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Real Estate Tips

What is the Dodd Frank Act & how will it affect new home owners?

Over the course of 2013, you've probably heard a lot about the Dodd-Frank Act, but may have no idea what it actually is. If you're buying a home, you'll likely hear the term a time or two, especially if you're doing a substantial amount of research before you buy. So what exactly is it and how does it affect you?
What is the Dodd-Frank Act?

Passed in 2010, the actual name of the bill is the Dodd-Frank Wall Street Reform and Consumer Protection Act, but considering the long name, many use the shortened version of the name instead. What it does is lower risk and put regulations on the United States financial industry as well as protect consumers. As evidenced by the moniker, the bill bears the names of the sponsors of the legislation, Senator Christopher J. Dodd (D-CT) and United States Representative Barney Frank (D-MA).

With the bill came the Financial Stability Oversight Council to oversee the financial institutions. In turn, this council assesses the risk of the financial system and identifies potential threats, identifies gaps in regulation, monitors the financial services marketplace, promotes market discipline, regulates credit rating agencies, gathers information about the insurance industry, combats corruption, provides an annual financial report to Congress, and more. The council keeps an eye on the larger financial institutions and ensure there's no disruption to the financial system. For example, if a firm seems too weak, the council can restructure it. The entire council consists of 9 members and is headed up by the Treasury Secretary.

How does the Dodd-Frank Act affect new home buyers?
The Consumer Financial Protection Bureau (CFPB) is in charge of protecting consumers from banks who try to take advantage through predatory practices. It provides info to consumers in clear verbiage  rather than a bunch of big words thrown together that only seem confusing and deceitful. They also keep an eye on banks to ensure there's no risky mortgage lending going on. If you're a new home buyer, lenders are now required to provide you with easy-to-read and easy-to-understand paperwork that discloses exactly what you're getting and doing with your money.
 
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