A Decade Later – Dodd-Frank's Impact on Appraisals (2024)
July 21, 2020, marked the 10th anniversary of signing the Dodd-Frank Wall Street Reform and Consumer Protection Act (aka ‘Dodd-Frank’) into law. The financial crisis of 2008 prompted the 350,000-word bill, which had far-reaching impacts, some foreseen and some not.
Consumer protections were grossly lacking, according to the architects of the financial crisis post-mortem. The primary intent of Dodd-Frank was to create more consumer protections across the U.S. financial system. Many will argue that the legislation was, at first, a one-size-fits-all overlay that placed (unfairly) the same guardrails on community banks as it did Wall Street investment banks. Several of those challenges have been tackled, to some degree, over the last decade.
Appraisal Management Companies (AMCs) have been around for roughly 50 years, creating a consistent and reliable operational model. Congress’ passing of Dodd-Frank contributed significantly to solidifying the model’s demand as much as anything prior.
Let’s be very clear – Dodd-Frank does not mandate the use of AMCs. As long as the legislation’s key provisions are well cared for, such as appraiser independence and reasonable and customary fees (to name a few), lenders may choose whatever appraisal model they desire.
While the Dodd-Frank inspired changes were widespread throughout the U.S. financial system, the legislation brought seven key transformations to the appraiser industry:
When signed into law, the bill immediately sunset the Home Valuation Code of Conduct (HVCC), the original attempt in 2009 at appraisal independence from Freddie Mac, the Federal Housing Finance Agency (FHFA), and the New York Attorney General. HVCC was gone, but appraiser independencerequirements remained prominent, in place to prevent conflicts of interest and undue influence in the appraisal process – or underhandedly trying to inflate appraised values. The appraisal process is now independent of the loan production process, and regulators can now prosecute violations. Behavior modification, across the board – from lenders to appraisers – was the overall objective.
Requiring ‘Reasonable and customary’ fees, whereby appraisers deliver comprehensive and accurate home valuations in return for being compensated at fair market value for the scope of work. With ‘reasonable’ meaning the fees are adjusted for the characteristics of the appraisal, such as the location of the subject property, the amount of time in which the appraisal services are required to be performed, and the necessary level of qualification of the appraiser for the assignment, just to name a few. In broad terms,’ Customary’ means the fee paid is reasonably related to recent rates paid for appraisal services, taking into geographic market dynamics.
The birth of a new financial services regulator. Dodd-Frank revised FIRREA’s independence standards by splitting residential and commercial appraisal oversight. Rulemaking and oversight for residential mortgage appraisals now fall under the Consumer Financial Protection Bureau (CFPB). Commercial real estate appraisal authority remains with FIRREA’s Appraisal Subcommittee.
Section 1471 requires a physical property visit for specific higher-risk mortgages.
Section 1473 amended FIRREA to provide for a national registry of AMCs and set minimum requirements for AMCs. These requirements set a baseline for what the industry should expect and are suitable for the industry as a whole. They have helped repair public trust in the AMC industry, and here at United States Appraisals, we consistently far exceed the set minimum standards.
While Dodd-Frank also addressed, at a high level, some appraiser certification and education standards, the legislation left most of the requirements to individual states.
A section of Subtitle F requires AMCs to pay each state ‘National AMC Registry’ fees. States continue to improve their management of the current appraisal regulations, leveraging grants in addition to the fees paid by AMCs. Fees collected are reported to be millions more than necessary to manage the registry. However, the additional money is earmarked to explore new training systems and alternative ways to entice new appraisers into the industry. As an AMC, we feel it’s important and essential, and we take pride in the fact that we are shaping the future of the industry.
In summary, the legislation appears to have met its original intent to shore-up critical aspects of our banking system. While Dodd-Frank is a significant compliance consideration, it’s not alone. There are many others. If you feel you have weaknesses in your current appraisal operation, we are here to help. We are trusted by many lenders and have a proven appraisal management system that will help your business remain compliant with Dodd-Frank and other regulatory and investor requirements.
[§1471] The Act specifies appraisal requirements, including a physical property visit and a second appraisal in some circ*mstances. Creditors must provide the borrower with a free copy of the appraisal, and creditors cannot charge the borrower for the cost of the appraisal.
Proponents of Dodd-Frank believed that the law would prevent the economy from experiencing a crisis like that of 2007–2008 and protect consumers from many of the abuses that contributed to the crisis. In effect, this limits the bond market-making role that banks have traditionally undertaken.
The most far reaching Wall Street reform in history, Dodd-Frank will prevent the excessive risk-taking that led to the financial crisis. The law also provides common-sense protections for American families, creating new consumer watchdog to prevent mortgage companies and pay-day lenders from exploiting consumers.
The Dodd-Frank Act, signed into law in July 2010, spans 2,300 pages and directs federal regulators to burden job creators and the economy with more than 400 new rules and mandates. The Act was touted by its supporters as “Wall Street reform” and Washington's response to the financial crisis of 2008.
The financial institutions covered under the Final Rule are required to compile and maintain data from small business loan applications. Specifically, there are 81 data points that these institutions must collect and submit to the CFPB, and a list of these data points can be found here.
The Dodd-Frank Act requires public companies, in connection with any shareholder vote on a merger, acquisition, or other change-in-control transaction to (i) disclose any arrangements that will provide any named executive officer with payments or benefits in connection with the transaction, as well as the amounts ...
The Dodd-Frank Act put restrictions on the financial industry and created programs to stop mortgage companies and lenders from taking advantage of consumers. Dodd-Frank added more mechanisms that enabled the government to regulate and enforce laws against banks as well as other financial institutions.
They failed to break up giant banks. They failed to require banks that returned to profitability after the giant post-crisis bailouts to pay some of the money back. They never fully implemented the Volcker Rule prohibiting bank proprietary trading in credit derivatives.
What are the five areas included in the Dodd-Frank Act of 2010? Consumer protection, resolution authority, systemic risk regulation, Volcker rule, and derivatives. a well-capitalized financial institution has ________ to lose if it fails and thus is ________ likely to pursue risky activities.
In 2010, U.S. lawmakers passed the Dodd-Frank Act, which sought to reduce risk in the banking system. In 2018, Congress and the Donald Trump administration scaled back many of the legislation's provisions, viewing them as too onerous on small and midsize banks.
Violations of the FCRA may also be considered as a FTC UDAP or Dodd- Frank UDAAP. For example, obtaining and using unsolicited medical information (outside of the exceptions provided by the rule) to make credit decisions may also be considered as unfair.
The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB) within the Federal Reserve Board. It's one of the Act's most notable achievements. The Dodd-Frank Act provides the CFPB with supervisory roles for certain financial firms.
Dodd-Frank established the CFPB, increased capital and other prudential requirements, augmented oversight of financial institutions, and created new resolution procedures to safely wind down institutions when they fail.
Dodd–Frank reorganized the financial regulatory system, eliminating the Office of Thrift Supervision, assigning new jobs to existing agencies similar to the Federal Deposit Insurance Corporation, and creating new agencies like the Consumer Financial Protection Bureau (CFPB).
The Dodd-Frank Act, officially called the Dodd-Frank Wall Street Reform and Consumer Protection Act, is a federal law that was passed by Congress on July 21, 2010. One purpose of the law is to promote the financial stability of the United States by improving accountability and transparency in the financial system.
Registered entities and swap counterparties must report swap creation data electronically to a Swap Data Repository (“SDR”). Required swap creation data includes all primary economic terms (“PET”) data and all confirmation data for a swap.
Section 1002.14(a)(1) requires that the creditor “provide” copies of appraisals and other written valuations to the applicant “promptly upon completion,” or no later than three business days before consummation (for closed-end credit) or account opening (for open-end credit), whichever is earlier.
Subsection 1 does not prohibit a person with an interest in a real estate transaction from requesting that an appraiser: (a) Consider additional appropriate property information; (b) Provide further detail, substantiation or explanation for the appraiser's conclusion as to value; o (c) Correct errors in his appraisal.
Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") requires certain national banks and federal savings associations to conduct company-run stress tests.
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