- Frank Act, which was passed in 2010 to protect bank customers and prevent another financial crisis. The CHOICE bill went over to the Senate in June where it stalled out, but it’s likely to be revived and revised next year.

Conservatives have been clamoring for President Trump to fire CFPB Director Cordray, however, Dodd-Frank contains a statute that stipulates the director can only be fired for “inefficiency, neglect of duty, or malfeasance in office.” The CHOICE Act would give the president the power to fire the agency’s director at will, and it would also curtail CFPB’s oversight powers.

Trade associations claim that the software for reporting won’t be ready in time for the HMDA rollout in January.

“Software companies responsible for implementing the HMDA are not ready to go forward, and they say it takes three months for installation, implementation and training, and it’s already near the end of August,” said Duncan Campbell III, president and CEO of the Pennsylvania Bankers Association in Harrisburg.

“Although community and regional bankers in Pennsylvania aren’t against regulations, they want to make sure they are ready to go forward rather than having to build the plane while they’re flying it.

“The other challenge we face with the new Home Mortgage Reporting Act rule is that customers end up with so much more paperwork that it becomes a trust and confidence issue, because they don’t realize that it’s coming from the government and not us.”

The Pennsylvania Bankers Association, whose membership includes banks in Altoona, Bedford, Clearfield, Ebensburg, Indiana, Johnstown, Mifflintown, Somerset, Washington and Williamsport, has consulted with Senator Toomey and Representative Rothfus about the CHOICE Act.

Members like that the bill repeals the Volker Rule, which prohibits banks from conducting certain investment activities with their own funds, and limits their ownership of and relationship with hedge funds and private equity firms.

“We already have a regulatory framework of the prudential regulators who have responsibility for consumer protection and who require financial institutions to control risks and hold adequate capital as defined by capital requirements,” said Campbell.

The most important reform in the CHOICE Act for smaller banks, said Campbell, is its tailored regulation provision.

“A good, solid tailored set of regulations that target where the risk to the system is greatest rather than spreading the regulations across the broad spectrum of U.S. financial institutions including community and regional banks that pose little risk would promote stability throughout the financial system and increase trust with bank customers,” said Campbell.

“I thought CFPB was set up to oversee banks with revenues of $10 billion and above, but its rulemaking has impacted every size bank including community and regional banks in the commonwealth, and it’s time for that overreach to end.” .

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