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.
To learn more click the image above for a PDF