60 Votes in Favor; Financial Reform Squeaks by Senate
Senators voted through wide-ranging financial reform this afternoon, after rallying support from key Republican opposition. The final version of the Restoring American Financial Stability Act of 2010, sponsored by Senator Christopher Dodd (D-CT), will now go to President Obama for ratification. (Download a copy of the bill by clicking here.) The House version of the bill, HR 4173, already passed. In the Senate, the reconciled reform package passed the cloture hurdle earlier today. A handful of Republicans previously against the reform came on board this week, finally shifting majority votes in favor. Sen. Olympia Snowe (R-ME) was one of those Republicans: "After thoroughly reviewing the 2,315-page financial regulatory reform conference bill during the July 4 work period, I intend to support passage of the legislation when it’s brought before the Senate for consideration," she said. Sen. Scott Brown (R-MA) also came in support of the financial reform, now that the $19bn bank tax is removed. Nonetheless, the American Bankers Association (ABA) still expressed its displeasure at the current structure of financial reform. ABA CEO Edward Yingling, said "while its core provisions provide needed reform, it is overloaded with new rules and restrictions on traditional banks that did not cause the financial crisis. The result will be over 5,000 pages of new regulations on traditional banks and years of uncertainty as to what the massive new rules will mean." “Its impact will be felt not only by the banking industry itself, but by the millions of consumers and businesses that rely on financial services every day to meet their saving, borrowing and financing needs," he added. "It will also, by extension, have a considerable impact on the broader economy and the capability of traditional banks to provide the credit needed to create jobs and drive economic growth." In the mortgage finance space, there is also some concerns that the bill does not address how to get Fannie Mae and Freddie Mac out of conservatorship. Lawyers at K&L Gates lawfirm said that mortgage servicers would only be effected negligibly by the new financial reform as the "Dodd-Frank Act left most of its ammunition for other segments of the financial services industry," said a note yesterday from the firm's attorneys, Steven Kaplan, Kerri Smith and Jonathan Jaffe. "Title XIV of the Dodd-Frank Act, entitled Mortgage Reform and Anti-Predatory Lending Act, would impose new restrictions and requirements on the residential mortgage industry, but in many cases these changes piggyback the regulations issued by the Federal Reserve Board in 2008," they wrote. "Nevertheless, there are changes that could have a material impact on loan servicers and open them up to a federal cause of action with a private right of enforcement." The calendar of implementation is also iffy with estimates of application ranging from 18 months from passage to immediate compliance the day after the president signs the bill into law. Under the Mortgage Reform Act, one of the biggest impact to servicers will be in responding appropriately to qualified written requests (QWR) from borrowers. According to K&L Gates, if a servicer fails to act accordingly to a QWR, then under RESPA, the borrowers account may have to be corrected. Write to Jacob Gaffney.