As the controversial Dodd-Frank Act enters its fifth year of implementation, the law has already reached a price tag of more than $21.8 billion — and one-quarter of the law is still left to implement, a report finds.
The American Action Forum (AAF), a policy institute providing research and analysis of policy changes, outlines the Act’s progress thus far, citing some of the burdens that have been placed on mortgage lenders.
“Banks have faced numerous challenges including increased costs from compliance, increased costs raising capital standards and regulatory uncertainty,” the report states. “With regard to home mortgages, lenders have been particularly conservative in part because of this uncertainty.”
As of July 1, 96 (or roughly 24%) of the 398 total required rulemakings established by Dodd-Frank had not yet been proposed, leaving some of the economic impacts to be determined in the coming years. But the rules that have been implemented have already caused significant regulatory burdens, AAF explains.
Dodd-Frank has increased compliance costs, forcing the need for outside expertise, additional staff and more time spent on additional paperwork, the report states. After four years of implementation, the Act has created 60.7 million “paperwork burden hours,” the equivalent of 30,370 employees working full-time to complete annual paperwork.
In a survey of small banks conducted by the Mercatus Center at George Mason University, more than 80% of respondents reported compliance cost increases of more than 5% since the passage of Dodd-Frank in 2010.
“In the survey, many small banks reported the need to trim back or eliminate some products and perks offered to customers, especially with regard to residential mortgages, home equity lines of credit, overdraft protection and credit cards,” the report states.
Similarly, the results of a survey on lending from the American Bankers Association shows that two-thirds of respondents would restrict lending because of the ability-to-repay/qualified mortgage rule as defined under Dodd-Frank. The ability-to-repay requires lenders to make a “reasonable, good-faith determination” that prospective borrowers have the ability to repay their loans.
These regulatory burdens and compliance costs, the article states, were top concerns of survey respondents.
To read the full report, click here.
Written by Emily Study
