We now have the War and Peace version of the Dodd Frank law in affect. But how is this going to affect real estate business? Is it going to stimulate the real estate industry? Stabilize home values? What about making it easier and inexpensive for consumers when obtaining a California real estate loan or a loan in any state?
All answers in my opinion are no. Something had to be done but was the result wasn’t researched or thought out very well.
When politicians make decisions and reform to something that they know very little about, isn’t a good idea. Creating sweeping reform using one’s own personal morals isn’t good for business either.
For example, limiting a lender contact and not allowing the selection of a specific appraiser (unless the appraiser works as an employee of the lender) is morally a good idea.
The result? Appraisal fees have gone up by 25%-50%. Who foots that bill? We do.
As a result, many experienced appraisers have left the business and many times appraisers are coming from long distances to appraise a home and know nothing about the local area. This doesn’t bode well for home values.
The appraisal issue isn’t a part of the Dodd Frank financial reform. However it’s just an example on how its unintended consequence can affect our wallets.
Another moral choice was made in that it’s not right to mark up an interest rate on a California real estate loan which means the lender and loan originator can make more money on a transaction.
Sounds fair right? Think again. That mark up on the interest rate frees up a pool of funds that could have gone to the lender as income OR the borrower and could have been used to pay for borrowers closing costs and fees. This is beneficial for first time home buyers who are short on cash and borrowers who don’t want to pay fees on their refinance loan. As a result of the new legislation, neither of these options will be available.
On the surface the moral compass is right but there’s wasn’t enough research as to how this change was going to affect all consumers.
The credit card part of the reform further illustrates. Credit card issuers no longer can charge predatory fees and rates. But really how many people were paying these rates? Less than 15% of the nation and we all now have to pay in one way or another.
Again the moral compass is good. Banks now lacking that income are cutting rebate programs and free checking accounts are no longer going to be free, and preferred interest rates on cards are going up.
How is this good for the majority of America?
The biggest surprise of the financial reform is that the largest bailouts in American history was given to mortgage giants Fannie Mae and Freddie Mac and they were completely left out of the financial reform act. WOW.
2011 will be one of historic proportions since all this new legislation becomes part of our daily lives.
Are there more unintended consequences are in store? One thing is for certain it won’t make it any easier or cheaper for the person trying to obtain a California real estate loan or in general, on the middle class American consumer.