Will Dodd-Frank become a death knell to community bankers and real estate brokers nationwide? It”™s a distinct possibility if the legislation”™s proposal to require a 20 percent down payment for potential homeowners is put into effect.
Rick Jones, executive vice president for Provident Bank, said the law is very complex as to how and when things will happen.
“One thing is certain, Dodd-Frank will make it more difficult to get credit and to obtain a mortgage if it stands as is,” the longtime banker said.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was created to keep an eye on banks and financial institutions so as to avoid repeating the mistakes like those that contributed to the Crash of 2008.
One year after Dodd-Frank was signed into law, the Independent Community Bankers of America (ICBA) took a look at the effects the massive financial regulations that have already or are about to be imposed.
HV Biz asked local bankers and the Westchester-Putnam Association of Realtors”™ chief for their reaction to the law.
Many of the provisions in Dodd-Frank were a “knee jerk” reaction to the financial meltdown, Jones said.
“The ICBA is correct about it making it harder to get credit ”“ but it will also hamper those who are trying to buy a house. Coming up with 20 percent for even a $200,000 mortgage is a substantial sum for any first-time home buyer.”
He also noted that provisions in the legislation may add some protection for consumers from banks who were doing the wrong thing, “but it”™s like throwing the baby out with bath water,” he said. “For example, it limits what banks can make on credit card transactions. Big-box retailers advocated for that, saying it would help them lower prices and help consumers. But will consumers really benefit at all?”
Michael Quinn, president and CEO of Rhinebeck Savings Bank, said “Dodd-Frank is troubling in that what it may bring ”“ but it has not brought enough yet to see what needs to be changed. We are still lending as we always lent. What we are experiencing is a shortage of demand for loans. The 20 percent down payment being proposed hasn”™t happened yet.”
Eric Wiggins, president and CEO of Greater Hudson Bank, is a proponent of home ownership.
“I think anyone buying a home should have the ability to put money down on a home. As a community bank, we don”™t need anyone to tell us this. A 20 percent down requirement would certainly stifle a fragile real estate market.”
Gil Mercurio, CEO of the Westchester-Putnam Association of Realtors, sees the Dodd Frank 20-percent down proposal as “a serious overreaction to lending programs that were not rigorous enough; in trying to fix it, they have seriously overregulated.
“There is no evidence that lower down payments, if they are carefully monitored and tested, are any more risky than a 20 percent down payment. Programs that can qualify consumers at lower ratios are more than desirable,” he said. “I would be concerned that, if this goes through, what is already a very low level of real estate activity will decrease even further and seriously impact the market ”“ not forgetting the price of real estate in this area is high to begin with.”
A typical case of Liberal Governmental “Do as I say, not as I do”