What is the Dodd-Frank Act?
The current economic crisis has led to the creation of tighter regulations in the finance industry in hopes of protecting the consumer and preventing a repeat of the 2008 recession. One of the safeguards recently passed into law is the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Named for Senator Christopher Dodd (D-CT) and US Representative Barney Frank (D-MA), the legislation’s sponsors, the Act became law in 2010 and was created to protect consumers from abusive terms and deceptive practices by banks and mortgage institutions.
According to CNBC, one of the main purposes of the Dodd-Frank Act is to regulate banks. The Financial Stability Oversight Council (FSOC) will watch for potential risks that affect the financial industry and may ask a bank to increase its reserve (the amount of money they have available that isn’t being used for business or lending). Under Dodd-Frank banks are also required to have an exit strategy for a “quick and orderly” shut down in case the bank goes out of business or runs out of money.
The Dodd-Frank Act also created the Federal Insurance Office in the Treasury Department. This office would monitor insurance companies that create risk to the financial system and make sure that affordable insurance is available.
The Consumer Financial Protection Bureau was born out of the Dodd-Frank Act as well. The CFPB was created to protect consumers from abusive practices by companies offering financial products and services including credit cards, mortgages and loans. The CFPB also provides information about mortgages in simple, easy-to-read language as well as a 24 hour toll free consumer hotline.
How Does the Dodd-Frank Act Affect Me?
In addition to the protections listed above, the CFPB has created a website to provide information on mortgages, both traditional and reverse. The CFPB continues to monitor the Reverse Mortgage industry to ensure that borrowers are protected from “unfair, deceptive or abusive practices and use it’s supervisory and enforcement authorities as appropriate.”
A brief summary of The Dodd-Frank Act is available at Senate.gov here.
For any questions about Reverse Mortgages or to learn more about the Dodd-Frank Act, please contact a Reverse Mortgage Advisor at 1 (800) 976-6211.