If it was largely “business as usual” for investors once the initial furor over Dodd-Frank passed, what happens now that the current administration might succeed in repealing the act? According to House Financial Services Committee Chairman Jeb Hensarling (R-TX), the biggest effect of the CHOICE act will be to strip a great deal of power from the CFPB. The CFPB was originally intended mainly to protect borrowers from unscrupulous lending practices, but it has extended its reach far beyond that and into all aspects of the nation’s credit industry and into other “consumer protections” as well. Not surprisingly, such federal reach (or overreach, as many see it) has not been well-received in many business sectors where entrepreneurs, small-business owners, and investors feel unfairly targeted. “We will replace Dodd-Frank’s growth-strangling regulations…with reforms that expand access to capital,” Hensarling promised last week. He introduced the CHOICE Act to the House and has promoted it as an avenue to increase small businesses’ options for obtaining capital.
Most real estate investors and, indeed, most of the financial industry, have instinctively applauded the notion of a Dodd-Frank repeal because this population generally supports lower levels of federal oversight. President Trump, an astronomically successful real estate investor himself, has said repeatedly that “tight lending practices” and overzealous bank regulation in the wake of the financial meltdown have hindered a true economic recovery in the United States. Opponents to the repeal like Pamela Banks, senior policy counsel for Consumers Union, say that it could cause another financial crisis by “leaving Americans vulnerable to financial fraud and rip-offs” such as poorly-backed mortgage loans that precipitated the housing crash in 2007.
If the CHOICE Act passes the Senate, which is the next step for the bill if it is to become law, it will move to President Trump’s desk for his approval, which he would likely give. In that event, here are three things that could happen that would directly affect your real estate investing business:
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