Title VI, or the "Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2010", introduces the so-called ""Volcker Rule" after former "Chairman of the Federal Reserve "Paul Volcker by amending the "Bank Holding Company Act of 1956. With the aim of reducing the amount of speculative investments on large firms' balance sheets, it limits banking entities to owning no more in a hedge fund or "private equity fund than 3% of the total ownership interest. The total of all of the banking entity's interests in hedge funds or private equity funds cannot exceed 3% of the Tier 1 capital of the banking entity. Furthermore, no bank that has a direct or indirect relationship with a hedge fund or private equity fund, "may enter into a transaction with the fund, or with any other hedge fund or private equity fund that is controlled by such fund" without disclosing the full extent of the relationship to the regulating entity, and assuring that there is no "conflict of interest. "Banking entity" includes an insured depository institution, any company controlling an insured depository institution and such a company's affiliates and subsidiaries, and must comply with the Act within two years of its passing, although it may apply for time extensions. In response to the Volcker Rule and in anticipation of its ultimate impact, a number of commercial banks and investment banks operating as bank holding companies have already begun to downsize or dispose of their proprietary trading desks.
The rule distinguishes transactions by banking entities from transactions by nonbank financial companies supervised by the Federal Reserve Board. The rule states that in general, "an insured depository institution may not purchase an asset from, or sell an asset to, an executive officer, director, or principal shareholder of the insured depository institution, or any related interest of such person ... unless— the transaction is on market terms; and if the transaction represents more than 10 percent of the capital stock and surplus of the insured depository institution, the transaction has been approved in advance by a majority of the members of the board of directors of the insured depository institution who do not have an interest in the transaction." Providing for the regulation of capital, the Volcker Rule says that regulators are required to impose upon institutions capital requirements that are "countercyclical, so that the amount of capital required to be maintained by a company increases in times of economic expansion and decreases in times of economic contraction", to ensure the safety and soundness of the organization. The rule also provides that an insured state bank may engage in a derivative transaction only if the law with respect to lending limits of the state in which the insured state bank is chartered takes into consideration credit exposure to derivative transactions. The title provides for a three-year moratorium on approval of FDIC deposit insurance received after November 23, 2009, for an industrial bank, a credit card bank, or a trust bank that is directly or indirectly owned or controlled by a commercial firm.
In accordance with section 1075 of the law, payment card networks must allow merchants to establish a minimum dollar amount for customers using payment cards, as long as the minimum is no higher than ten dollars.
The Volcker Rule was first publicly endorsed by President Obama on January 21, 2010. The final version of the Act prepared by the conference committee included a strengthened Volcker rule by including language by Senators "Jeff Merkley, D-Oregon, and "Carl Levin, D-Michigan, that covers a greater range of proprietary trading than originally proposed by the administration, with the notable exceptions of trading in U.S. government securities and bonds issued by government-backed entities, and the rule also bans conflict of interest trading. The rule seeks to ensure that banking organizations are both well capitalized and well managed. The proposed draft form of the Volcker Rule was presented by regulators for public comment on October 11, 2011, with the rule due to go into effect on July 21, 2012.
Title VII – Wall Street Transparency and Accountability
Title VII, also called the Wall Street Transparency and Accountability Act of 2010, concerns regulation of "over the counter swaps markets. Included in this section are the "credit default swaps and "credit derivative that were the subject of several bank failures c. 2007. Financial instruments have the meanings given the terms in section 1a of the "Commodity Exchange Act ("7 U.S.C. § 1a). On a broader level, the Act requires that various derivatives known as "swaps, which are traded "over the counter be cleared through exchanges or "clearinghouses.:55
The "Commodity Futures Trading Commission (CFTC) and the "Securities and Exchange Commission (SEC) both regulate derivatives known as swaps under the Act, but the SEC has authority over "security-based swaps". The Act repeals exemption from regulation for security-based swaps under the "Gramm–Leach–Bliley Act:55 The regulators are required to consult with each other before implementing any rule-making or issuing orders regarding several different types of security swaps. The CFTC and SEC, in consultation with the Federal Reserve are charged with further defining swap related terms that appear in "Commodity Exchange Act ("7 U.S.C. § 1a(47)(A)(v)) and section 3(a)(78) of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78c(a)(78)).
The title provides that, "Except as provided otherwise, no Federal assistance may be provided to any swaps entity with respect to any swap, security-based swap, or other activity of the swaps entity." An "Interagency Group" is constituted to handle the oversight of existing and prospective carbon markets to ensure an efficient, secure, and transparent carbon market, including oversight of spot markets and derivative markets.
Title VIII – Payment, Clearing and Settlement Supervision
Title VIII, called the "Payment, Clearing, and Settlement Supervision Act of 2010", aims to mitigate systemic risk within and promote stability in the financial system by tasking the Federal Reserve to create uniform standards for the management of risks by systemically important financial organizations and institutions by providing the Fed with an "enhanced role in the supervision of risk management standards for systemically important financial market utilities; strengthening the liquidity of systemically important financial market utilities; and providing the Board of Governors an enhanced role in the supervision of risk management standards for systemically important payment, clearing, and settlement activities by financial institutions."
Title IX – Investor Protections and Improvements to the Regulation of Securities
Title IX, sections 901 to 991, known as the "Investor Protections and Improvements to the Regulation of Securities", revises the powers and structure of the "Securities and Exchange Commission, credit rating organizations, and the relationships between customers and "broker-dealers or investment advisers. This title calls for various studies and reports from the SEC and "Government Accountability Office (GAO). This title contains ten subtitles, A through J.
Subtitle A – Increasing Investor Protection
Subtitle A contains provisions:
- To prevent "regulatory capture within the SEC and increase the influence of investors, the Act creates an Office of the Investor Advocate, an Investor Advisory Committee composed of 12–22 members of whom serve 4-year terms, and an "ombudsman appointed by the Office of the Investor Advocate. The Investor Advisory Committee was actually created in 2009 and therefore predates the passage of the Act, but it is specifically authorized under the Act.
- SEC is specifically authorized to issue "point-of-sale disclosure" rules when retail investors purchase investment products or services; these disclosures include concise information on costs, risks, and conflicts of interest.:160–1 This authorization follows up the SEC's failure to implement proposed point-of-sale disclosure rules in 2004 and 2005; These proposed rules generated opposition because they were perceived as burdensome to broker-dealers. For example, they would require oral disclosures for telephone transactions, were not satisfied by cheap internet or email disclosures, and could allow the customer to request disclosures specific to the amount of their investment. In determining the disclosure rules, the Act authorizes the SEC to do "investor testing" and rely on experts to study financial literacy among retail investors.
Subtitle A provides authority for the SEC to impose regulations requiring ""fiduciary duty" by broker-dealers to their customers.:158 Although the Act does not create such a duty immediately, the Act authorizes the SEC to establish such a standard and requires that the SEC study the "standards of care that broker-dealers and investment advisers apply to their customers and report to Congress on the results within 6 months. Under the law, commission and limited product range would not violate the duty and broker-dealers would not have a continuing duty after the investment advice is given.
Subtitle B – Increasing Regulatory Enforcement and Remedies
Subtitle B gives the SEC further powers of enforcement. This includes a "whistleblower bounty program" which is partially based upon the successful "qui tam" provisions of the 1986 Amendments to the False Claims Act and an IRS whistleblower reward program Congress created in 2006. The SEC program rewards individuals who provide information that leads to an SEC enforcement action in which more than $1 million in sanctions is ordered. Whistleblower rewards range from 10 to 30% of the recovery. The law also provides job protection for SEC whistleblowers and promises confidentiality for them.
Section 921I controversially limited "FOIA's applicability to the SEC, a change that was partially repealed a few months later. Previously, the SEC used a narrower existing exemption for trade secrets when refusing Freedom of Information Requests.
Subtitle C – Improvements to the Regulation of Credit Rating Agencies
Recognizing credit ratings issued by credit rating agencies, including "nationally recognized statistical rating organizations (NRSROs), are matters of national public interest, that credit rating agencies are critical "gatekeepers" in the debt market central to capital formation, investor confidence, and the efficient performance of the United States economy, Congress expanded regulation of credit rating agencies.
Subtitle C cites findings of conflicts of interest and inaccuracies during the recent financial crisis contributed significantly to the mismanagement of risks by financial institutions and investors, which in turn adversely impacted the health of the United States economy as factors necessitating increased accountability and transparency by credit rating agencies.
Subtitle C mandates the creation by the SEC of an Office of Credit Ratings (OCR) to provide oversight over NRSROs and enhanced regulation of such entities.
Enhanced regulations of "nationally recognized statistical rating organizations (NRSROs) include:
- NRSROs are required to establish, maintain, enforce and document an effective internal control structure governing the implementation of and adherence to policies, procedures, and methodologies for determining credit ratings.
- Submit to the OCR an annual internal control report.
- Adhere to rules established by the Commission to prevent sales and marketing considerations from influencing the ratings issued by a NRSRO.
- Policies and procedures with regard to (1) certain employment transitions to avoid conflicts of interest, (2) the processing of complaints regarding NRSRO noncompliance, and (3) notification to users of identified significant errors are required.
- Compensation of the compliance officer may not be linked to the financial performance of the NRSRO.
- The duty to report to appropriate authorities credible allegations of unlawful conduct by issuers of securities.
- The consideration of credible information about an issuer from sources other than the issuer or underwriter that is potentially significant to a rating decision.
- The Act establishes corporate governance, organizational, and management of conflict of interest guidelines. A minimum of 2 independent directors is required.
Subtitle C grants authority to the Commission to temporarily suspend or permanently revoke the registration of an NRSRO with respect to a particular class or subclass of securities if after notice and hearing the NRSRO lacks the resources to produce credit ratings with integrity. Additional key provisions of the Act are:
- The Commission shall prescribe rules with respect to credit rating procedures and methodologies.
- OCR is required to conduct an examination of each NRSRO at least annually and shall produce a public inspection report.
- To facilitate transparency of credit ratings performance, the Commission shall require NRSROs to publicly disclose information on initial and revised credit ratings issued, including the credit rating methodology utilized and data relied on, to enable users to evaluate NRSROs.
In addition, Subtitle C requires the SEC to conduct a study on strengthening NRSRO independence and recommends the SEC utilize its rulemaking authority to establish guidelines to prevent improper conflicts of interest arising from the performance of services unrelated to the issuance of credit ratings such as consulting, advisory, and other services. The Act requires the Comptroller General of the United States to conduct a study on alternative business models for compensating NRSROs
Subtitle D – Improvements to the Asset-Backed Securitization Process
In Subtitle D, the term "Asset-Backed Security" is defined as a fixed-income or other security collateralized by any type of self-liquidating financial asset, such as a loan, lease, mortgage, that allows the owner of the Asset-Backed Security to receive payments that depend on the cash flow of the (ex.) loan. For regulation purposes, Asset-Backed Securities are described as including (but not limited to):
- collateralized mortgage obligation
- collateralized debt obligation (CDOs)
- collateralized bond obligation
- collateralized debt obligation of asset-backed securities
- collateralized debt obligation of collateralized debt obligations (CDOs Squared)
The law required credit risk retention regulations (where 5% of the risk was retained) within nine months of enactment,. Proposals had been highly criticized due to restrictive definitions on 'qualified residential mortgages' with restrictive down-payment and debt-to-income requirements. In the August 2013 proposal, the 20% down-payment requirement was dropped. In October 2014, six federal agencies (Fed, OCC, FDIC, SEC, FHFA, and HUD) finalized their joint asset-backed securities rule.
Regulations for assets that are:
- Residential in Nature – are jointly prescribed by the SEC, the Secretary of Housing and Urban Development, and the Federal Housing Finance Agency
- In General – the federal banking agencies and the SEC
Specifically, securitizers are:
- prohibited from hedging or transferring the credit risk it is required to retain with respect to the assets
- required to retain not less than 5% of the credit risk for an asset that is not a qualified residential mortgage,
- for commercial mortgages or other types of assets, regulations may provide for retention of less than 5% of the credit risk, provided that there is also disclosure
The regulations are to prescribe several asset classes with separate rules for securitizers, including but not limited to, residential mortgages, commercial mortgages, commercial loans, and auto loans. The SEC and the federal banking agencies may jointly issue exemptions, exceptions, and adjustments to the rules issues provided that they:
- help ensure high quality underwriting standards for the securitizers and originators of assets that are securitized or available for securitization
- encourage appropriate risk management practices by the securitizers and originators of assets, improve the access of consumers and businesses to credit on reasonable terms, or otherwise be in the public interest and for the protection of investors.
Additionally, the following institutions and programs are exempt:
- Farm Credit System
- Qualified Residential Mortgages (which are to be jointly defined by the federal banking agencies, SEC, Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency)
The SEC may classify issuers and prescribe requirements appropriate for each class of issuers of asset-backed securities. The SEC shall also adopt regulations requiring each issuer of an asset-backed security to disclose, for each "tranche or class of security, information that will help identify each asset backing that security. Within six months of enactment, the SEC shall issue regulations prescribing representations and warranties in the marketing of asset-backed securities:
- require each "Nationally Recognized Statistical Rating Organization to include in any report accompanying a credit rating a description of:
- the representations, warranties, and enforcement mechanisms available to investors
- how they differ from the representations, warranties, and enforcement mechanisms in issuances of similar securities
- require any securitizer to disclose fulfilled and unfulfilled repurchase requests across all trusts aggregated by the securitizer, so that investors may identify asset originators with clear underwriting deficiencies.
The SEC shall also prescribe a "Due Diligence analysis/review of the assets underlying the security, and a disclosure of that analysis.
Subtitle E – Accountability and Executive Compensation
Within one year of enactment, the SEC must issue rules that direct the national securities exchanges and associations to prohibit the listing of any security of an issuer that is not in compliance with the requirements of the compensation sections. At least once every 3 years, a public corporation is required to submit to a shareholder vote the approval of executive compensation. And once every six years there should be a submitted to shareholder vote whether the required approval of executive compensation should be more often that once every three years. Shareholders may disapprove any "Golden Parachute compensation to executives via a non-binding vote. Shareholders must be informed of the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions as well as:
- the median of the annual total compensation of all employees of the issuer, except the chief executive officer (or any equivalent position)
- the annual total compensation of the chief executive officer, or any equivalent position
- the ratio of the amount of the median of the annual total with the total CEO compensation
The company shall also disclose to shareholders whether any employee or member of the board of directors is permitted to purchase financial instruments that are designed to hedge or offset any decrease in the market value of equity securities that are part of a compensation package. Members of the Board of Director's Compensation Committee shall be an independent member of the board of directors, a compensation consultant or legal counsel, as provided by rules issued by the SEC. Federal regulators, within 9 months of enactment of this legislation, shall proscribe regulations that a covered company shall disclose to the appropriate Federal regulator, all incentive-based compensation arrangements with sufficient information such that the regulator may determine:
- whether the compensation package could lead to material financial loss to the company
- provides the employee/officer with excessive compensation, fees, or benefits
Subtitle F – Improvements to the Management of the Securities and Exchange Commission
Within Subtitle F are various managerial changes intended to increase the efficiency of the agency will be implemented, including reports on "internal controls, a triennial report on personnel management by the head of the GAO (the "Comptroller General of the United States), a hotline for employees to report problems in the agency, a report by the GAO on the oversight of "National Securities Associations, and a report by a consultant on reform of the SEC. Under Subtitle J of the title, the SEC will be funded through "match funding", which will in effect mean that its budget will be funded through filing fees.:81
Subtitle G – Strengthening Corporate Governance
Subtitle G provides that the SEC may issue rules and regulations that include a requirement that permit a shareholder to use a company's proxy solicitation materials for the purpose of nominating individuals to membership on the board of directors. The company is also required to inform investors the reason why the same person is to serve as chairman of the board of directors and chief executive officer, or why different individuals are to serve as chairman of the board of directors and chief executive officer.
Subtitle H – Municipal Securities
This provision of the statute creates a guarantee of trust that correlates a municipal advisor (who provide advice to state and local governments regarding investments) with any municipal bodies that provides services. Also it alters the make-up of the Municipal Securities Rulemaking Board ("MSRB") and mandates that the Comptroller General conducts studies relating to municipal disclosure and municipal markets. The new MSRB will be composed of fifteen individuals, have the authority to regulate municipal advisors, and be permitted to charge fees regarding trade information. Also, it is mandated that the Comptroller General makes several recommendations, which must be submitted to Congress within at most 24 months of enactment of the Act.
Subtitle I – Public Company Accounting Oversight Board, Portfolio Margining, and Other Matters
Subtitle I is concerned with the establishment of a Public Company Accounting Oversight Board (or PCAOB). The PCAOB has the authority to establish oversight of certified public accounting firms. The Subtitle I provision allows the SEC to authorize necessary rules with respect to securities for borrowing. The SEC shall, as deemed appropriate, exercise transparency within this sector of the financial industry. A council of Inspectors General On Financial Oversight, consisting of several members of federal agencies (such as "the United States Department of the Treasury, "the FDIC, and "the Federal Housing Finance Agency) will be established. The council will more easily allow the sharing of data with inspectors general (which includes members by proxy or in person from the SEC and "CFTC) with a focus on dealings that may be applicable to the general financial sector at large with focus on the improvement of financial oversight.
Subtitle J – Securities and Exchange Commission Match Funding
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Subtitle J provides adjustments to Section 31 of the Securities Exchange Act of 1934 regarding the "Recovery Cost of Annual Appropriation", the "Registration of Fees" and the "Authorization of Appropriations" provisions of the Act.
Title X – Bureau of Consumer Financial Protection
Title X, or the "Consumer Financial Protection Act of 2010", establishes the Bureau of Consumer Financial Protection. The new Bureau regulates consumer financial products and services in compliance with federal law. The Bureau is headed by a director who is appointed by the President, with the advice and consent of the Senate, for a term of five years. The Bureau is subject to financial audit by the GAO, and must report to the "Senate Banking Committee and the "House Financial Services Committee bi-annually. The "Financial Stability Oversight Council may issue a "stay" to the Bureau with an appealable 2/3 vote. The Bureau is not placed within the Fed, but it operates independently. The Fed is prohibited from interfering with matters before the Director, directing any employee of the Bureau, modifying the functions and responsibilities of the Bureau or impeding an order of the Bureau. The Bureau is separated into six divisions:
- Supervision, Enforcement, and Fair Lending
- Research, Markets, and Regulations
- Office of the Chief Operating Officer
- General Counsel
- Consumer Education and Engagement
- External Affairs.
Within the Bureau, a new Consumer Advisory Board assists the Bureau and informs it of emerging market trends. This Board is appointed by the Director of the Bureau, with at least six members recommended by regional Fed Presidents. "Elizabeth Warren was the first appointee of the President as an adviser to get the Bureau running. The Consumer Financial Protection Bureau can be found on the web.
The Bureau was formally established when Dodd–Frank was enacted, on July 21, 2010. After a one-year "stand up" period, the Bureau obtained enforcement authority and began most activities on July 21, 2011.
The Durbin Amendment targeting interchange fees is also in Title X, under Subtitle G, section 1075.
Title XI – Federal Reserve System Provisions
Governance and oversight
A new position is created on the "Board of Governors, the "Vice Chairman for Supervision", to advise the Board in several areas and:
- serves in the absence of the Chairman,
- is responsible for developing policy recommendations to the Board regarding supervision and regulation of financial institution supervised by the Board,
- oversees the supervision and regulation of such firms, and
- reports to Congress on a semiannual basis to disclose their activities and efforts, testifying before Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives
Additionally, the GAO is now required to perform several different audits of the Fed:
- A one-time audit of any emergency lending facility established by the Fed since December 1, 2007 and ending with the date of enactment of this Act
- A Federal Reserve Governance Audit that shall examine:
- The extent to which the current system of appointing Federal reserve bank directors represents "the public, without discrimination on the basis of race, creed, color, sex or national origin, and with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers"
- Whether there are actual or potential conflicts of interest
- Examine each facilities operation
- Identify changes to selection procedures for Federal reserve bank directors or to other aspects of governance that would improve public representation and increase the availability of monetary information
Standards, plans & reports, and off-balance-sheet activities
The Fed is required to establish prudent standards for the institutions they supervise that include:
- Risk-Based Capital Requirements and Leverage Limits
- Liquidity requirements;
- Resolution plan and credit exposure report requirements;
- Overall risk management requirements; and
- Concentration limits.
The Fed may establish additional standards that include, but are not limited to:
- A contingent capital requirement
- Enhanced public disclosure
- Short-term debt limits
The Fed may require supervised companies to "maintain a minimum amount of contingent capital that is convertible to equity in times of financial stress".
Title XI requires companies supervised by the Fed to periodically provide additional plans and reports, including:"
- A plan for a rapid and orderly liquidation of the company in the event of material financial distress or failure,
- A credit exposure report describing the nature to which the company has exposure to other companies, and credit exposure cannot exceed 25% of the capital stock and surplus of the company."
The title requires that in determining capital requirements for regulated organizations, off-balance-sheet activities shall be taken into consideration, being those things that create an accounting liability such as, but not limited to:"
- Direct credit substitutes in which a bank substitutes its own credit for a third party, including standby letters of credit.
- Irrevocable letters of credit that guarantee repayment of commercial paper or tax-exempt securities.
- Risk participations in bankers' acceptances.
- Sale and repurchase agreements.
- Asset sales with recourse against the seller.
- Interest rate swaps.
- Credit swaps.
- Commodities contracts.
- Forward contracts.
- Securities contracts.
Title XII – Improving Access to Mainstream Financial Institutions
Title XII, known as the "Improving Access to Mainstream Financial Institutions Act of 2010", provides incentives that encourage low- and medium-income people to participate in the financial systems. Organizations that are eligible to provide these incentives are "501(c)(3) and "IRC § 501(a) tax exempt organizations, federally insured depository institutions, "community development financial institutions, State, local or tribal governments. Multi-year programs for grants, cooperative agreements, etc. are also available.
- to enable low- and moderate-income individuals to establish one or more accounts in a federal insured bank
- make micro loans, typically under $2,500
- provide financial education and counseling
Title XIII – Pay It Back Act
Title XIII, or the "Pay It Back Act", amends the "Emergency Economic Stabilization Act of 2008 to limit the "Troubled Asset Relief Program, by reducing the funds available by $225 billion (from $700 billion to $475 billion) and further mandating that unused funds cannot be used for any new programs.
Amendments to the "Housing and Economic Recovery Act of 2008 and other sections of the federal code to specify that any proceeds from the sale of securities purchased to help stabilize the financial system shall be:
- dedicated for the sole purpose of deficit reduction
- prohibited from use as an offset for other spending increases or revenue reductions
The same conditions apply for any funds not used by the state under the "American Recovery and Reinvestment Act of 2009 by December 31, 2012, provided that the President may waive these requirements if it is determined to be in the best interest of the nation.
Title XIV – Mortgage Reform and Anti-Predatory Lending Act
Title XIV, or the "Mortgage Reform and Anti-Predatory Lending Act", whose subtitles A, B, C, and E are designated as Enumerated Consumer Law, which will be administered by the new Bureau of Consumer Financial Protection. The section focuses on standardizing data collection for underwriting and imposes obligations on mortgage originators to only lend to borrowers who are likely to repay their loans.
Subtitle A – Residential Mortgage Loan Organization Standards
A "Residential Mortgage Originator" is defined as any person who either receives compensation for or represents to the public that they will take a residential loan application, assist a consumer in obtaining a loan, or negotiate terms for a loan. A residential Mortgage Originator is not a person who provides financing to an individual for the purchase of 3 or less properties in a year, or a licensed real estate broker/associate. All Mortgage Originators are to include on all loan documents any unique identifier of the mortgage originator provided by the Registry described in the "Secure and Fair Enforcement for Mortgage Licensing Act of 2008
For any residential mortgage loan, no mortgage originator may receive compensation that varies based on the term of the loan, other than the principal amount. In general, the mortgage originator can only receive payment from the consumer, except as provided in rules that may be established by the Board. Additionally, the mortgage originator must verify the consumer's ability to pay. A violation of the "ability to repay" standard, or a mortgage that has excessive fees or abusive terms, may be raised as a foreclosure defense by a borrower against a lender without regard to any statute of limitations. The Act bans the payment of yield spread premiums or other originator compensation that is based on the interest rate or other terms of the loans.
Subtitle B – Minimum Standards for Mortgages
In effect, this section of the Act establishes national underwriting standards for residential loans. It is not the intent of this section to establish rules or regulations that would require a loan to be made that would not be regarded as acceptable or prudential by the appropriate regulator of the financial institution. However, the loan originator shall make a reasonable and "good faith effort based on verified and documented information that "at the time the loan is consummated, the consumer has a reasonable ability to repay the loan, according to the terms, and all applicable taxes, insurance (including "mortgage guarantee insurance), and other assessments". Also included in these calculations should be any payments for a "second mortgage or other subordinate loans. Income verification is mandated for residential mortgages. Certain loan provisions, including prepayment penalties on some loans, and mandatory arbitration on all residential loans, are prohibited.
This section also defined a "Qualified Mortgage" as any residential mortgage loan that the regular periodic payments for the loan does not increase the principal balance or allow the consumer to defer repayment of principal (with some exceptions), and has points and fees being less than 3% of the loan amount. The Qualified Mortgage terms are important to the extent that the loan terms plus an "Ability to Pay" presumption create a "safe harbor situation concerning certain technical provisions related to foreclosure.
Subtitle C – High-Cost Mortgages
A "High-Cost Mortgage" as well as a "reverse mortgage are sometimes referred to as "certain home mortgage transactions" in the Fed's "Regulation Z (the regulation used to implement various sections of the "Truth in Lending Act) High-Cost Mortgage is redefined as a "consumer credit transaction that is secured by the consumer's principal dwelling" (excluding reverse mortgages that are covered in separate sections), which include:
- Credit Transactions secured by consumer's principal dwelling and interest rate is 6.5% more than the "prime rate for comparable transactions
- subordinated (ex. "second mortgage) if secured by consumer's principal dwelling and interest rate is 8.5% more than the "prime rate for comparable transactions
- Points and Fees, excluding "Mortgage Insurance, if the transaction is:
- less than $20,000, total points and fees greater than 8% or $1000
- greater than $20,000, total points and fees greater than 6%
- under certain conditions, if the fees and points may be collected more than 36 months after loan is executed
New provisions for calculating adjustable rates as well as definitions for points and fees are also included.
When receiving a High-Cost mortgage, the consumer must obtain pre-loan counseling from a certified counselor. The Act also stipulates there are additional "Requirements to Existing Residential Mortgages". The changes to existing contracts are:
- disallowing Balloon Payments
- disallowing prepayment penalties
- banning the practice of encouraging default on an existing loan when refinancing
Subtitle D – Office of Housing Counseling
Subtitle D, known as the Expand and Preserve Home Ownership Through Counseling Act, creates a new Office of Housing Counseling, within the department of "Housing and Urban Development. The director reports to the Secretary of Housing and Urban Development. The Director shall have primary responsibility within the Department for consumer oriented homeownership and rental housing counseling. To advise the Director, the Secretary shall appoint an advisory committee of not more than 12 individuals, equally representing mortgage and real estate industries, and including consumers and housing counseling agencies. Council members are appointed to 3-year terms. This department will coordinate media efforts to educate the general public in home ownership and home finance topics.
The Secretary of "Housing and Urban Development is authorized to provide grants to HUD-approved housing counseling agencies and state Housing Finance Agencies to provide education assistance to various groups in home ownership. The Secretary is also instructed, in consultation with other federal agencies responsible for financial and banking regulation, to establish a database to track foreclosures and defaults on mortgage loans for 1 through 4 unit residential properties.
Subtitle E – Mortgage Servicing
Subtitle E concerns jumbo rules concerning escrow and settlement procedures for people who are in trouble repaying their mortgages, and also makes amendments to the "Real Estate Settlement Procedures Act of 1974. In general, in connection with a residential mortgage there should be an established "escrow or impound account for the payment of taxes, "hazard insurance, and (if applicable) "flood insurance, "mortgage insurance, ground rents, and any other required periodic payments. Lender shall disclose to borrower at least three business days before closing the specifics of the amount required to be in the escrow account and the subsequent uses of the funds. If an escrow, impound, or trust account is not established, or the consumer chooses to close the account, the servicer shall provide a timely and clearly written disclosure to the consumer that advises the consumer of the responsibilities of the consumer and implications for the consumer in the absence of any such account. The amendments to the "Real Estate Settlement Procedures Act of 1974 (or RESPA) change how a "Mortgage servicer (those who administer loans held by Fannie Mae, Freddie Mac, etc.) should interact with consumers.
Subtitle F – Appraisal Activities
A creditor may not extend credit for a higher-risk mortgage to a consumer without first obtaining a written appraisal of the property with the following components:
- Physical Property Visit – including a visit of the interior of the property
- Second Appraisal Circumstances – creditor must obtain a second appraisal, with no cost to the applicant, if the original appraisal is over 180 days old or if the current acquisition price is lower than the previous sale price
A "certified or licensed appraiser" is defined as someone who:
- is certified or licensed by the state in which the property is located
- performs each appraisal in conformity with "Uniform Standards of Professional Appraisal Practice and "title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
The Fed, "Comptroller of the Currency, FDIC, "National Credit Union Administration Board, "Federal Housing Finance Agency and "Bureau of Consumer Financial Protection (created in this law) shall jointly prescribe regulations.
The use of Automated Valuation Models to be used to estimate collateral value for mortgage lending purposes.
Automated valuation models shall adhere to quality control standards designed to,
- ensure a high level of confidence in the estimates produced by automated valuation models;
- protect against the manipulation of data;
- seek to avoid conflicts of interest;
- require random sample testing and reviews; and
- account for any other such factor that those responsible for formulating regulations deem appropriate
The Fed, the Comptroller of the Currency, the FDIC, the National Credit Union Administration Board, the Federal Housing Finance Agency, and the Bureau of Consumer Financial Protection, in consultation with the staff of the Appraisal Subcommittee and the "Appraisal Standards Board of "The Appraisal Foundation, shall promulgate regulations to implement the quality control standards required under this section that devises Automated Valuation Models.
Residential and 1-to-4 unit single family residential real estate are enforced by: Federal Trade Commission, the Bureau of Consumer Financial Protection, and a state attorney general. Commercial enforcement is by the Financial regulatory agency that supervised the financial institution originating the loan.
Broker Price Opinions may not be used as the primary basis to determine the value of a consumer's principal dwelling; but valuation generated by an automated valuation model is not considered a Broker Price Opinion.
The standard settlement form (commonly known as the HUD 1) may include, in the case of an appraisal coordinated by an appraisal management company, a clear disclosure of:
- the fee paid directly to the appraiser by such company
- the administration fee charged by such company
Within one year, the Government Accountability Office shall conduct a study on the effectiveness and impact of various appraisal methods, valuation models and distribution channels, and on the home valuation code of conduct and the appraisal subcommittee.
Subtitle G – Mortgage Resolution and Modification
The Secretary of Housing and Urban Development is charged with developing a program to ensure protection of current and future tenants and at-risk multifamily (5 or more units) properties. The Secretary may coordinate the program development with the Secretary of the Treasury, the FDIC, the Fed, the Federal Housing Finance Agency, and any other federal government agency deemed appropriate. The criteria may include:
- creating sustainable financing of such properties, that may take into consideration such factors as:
- the rental income generated by such properties
- the preservation of adequate operating reserves
- maintaining the current level of federal, state, and city subsidies
- funds for rehabilitation
- facilitating the transfer of such properties, when appropriate and with the agreement of owners
Previously the Treasury Department has created the "Home Affordable Modification Program, set up to help eligible home owners with loan modifications on their home mortgage debt. This section requires every "mortgage servicer participating in the program and denies a re-modification request to provide the borrower with any data used in a net present value (NPV) analysis. The Secretary of the Treasury is also directed to establish a Web-based site that explains NPV calculations.
The secretary of the Treasury is instructed to develop a Web-based site to explain the "Home Affordable Modification Program and associated programs, that also provides an evaluation of the impact of the program on home loan modifications.
Subtitle H – Miscellaneous Provisions
- It is the sense of the Congress that significant structural reforms of Fannie Mae and Freddie Mac are required
- GAO is commissioned to study current inter-agency efforts to reduce mortgage foreclosure and rescue scams and loan modification fraud.
- HUD is commissioned to study the impact of defective drywall imported from China from 2004 through 2007 and their effect on foreclosures.
- Additional funding for Mortgage Relief and Neighborhood Stabilization programs ($1 billion each)
- HUD to establish legal assistance for foreclosure-related issues with $35 million authorized for fiscal years 2011 through 2012.
Title XV – Miscellaneous Provisions
The following sections have been added to the Act:
Restriction on U.S. approval of loans issued by International Monetary Fund
The US Executive Director at the "International Monetary Fund is instructed to evaluate any loan to a country if
- The amount of the public debt of the country exceeds the annual gross domestic product of the country
- the country is not eligible for assistance from the "International Development Association and to oppose any loans unlikely to be repaid in full.
Disclosures on conflict materials in or near the Democratic Republic of the Congo
- The SEC is mandated to create rules that address potential conflict materials (e.g. "coltan, "tantalum, "tin, "tungsten, "gold or their derivatives) and to assess whether materials originating in or near the "Democratic Republic of the Congo are benefiting armed groups in the area.
- The Secretary of State and Administrator of the "United States Agency for International Development are required to develop a strategy to address the linkages between human rights abuses, armed groups, mining of "conflict minerals, and commercial products, and promoted peace and security in the "Democratic Republic of the Congo.
- An industry group has complained that the legislation goes beyond voluntary industry initiative such as the "Kimberley Process Certification Scheme.
- The "United Nations Security Council committee charged with overseeing conflict minerals issues reported that this legislation was a "catalyst" for efforts to save lives by cutting off a key source of funding for armed groups.
Reporting on mine safety
Requires the SEC to report on mine safety by gathering information on violations of health or safety standards, citations and orders issued to mine operators, number of flagrant violations, value of fines, number of mining-related fatalities, etc., to determine whether there is a pattern of violations.
Reporting on payments by oil, gas and minerals industries for acquisition of licenses
The "Securities Exchange Act of 1934 is amended to require disclosure of payments relating to the acquisition of licenses for exploration, production, etc., where "payment" includes fees, production entitlements, bonuses, and other material benefits. The act states in SEC. 1504 (3) that these documents will be made available online to the public.
Study on effectiveness of inspectors general
The Comptroller General is commissioned to assess the relative independence, effectiveness, and expertise of presidentially appointed inspectors general and inspectors general of federal entities.
Study on core deposits and brokered deposits
The FDIC is instructed to conduct a study to evaluate:
- the definition of "core deposits for the purpose of calculating the insurance premiums of banks;
- the potential impact on the "Deposit Insurance Fund of revising the definitions of "brokered deposits and core deposits to better distinguish between them;
- an assessment of the differences between core deposits and brokered deposits and their role in the economy and banking sector
- the potential stimulative effect on local economies of redefining core deposits; and
- the competitive parity between large institutions and community banks that could result from redefining core deposits.
Title XVI – Section 1256 Contracts
A Section "1256 Contract refers to a section of the "IRC § 1256 that described tax treatment for any regulated futures contract, foreign currency contract or non-equity option. To calculate capital gains or losses, these trades have traditionally been "marked to market on the last business day of the year. A "section 1256 contract" shall not include:
- any securities futures contract or option on such a contract unless such contract or option is a dealer securities futures contract
- "swap form of a derivative, such as interest rate swaps, currency swaps, etc.
Impact and reaction
Senator "Chris Dodd, who co-proposed the legislation, has classified the legislation as "sweeping, bold, comprehensive, [and] long overdue". In regards to the Fed and what he regarded as their failure to protect consumers, Dodd voiced his opinion that "[...] I really want the Federal Reserve to get back to its core enterprises [...] We saw over the last number of years when they took on consumer protection responsibilities and the regulation of bank holding companies, it was an abysmal failure. So the idea that we're going to go back and expand those roles and functions at the expense of the vitality of the core functions that they're designed to perform is going in the wrong way." However, Dodd pointed out that the transfer of powers from the Fed to other agencies should not be construed as criticism of "Fed Chairman Ben Bernanke, but rather that "[i]t's about putting together an architecture that works".
With regards to the lack of bipartisan input on the legislation, Dodd alleged that had he put together a "[...] bipartisan compromise, I think you make a huge mistake by doing that. You're given very few moments in history to make this kind of a difference, and we're trying to do that." Put another way, Dodd construed the lack of "Republican amendments as a sign "[...] that the bill is a strong one".
"Richard Shelby, the top-ranking Republican on the Senate Banking Committee and the one who proposed the changes to the Fed governance, voiced his reasons for why he felt the changes needed to be made: "It's an obvious conflict of interest [...] It's basically a case where the banks are choosing or having a big voice in choosing their regulator. It's unheard of." Democratic Senator "Jack Reed agreed, saying "The whole governance and operation of the Federal Reserve has to be reviewed and should be reviewed. I don't think we can just assume, you know, business as usual."
"Barney Frank, who proposed his own legislative package of financial reforms in the "House, did not comment on the Stability Act directly, but rather indicated that he was pleased that reform efforts were happening at all – "Obviously the bills aren't going to be identical, but it confirms that we are moving in the same direction and reaffirms my confidence that we are going to be able to get an appropriate, effective reform package passed very soon."
During a Senate Republican press conference on April 21, 2010, "Richard Shelby reported that he and Dodd were meeting "every day", and were attempting to forge a bipartisan bill. Shelby also expressed his optimism that a "good bill" will be reached, and that "we're closer than ever". "Saxby Chambliss echoed Shelby's sentiments, saying "I feel exactly as Senator Shelby does about the Banking Committee negotiations.", but voiced his concern about maintaining an active derivatives market and not driving financial firms overseas. "Kay Bailey Hutchison indicated her desire to see state banks have access to the Fed, while "Orrin Hatch had concerns over transparency, and the lack of "Fannie and "Freddy reform.
Industry and other groups
Ed Yingling, president of the "American Bankers Association, regarded the reforms as haphazard and dangerous, saying "To some degree, it looks like they're just blowing up everything for the sake of change [...] [i]f this were to happen, the regulatory system would be in chaos for years. You have to look at the real-world impact of this."
Some experts have argued that Dodd–Frank isn't strong enough, arguing that it fails to protect consumers adequately, and, more importantly, does not end "too big to fail.
The "Securities Industry and Financial Markets Association (SIFMA) — the "top Wall Street lobby" — has expressed support for the law, and has urged Congress not to change or repeal it in order to prevent a stronger law from passing.
A survey by RIMES of senior investment banking figures in the US and UK showed that 86% expect that Dodd–Frank will significantly increase the cost of their data operations.
Law professor and bankruptcy expert David Skeel concluded that the law has two major themes: "government partnership with the largest Wall Street banks and financial institutions" and "a system of ad hoc interventions by regulators that are divorced from basic rule-of-law constraints". While he states that "the overall pattern of the legislation is disturbing", he also concludes that some are clearly helpful, such as the derivatives exchanges and the Consumer Financial Protection Bureau.
Continental European scholars have also discussed the necessity of far-reaching banking reforms in light of the current crisis of confidence, recommending the adoption of "binding "regulations that would go further than Dodd–Frank—notably in France where "SFAF and World Pensions Council (WPC) banking experts have argued that, beyond national "legislations, such rules should be adopted and implemented within the broader context of "separation of powers in "European Union law. This perspective has gained ground after the unraveling of the "Libor scandal in July 2012, with mainstream opinion leaders such as the "Financial Times editorialists calling for the adoption of an EU-wide "Glass Steagall II".
Congressional Budget Office
On April 21, 2010, the "CBO released a cost-estimate of enacting the legislation. In its introduction, the CBO briefly discussed the legislation and then went on to generally state that it is unable to assess the cost of financial crises under current law, and added that estimating the cost of similar crises under this legislation (or other proposed ideas) is equally (and inherently) difficult: "[...] CBO has not determined whether the estimated costs under the Act would be smaller or larger than the costs of alternative approaches to addressing future financial crises and the risks they pose to the economy as a whole."
In terms of the impact on the federal budget, the CBO estimates that deficits would reduce between 2011–2020, but in part due to the risk-based assessment fees levied to initially capitalize the Orderly Liquidation Fund; after which, the majority of revenue for the fund would be drawn primarily from interest payments. Due to this, the CBO projects that eventually the money being paid into the Fund (in the form of fees) would be exceeded by the expenses of the Fund itself. Additionally, the CBO points out that the reclassification of collected fees by various government agencies has the effect of boosting revenue.
The cost estimate also raises questions about the time-frame of capitalizing the Fund – their estimate took the projected value of fees collected for the Fund (and interest collected on the Fund) weighed against the expected expense of having to deal with corporate default(s) until 2020. Their conclusion was it would take longer than 10 years to fully capitalize the Fund (at which point they estimated it would be approximately 45 billion), although no specifics beyond that were expressed.
The projection was a $5 billion or more deficit increase in at least one of the ten-year periods starting in 2021.
An editorial in the Wall Street Journal speculated that the law would make it more expensive for "startups to raise capital and create new jobs; other opinion pieces suggest that such an impact would be due to a reduction in fraud or other misconduct. Complying with the statute seems to have resulted in job shifting or job creation in the business of fulfilling reporting requirements, while making it more difficult to fire employees who report criminal violations. Opponents of the Dodd–Frank Law believe that it will affect job creation, in a sense that because of stricter regulation unemployment will increase significantly. However, the Office of Management and Budget attempts to "monetize" benefits versus costs to prove the contrary. The result is a positive relationship where benefits exceed costs: "During a 10-year period OMB reviewed 106 major regulations for which cost and benefit data were available [...] $136 billion to $651 billion in annual benefits versus $44 billion to $62 billion in annual costs" (Shapiro and Irons, 2011, p. 8).
Effects on small banks
Associated Press reported that in response to the costs that the legislation places on banks, some banks have ended the practice of giving their customers free checking.
Small banks have been forced to end some businesses such as mortgages and car loans in response to the new regulations. The size of regulatory compliance teams has grown. The "Heritage Foundation, calling attention to the new ability of borrowers to sue lenders for misjudging their ability to repay a loan, predicted that smaller lenders would be forced to exit the mortgage market due to increased risk.
One study has shown that smaller banks have been hurt by the regulations of the Dodd–Frank Act. Community banks' share of the US banking assets and lending market fell from over 40% in 1994 to around 20% today. These experts believe that regulatory barriers fall most heavily on small banks, even though legislators intended to target large financial institutions.
Corporate governance issues and U.S. public corporations
The Dodd–Frank Act has several provisions that call upon the "Securities and Exchange Commission (SEC) to implement several new rules and regulations that will affect "corporate governance issues surrounding public corporations in the United States. Many of the provisions put in place by Dodd–Frank require the SEC to implement new regulations, but intentionally do not give specifics as to when regulations should be adopted or exactly what the regulations should be. This will allow the SEC to implement new regulations over several years and make adjustments as it analyzes the environment. Public companies will have to work to adopt new policies in order to adapt to the changing regulatory environment they will face over the coming years.
Section 951 of Dodd–Frank deals with executive compensation. The provisions require the SEC to implement rules that require proxy statements for shareholder meetings to include a vote for shareholders to approve executive compensation by voting on ""say on pay" and ""golden parachutes." SEC regulations require that at least once every three years shareholders have a non-binding say-on-pay vote on executive compensation. While shareholder are required to have a say-on-pay vote at least every three years, they can also elect to vote annually, every two years, or every third year. The regulations also require that shareholders have a vote at least every six years to decide how often they would like to have say-on-pay votes. In addition, companies are required to disclose any golden parachute compensation that may be paid out to executives in the case of a merger, acquisition, or sale of major assets. "Proxy statements must also give shareholders the chance to cast a non-binding vote to approve golden parachute policies. Although these votes are non-binding and do not take precedence over the decisions of the board, failure to give the results of votes due consideration can cause negative shareholder reactions. Regulations covering these requirements were implemented in January 2011 and took effect in April 2011.
Section 952 of Dodd–Frank deals with independent "compensation committees as well as their advisors and legal teams. These provisions require the SEC to make national "stock exchanges set standards for the compensation committees of publicly traded companies listed on these exchanges. Under these standards national stock exchanges are prohibited from listing public companies that do not have an independent compensation committee. To insure that compensation committees remain independent, the SEC is required to identify any areas that may create a potential conflict of interest and work to define exactly what requirements must be met for the committee to be considered independent. Some of the areas examined for conflicts of interest include other services provided by advisors, personal relationships between advisors and shareholders, advisor fees as a percentage of their company's revenue, and advisors' stock holdings. These provisions also cover advisors and legal teams serving compensation committees by requiring proxy statements to disclose any compensation consultants and include a review of each to ensure no conflicts of interest exist. Compensation committees are fully responsible for selecting advisors and determining their compensation. Final regulations covering issues surrounding compensation committees were implemented in June 2012 by the SEC and took effect in July 2012. Under these regulations the New York Stock Exchange (NYSE) and "NASDAQ also added their own rules regarding the retention of committee advisors. These regulations were approved by the SEC in 2013 and took full effect in early 2014.
Section 953 of Dodd–Frank deals with "pay for performance policies to determine executive compensation. Provisions from this section require the SEC to make regulations regarding the disclosure of executive compensation as well as regulations on how executive compensation is determined. New regulations require that compensation paid to executives be directly linked to financial performance including consideration of any changes in the value of the company's stock price or value of dividends paid out. The compensation of executives and the financial performance justifying it are both required to be disclosed. In addition, regulations require that CEO compensation be disclosed alongside the median employee compensation excluding CEO compensation, along with ratios comparing levels of compensation between the two. Regulations regarding pay for performance were proposed by the SEC in September 2013 and were adopted in August 2015.
Section 954 of Dodd–Frank deals with clawback of compensation policies, which work to ensure that executives do not profit from inaccurate financial reporting. These provisions require the SEC to create regulations that must be adopted by national stock exchanges, which in turn require publicly traded companies who wish to be listed on the exchange to have clawback policies. These policies require executives to return inappropriately awarded compensation, as set forth in section 953 regarding pay for performance, in the case of an accounting restatement due to noncompliance with reporting requirements. If an accounting restatement is made then the company must recover any compensation paid to current or former executives associated with the company the three years prior to the restatement. The SEC proposed regulations dealing with clawback of compensation in July 2015.
Section 955 of Dodd–Frank deals with employees' and directors' hedging practices. These provisions stipulate that the SEC must implement rules requiring public companies to disclose in proxy statements whether or not employees and directors of the company are permitted to hold a "short position on any equity shares of the company. This applies to both employees and directors who are compensated with company stock as well as those who are simply owners of company stock. The SEC proposed rules regarding hedging in February 2015.
Section 957 deals with broker voting and relates to section 951 dealing with executive compensation. While section 951 requires say on pay and golden parachute votes from shareholders, section 957 requires national exchanges to prohibit brokers from voting on executive compensation. In addition, the provisions in this section prevent brokers from voting on any major corporate governance issue as determined by the SEC including the election of board members. This gives shareholders more influence on important issues since brokers tend to vote shares in favor of executives. Brokers may only vote shares if they are directly instructed to do so by shareholders associated with the shares. The SEC approved the listing rules set forth by the NYSE and NASDAQ regarding provisions from section 957 in September 2010.
Additional provisions set forth by Dodd–Frank in section 972 require public companies to disclose in proxy statements reasons for why the current CEO and chairman of the board hold their positions. The same rule applies to new appointments for CEO or "chairman of the board. Public companies must find reasons supporting their decisions to retain an existing chairman of the board or CEO or reasons for selecting new ones to keep shareholders informed.
Provisions from Dodd–Frank found in section 922 also address "whistle blower protection. Under new regulations any whistle blowers who voluntarily expose inappropriate behavior in public corporations can be rewarded with substantial compensation and will have their jobs protected. Regulations entitle whistle blowers to between ten and thirty percent of any monetary sanctions put on the corporation above one million dollars. These provisions also enact anti-retaliation rules that entitle whistle blowers the right to have a jury trial if they feel they have been wrongfully terminated as a result of whistle blowing. If the jury finds that whistle blowers have been wrongfully terminated, then they must be reinstated to their positions and receive compensation for any back-pay and legal fees. This rule also applies to any private subsidiaries of public corporations. The SEC put these regulations in place in May 2011.
Section 971 of Dodd–Frank deals with proxy access and shareholders' ability to nominate candidates for director positions in public companies. Provisions in the section allow shareholders to use proxy materials to contact and form groups with other shareholders in order to nominate new potential directors. In the past, activist investors had to pay to have materials prepared and mailed to other investors in order to solicit their help on issues. Any shareholder group that has held at least three percent of voting shares for a period of at least three years is entitled to make director nominations. However, shareholder groups may not nominate more than twenty five percent of a company's board and may always nominate at least one member even if that one nomination would represent over twenty five percent of the board. If multiple shareholder groups make nominations then the nominations from groups with the most voting power will be considered first with additional nominations being considered up to the twenty five percent cap.
Constitutional challenge to Dodd–Frank
On July 12, 2012, the "Competitive Enterprise Institute joined the State National Bank of Big Spring, Texas, and the "60 Plus Association as plaintiffs in a lawsuit filed in the "U.S. District Court for the District of Columbia, challenging the constitutionality of provisions of Dodd–Frank. The complaint asked the court to invalidate the law, arguing that it gives the federal government unprecedented, unchecked power. The lawsuit was amended on September 20, 2012, to include the states of "Oklahoma, "South Carolina, and "Michigan as plaintiffs. The states asked the court to review the constitutionality of the "Orderly Liquidation Authority established under Title II of Dodd–Frank.
In February 2013 Kansas Attorney General "Derek Schmidt announced that "Kansas along with "Alabama, "Georgia, "Ohio, "Oklahoma, "Nebraska, "Michigan, "Montana, "South Carolina, "Texas and "West Virginia would join the lawsuit. The second amended complaint included those new states as plaintiffs.
On August 1, 2013, U.S. District Judge Ellen Segal Huvelle dismissed the lawsuit for lack of "standing. In July 2015, the "Court of Appeals for the District of Columbia Circuit affirmed in part and reversed in part, holding that the bank, but not the states that later joined the lawsuit, had standing to challenge the law, and returned the case to Huvelle for further proceedings.
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Should we have had a stiffer financial reform? Definitely — required capital ratios should be a lot higher than they are. But Dodd–Frank's rules — especially, I think, the prospect of being classed as a SIFI, a strategically important institution subject to tighter constraints, have had a real effect in reducing risk.
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- H.R. 4173, § 616
- H.R. 4173, § 611
- H.R. 4173, § 603
- H.R. 4173, § 1075
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- H.R. 4173, § 619
- H.R. 4173, § 606
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- H.R. 4173, § 701
- Dechert LLP (July 2010). The Regulatory Reset of the OTC Derivatives Markets (PDF) (Report).
- H.R. 4173, § 711
- Skadden. The Office of the Whistleblower (PDF) (Report).
- H.R. 4173, § 712(a)
- H.R. 4173, § 712(d)(1)
- H.R. 4173, § 716
- H.R. 4173, § 750
- H.R. 4173, § 801
- H.R. 4173, § 802
- H.R. 4173, § 901
- H.R. 4173, § 915; amending section 4 of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78d) by adding: (g) OFFICE OF THE INVESTOR ADVOCATE.
- H.R. 4173, § 911; amending Title I of the "Securities Exchange Act of 1934 ("15 U.S.C. ch. 2B) by adding Sec 39(a): Investors Advisory Committee
- H.R. 4173, § 919D; amending section 4(g) of the "Securities Exchange Act of 1934 (as added by section 914) by adding: (8) OMBUDSMAN.
- For the 2005 proposed rule, see Point of Sale Disclosure Requirements and Confirmation Requirements for Transactions in Mutual Funds, College Savings Plans, and Certain Other Securities, and Amendments to the Registration Form for Mutual Funds, via sec.gov
- H.R. 4173, § 912; adding to Section 19 of the "Securities Act of 1933 ("15 U.S.C. § 77s) by adding (e)Evaluation of Rules or Programs
- H.R. 4173, § 913(g); amending section 15 of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78o) by adding at the end: (k) STANDARD OF CONDUCT
- H.R. 4173, § 922; The "Securities Exchange Act of 1934 ("15 U.S.C. ch. 2B) by inserting: SEC. 21F. SECURITIES WHISTLEBLOWER INCENTIVES AND PROTECTION.
- , SEC and CFTC whistleblower programs.
- H.R. 4173, § 929I. PROTECTING CONFIDENTIALITY OF MATERIALS SUBMITTED TO THE COMMISSION; (a) SECURITIES EXCHANGE ACT OF 1934.—Section 24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x) is amended— (1) in subsection (d), by striking subsection (e) and inserting subsection (f); (2) by redesignating subsection (e) as subsection (f); and (3) by inserting after subsection (d) the following: (e) RECORDS OBTAINED FROM REGISTERED PERSONS
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- H.R. 4173, § 931(1)
- H.R. 4173, § 931(5)
- H.R. 4173, § 932(p)
- H.R. 4173, § 932
- H.R. 4173, § 939C
- H.R. 4173, § 939E
- H.R. 4173, § 941; amending section 3(a) of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78c(a)) by adding: (77) ASSET-BACKED SECURITY
- H.R. 4173, § 941; amending section 3(a) of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78c(a)) by adding: (15G) Credit Risk Retention
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- Kider, Mitchel (with Michael Kieval & Leslie Sowers) (2011). Consumer Protection and Mortgage Regulation Under Dodd–Frank. West. p. 540. "ISBN "978-0-314-93736-0.
- H.R. 4173, § 941; amending section 3(a) of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78c(a)) by adding: (15G)(e) Exemptions, Exceptions and Adjustments
- H.R. 4173, § 942; replacing section 15(d) of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78o(d)) with a new subsection.
- H.R. 4173, § 942; amending section 7 of the "Securities Act of 1933 ("15 U.S.C. § 77) by adding: (c) DISCLOSURE REQUIREMENTS."
- H.R. 4173, § 942
- H.R. 4173, § 951; amending the "Securities Exchange Act of 1934 ("15 U.S.C. § 78 et seq.) by inserting: SEC. 10C. COMPENSATION COMMITTEES. (f) Commission Rules
- H.R. 4173, § 951; amending the "Securities Exchange Act of 1934 ("15 U.S.C. ch. 2B) by inserting: SEC. 14A. SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION
- "Brief Summary of the Dodd–Frank Wall Street Reform and Consumer Protection Act" (PDF). Retrieved August 1, 2010.
- H.R. 4173, § 953; amending section 14 of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78n), by adding: (i) DISCLOSURE OF PAY VERSUS PERFORMANCE.
- H.R. 4173, § 953(d); amending "17 C.F.R. 229.402
- H.R. 4173, § 955; amending section 14 of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78n), by adding: (j) DISCLOSURE OF HEDGING BY EMPLOYEES AND DIRECTORS
- H.R. 4173, § 951; amending the "Securities Exchange Act of 1934 ("15 U.S.C. § 78 et seq.) by inserting: SEC. 10C. COMPENSATION COMMITTEES.
- H.R. 4173, § 956
- H.R. 4173, § 971; amending section 14(a) of the "Securities Exchange Act of 1934 ("15 U.S.C. § 78n(a))
- H.R. 4173, § 972; amending the "Securities Exchange Act of 1934 ("15 U.S.C. ch. 2B) by inserting SEC 14B. Corporate Governance
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- H.R. 4173 § 165(d)
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- H.R. 4173 § 165(k)
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- H.R. 4173, §§ 1202 & 1203
- H.R. 4173, § 1204
- H.R. 4173, § 1302; amending Section 115(a) of the "Emergency Economic Stabilization Act of 2008 ("12 U.S.C. § 5225(a))
- H.R. 4173, § 1304; amending: section 304(g)(2) of the "Federal National Mortgage Association Charter Act ("12 U.S.C. § 1719(g)(2)), section 306(l)(2) of the Federal Home Loan Mortgage Corporation Act ("12 U.S.C. § 1455(l)(2)), and section 11(l)(2) of the "Federal Home Loan Bank Act ("12 U.S.C. § 1431(l)(2); and Pub.L. 110–289, 122 "Stat. 2683)
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- "Summary of Key Provisions: Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111–203)" (PDF).
- H.R. 4173, § 1401; amending section 103 of the "Truth in Lending Act ("15 U.S.C. § 1602) by adding: (cc) DEFINITIONS RELATING TO MORTGAGE ORIGINATION AND RESIDENTIAL MORTGAGE LOANS
- H.R. 4173, § 1402
- H.R. 4173, § 1403; amending section 129B of the "Truth in Lending Act (as added by section 1402(a)) by inserting: (c) PROHIBITION ON STEERING INCENTIVES
- H.R. 4173, § 1411; amending chapter 2 of the "Truth in Lending Act ("15 U.S.C. § 1631 et seq.) by inserting: § 129C. Minimum standards for residential mortgage loans
- H.R. 4173, § 1414; amending section 129C of the "Truth in Lending Act by inserting: (c) PROHIBITION ON CERTAIN PREPAYMENT PENALTIES
- H.R. 4173, § 1412; amending section 129C of the "Truth in Lending Act by inserting: (b) PRESUMPTION OF ABILITY TO REPAY
- H.R. 4173, § 1431; DEFINED.—Section 103(aa) of the "Truth in Lending Act ("15 U.S.C. § 1602(aa)) by striking all that precedes paragraph (2) and inserting: (aa) HIGH-COST MORTGAGE
- H.R. 4173, § 1432; amending section 129 of the "Truth in Lending Act ("15 U.S.C. § 1639) by inserting: (u) PRE-LOAN COUNSELING
- H.R. 4173, § 1432; amending section 129(e) of the "Truth in Lending Act ("15 U.S.C. § 1639(e)) is amended to read as follows: (e) NO BALLOON PAYMENTS.—No high-cost mortgage may contain a scheduled payment that is more than twice as large as the average of earlier scheduled payments. This subsection shall not apply when the payment schedule is adjusted to the seasonal or irregular income of the consumer.
- H.R. 4173, § 1432; amending section 129(c)(2) of the "Truth in Lending Act ("15 U.S.C. § 1639(c)(2)) is hereby repealed
- H.R. 4173, § 1432; amending section 129 of the "Truth in Lending Act ("15 U.S.C. § 1639) is amended
- H.R. 4173, § 1441
- H.R. 4173, § 1442 added to "42 U.S.C. § 3533: (g) Office of Housing Consulting
- H.R. 4173, § 1444; amending section 106(a) of the "Housing and Urban Development Act of 1968 ("12 U.S.C. § 1701x(a)) by adding: (4) HOMEOWNERSHIP AND RENTAL COUNSELING ASSISTANCE
- H.R. 4173, § 1447
- H.R. 4173, § 1461; amending chapter 2 of the "Truth in Lending Act ("15 U.S.C. § 1631 et seq.): § 129D. Escrow or impound accounts relating to certain consumer credit transactions
- H.R. 4173, § 1462; amending section 129D of the "Truth in Lending Act (as added by section 1461) by adding: (j) DISCLOSURE NOTICE REQUIRED FOR CONSUMERS WHO WAIVE ESCROW SERVICES
- H.R. 4173, § 1463; amending section 6 of the Real Estate Settlement Procedures Act of 1974 ("12 U.S.C. § 2605) by adding: (k) SERVICER PROHIBITIONS
- H.R. 4173, § 1471, new section (129G) is added to Chapter 2 of the "Truth in Lending Act ("15 U.S.C. § 1631 et seq.)
- H.R. 4173, § 1473; Title XI of the "Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("12 U.S.C. § 3331 et seq.) by adding (and amending the table of contents accordingly): SEC. 1125. AUTOMATED VALUATION MODELS USED TO ESTIMATE COLLATERAL VALUE FOR MORTGAGE LENDING PURPOSES.
- H.R. 4173, § 1475; Real Estate Settlement Procedures Act of 1974 is amended relating to certain Appraisal Fees – new section is added to Section 4
- H.R. 4173, § 1476
- H.R. 4173, § 1481
- H.R. 4173, § 1482 modifies sections of "Emergency Economic Stabilization Act of 2008
- H.R. 4173, § 1483
- H.R. 4173, § 1491
- H.R. 4173, § 1492
- H.R. 4173, § 1494
- H.R. 4173, § 1496 & 1497
- H.R. 4173, § 1498
- H.R. 4173, § 1501
- H.R. 4173, § 1502
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