What The Dodd-Frank Repeal Means For The Future Of Alabama’s Short Term Interest Rates
It had been no secret that President Trump had plans to make the dismantling of the Consumer Protection Act and Dodd-Frank Wall Street Reform a number one priority after taking office. Within two short weeks after his inauguration into the Oval Office, he swiftly issued an executive order that set the ball rolling by way of agency action. Dodd-Frank was an effort lead by a team at the Department of Treasury, which also garners a great deal of support by many in Congress. But, what will this mean for short-term interest rates in Alabama?
All homeowners should be sitting up and taking notice of the Dodd-Frank repeal efforts, as a lot of protections that have been taken for granted for years are being stripped away with a successful push of the executive order. The newly created CFPB or Consumer Financial Protection Bureau is one of the major components of the Dodd-Frank regulatory mandate. This bureau is responsible for the administration of a range of regulations for protecting consumers, where some of which even predate Dodd-Frank and some are mandated by it.
A great many of these regulations in question are in place to protect the homeowners as they seek mortgages for their homes. The others are there to safeguard the consumers throughout the life of their home mortgage, especially when they are faced with a difficult time trying to keep up with the mortgage payments due to every day, unforeseen life events. The events that are known for knocking people for a loop, including divorce, medical bills, job loss, or a death in the family.
Dodd-Frank was created back in 2010 as a response to what the country saw in both 2007 and 2008 with the financial crisis. Instead of consumers in Alabama worrying themselves silly, it may be best to focus on the fundamentals instead; determining their short term and medium term goals and the ways that they will be able to achieve them. A homebuyer may be best suited identifying a home that will be affordable to them over the long term while learning more about how the mortgage process works. Do you have a current mortgage in Alabama that is right for you? Should you be looking into refinancing with the kind of mortgage that has a much lower interest rate?
The repeal of Dodd-Frank could end up impacting more than mortgages, however, with many officials in the financial world pointing at the credit card industry as a sector that could be impacted most. A lot of the protections that are listed in Dodd-Frank had been intended to take away a lot of the abusive practices that the financial services industry is known for. For example, paying credit cards late, or going over their limit. Such consumer errors brought about penalty fees and interest rate hikes in the past.
Republicans had long criticized the regulations set forth with Dodd-Frank as being one of the primary driving forces for the notable anemic economic growth across the States, and for encouraging the ‘too big to fail’ mentality, which they say opens up the door for taxpayer bailouts in the future of the major banks in the country today.
To better sum up Dodd-Frank and what it means for consumers across the state of Alabama, these are the best and worst elements:
- Mortgage Market Reform – The mortgage industry was the number one culprit with the financial crisis, where inappropriate and expensive loans were sold to consumers who were not able to afford them while companies also repackaged mortgages into securities without looking into the likelihood that debt would not be repaid. Dodd-Frank was set to prevent a repeat of the housing collapse by overseeing the payday lenders and other non-bank firms, while also requiring that mortgage originators verify the borrower can repay the loan.
- CFPB – The Consumer Financial Protection Bureau offers average Americans a good deal of protection from the traps of the financial industry. The bureau has worked to simplify the mortgage disclosure forms and also works on having the power to enforce a long list of truth in lending, fair credit and other laws for consumer protection.
- Capital Standards And Derivatives Rules – There is concern that the new derivatives rules, as well as rigorous standards for capital and risk, make the United States less competitive in the global market. The capital markets have to have some level of risk to function, and the best solution would be to rely on more information and transparency for the investors to make better decisions instead of eliminating risk.
- Interchange Fees – This had been designed to protect consumers as a way to holster in the financial industry charged. However, Dodd-Frank worked to have the Federal Reserve Board cut the swipe fees that the banks will charge their merchants for the use of debit cards, bringing about $20 billion in revenue each year.
- Volcker Rule – Through the meltdown, both the regulators and the market had been panicking while not knowing how the proprietary trading and the level of potential losses by the banks would impact the financial system. In this rule of Dodd-Frank named after Paul Volcker, the chairman of the Federal Reserve Board, the banks would be prohibited from any proprietary trading and also limited when it comes to investing in private equity firms and hedge funds. It is said that this rule would end up harming banks or the ability of their customers to manage assets while also cutting into growth and profits.
While looking at the short-term interest rates in Alabama and the other elements of the financial crisis, it is easy to look back on how homeowners took a hit from the abusive, predatory behaviors in the mortgage industry, which took place over many years. Lenders were lending without thinking of the borrower, and as long as the home had enough equity in the home, the lender would be okay even after foreclosure. It remains to be seen just what else will happen with the repeal of Dodd-Frank, and it may be impossible to determine who will be impacted next or if there will be a turn for the better over the complete financial climate.