Tuesday, September 28, 2010

Dodd-Frank Act - Part II: Legislation - Reactive or Proactive

Commentary by Jonathan Foxx

Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group.

Lenders Compliance Group is the first full-service, mortgage risk management firm in the country and pioneers in outsourcing solutions in regulatory compliance.

Published in the September 2010 Edition of National Mortgage Professional Magazine.


In the wake of the recent financial collapse, the mortgage industry finds itself today faced with a blizzard of new regulations. There are reformist politicians who advocate for these new regulations, giving forth an apologetic that rival the reasoning of the most eloquent, ancient rhetoricians; and, there are politicians who condemn these same, new regulations, proclaiming that the prior existing regulations should have been (but were not) enforced, and that interposing new regulations in a deteriorating economy only adds to the industry's already hefty and costly regulatory burden.

The "Wall Street Reform and Consumer Protection Act," known as the "Dodd-Frank Act" (Act), is the federal government's response to the financial collapse, offering financial reform of the financial system in general, and to the mortgage industry in particular. It has been legislated into law at a time when fear pervades politics and the economic climate continues to worsen, with high unemployment, an eroding tax base, a swelling budget deficit, trillions of dollars in debt, and increasingly compressed corporate profit margins.

The Act hopes to provide that salvific safety, certainty, and stability that will calm our fears. But it is legislation that reacts to events past, and it is not necessarily proactive about possible events that may yet transpire. Financial bubbles, after all, exist due to the blindness of market participants, not their foresight.


This new article, the second article in a 3-part series that dissects the landmark financial reform legislation now known as the Dodd-Frank Act, is entitled Part II: Legislation - Reactive or Proactive, A New Era of Mortgage Reform.

In this article, I summarize certain salient aspects of the Mortgage Reform and Predatory Lending Act (Mortgage Reform Act). It is a primary component of the Dodd-Frank Act and requires careful review and analysis in order to implement properly. And, I provide a matrix of the Mortgage Reform and Predatory Lending Act, with respect to the minimum standards for mortgages.

Download Origination Article (1.75)


LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.