Over the past few months, the United States Congress has been working hard to reach a consensus on exactly what it believes should be in the much-vaunted financial reform legislation. Whether you agree with Congress that this is vitally important or you believe that we’d be better off without it, the House and Senate committees have finally reached a consensus, and you need to be aware of what will be on the floors of both halves of Congress for debate.
Here are some key “highlights” that have already been controversial and that made it into the bill:
- Formation of a new Consumer Financial Protection Bureau.This authority will regulate mortgages and credit cards
- 5% risk retentionLenders will be required to retain as much as 5% of a credit risk, depending on the “quality” of the mortgage being granted. FHA, USDA and VA loans are exempt from this. As yet, there are no clear definitions for levels of quality but the SEC and FHFA will be working on the criteria. Negative amortization loans, loans with prepayment penalties and loans will balloon payments are already in the “unqualified” category, meaning a full 5% must be retained by the lender.
- Proposed tax on hedge funds and large bank.This is intended to raise $19 billion over five years to help alleviate the cost of some of the new initiatives in the bill.
- Banks no longer can trade on high-risk deals with their own moneyHowever, some types of trading and investments, including hedge funds and private equity funds, will still be permitted.
The President stated that the bill incorporates “90 percent of what I proposed when I took up this fight”[1]. If this is the case, then there are likely many other issues in the bill that are not yet being highlighted in the media that will impact real estate investors – and possibly not all in a positive fashion. It will behoove us all to get a clear grip on exactly what our congressmen and senators are debating so that we can have an active, effective and just voice in this debate.
What are your opinions on the financial reform bill?
Thank you for reading! Your comments and questions are welcomed below.
[1]http://www.dsnews.com/articles/congress-reaches-consensus-on-financial-reform-legislation-2010-06-25
i’m sure the banks have already got a strategy around this. a real shame
Come NOVEMBER we need to KICK these congressmen/women and senate out of office they are one messing up the system and we have to pay for it….what a country!
Yet another expansion of the federal bureaucracy to make us think that they are helping us. Remember the McCain Feingold campaign contribution reform bill of a few years ago that was supposed to rein in spending? There were so many loopholes in that that very little really changed. You can bet that the banks and their attorneys have already figured out ways around this or contributed so much to the key politicians writing this thing that while the old ways may be blocked they already know a new way to accomplish the same miserable result. Hooray for Barney Frank and Chris Dodd for such a fine piece of legislation!
On a side note, it will be interesting to see where Chris Dodd ends up now that he is leaving the Senate. My money is on a cushy lobbying job or a bank to pay him off for his years of good work on their behalf.
You know that anything that Barney Frank is part of has got to be nothing but a steaming pile of…..
Not sure Dodd can pass the backround check for a bank?!
There are all the regulations and laws we need that were not enforced or poorly enforced or when pointed out to the Feds they needed to be looked into or enforced were just ignored. More crap to ignore or more crap to take kick backs from, not sure which way it will go. Oh wait it will go both ways what was I thinking?
All this will actually do is protect no one, Just employ one more government welfare receipient, put the economy in a bigger hole and screw you and me!!!
We need to send Obama and all of his people to that toilet called Chicago!
Only 5%? I was under the impression that they had to set aside an equal amount to cover losses
I read that people who invest in rental property and other property they sell will need a license as a mortgage company if they do the financing as an owner financier, any truth to this?