"I have a hypothetical question regarding current events. President Trump may dismantle Dodd Frank. Since we learned so much of the details on that legislation, I'm wondering if a new administration tosses it out, how long before state real estate license exams purge questions pertaining to it? This is similar to the Loan Estimate and Closing Disclosure forms which replaced Good Faith Estimate, older HUD forms."
One Possible Answer from our Team
These types of questions always come about when administrations change. It's part of the fun on being in real estate!
So let's start with the second item - the new TRID rules. When the financial collapse happened under the Bush administration there was a lack of regulation on derivatives and integrals that allowed higher risk loans to be secured and packaged for sale. When the Congress (under the Obama administration) moved to correct that they likely overreached and created entirely new layers of oversight. BUT... the TRID rules have not caused an undo hardship on the industry, which has been able to succeed because of record low rates for a record period of time. Keep in mind it took from 2009 to 2016 to get from A to B.
Considering how embeded the rules are, simply "turning them off" is not really a viable possibility under any new administration. Similar to the Affordable Care Act any changes in law won't be able to take effect until 2018 at the earliest, and more likely beyond that due to the complications involved in major law changes and how they effect the actual functions and process at the street level between the consumer and the institutions.
Consider just this one small item - the Loan Estimate and Closing Disclosure are forms born out of rules required by a law written 8 years earlier. It took banks, brokers, title companies and underwriters more than a year to program the forms and calculations into their systems once those forms came out, and implementation of the forms was delayed by months due to technical problems in 2015. To undo all of that work will cost millions, take years and likely be lobbied against by those who did the work the first time. This means that to undo the Act and go back in time the new Administration and Congress would in all likelihood go one step at a time over years.
A more probable first step would be that a Republican Congress could move to delete regulations that govern the Safe Harbors or Mortgage Servicing rules which would remove a small layer of regulation on lenders allowing them to increase lending opportunities again.
We will not know what the new Congress or administration will do first, but our suggestion is to do it slowly. Why? Because housing sales are at an all time high with investors moving markets in many local communities, and housing starts (new construction) have been increasing in the last two years since the recovery. All of this has raised prices back to pre-recession levels without the high-risk loans that led to the 2006/2007 crisis. Rents in some cities are at all time highs and housing affordability is a rising problem. None of these facts indicate that there are any problems in the lending industry that are being caused by the rules and regulations except for the affordable housing piece. So what problem would a new administration be trying to solve by deregulation of the industry? And what problems would come back? Key questions to ask before taking any action at all.
While that is a 10,000 foot view of the issue, it leads to the answer to your question. State exams change about once every three years in most cases because law and regulation and policy doesn't change in a minute, but rather over years. In any state a new law takes 6 months to go into effect, and usually has an implementation date much further down the line (months or years or a start date). For Federal Rules, it takes months to write, months to publish for comment, months to re-write a final rule and months to approve it. Legislation takes longer.
That being said we believe there won't be a change to the content of these rules and laws until at least 2018, and implementation on any state exam would be even further down the road. Best thing to do is pass the state exam soon, and then pay attention to changes, take continuing education courses, become active in a local board or association and fight to protect property rights on your clients behalf. Real Estate organizations have the largest and in many cases the most effective lobbies and have a true impact on the final outcome of these kinds of decisions. Get involved and remind lawmakers that no regulation leads to abuse, over-regulation leads to downturns, and the best regulations lead to a balance in the markets that allows the purchase and sale of real property to take place in a fair, open marketplace while ensuring that the economy sees more benefits from those transactions.
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