Trump Signs Dodd-Frank Rollback Legislation

On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act—a piece of legislation that rolls back many of the reforms instituted by the 2010 Dodd-Frank Act.  The bill passed the Senate in March and was sent back to the House for approval.  On May 22, 2018, it passed the House by a vote of 258-159.

During his signing remarks, President Trump emphasized the potential benefits that the Act is expected to have on the commercial health and viability of smaller community banks and credit unions.  In particular, whereas Dodd-Frank says the Federal Reserve “may” individually tailor its regulation of financial institutions, this legislation mandates the Fed to specifically and individually tailor supervision and standards.  Further—with respect to nonbank financial companies supervised by the Fed and certain bank holding companies—the Act increases the asset threshold at which certain enhanced prudential standards apply from $50 billion to $250 billion.  The Fed will have discretion to determine whether financial institutions with assets equal or greater than $100 billion must be subject to such standards.  Moreover, rather than applying enhanced prudential standards uniformly among all banks with assets of $50 billion or more, the Fed may now apply different standards for each major bank it regulates—based on factors such as their capital structure, activities, and riskiness—which will benefit small institutions that were previously constrained by the strict mandates placed on larger banks.

In addition, the Act contains a number of provisions which lessen statutory constraints on banks and lenders, such as:

• Amendments to the SAFE Act which provide 120 days of transitional authority for MLOs to originate when leaving a depository to join a sponsoring non-bank (or when crossing state lines);
• A provision which applies TILA consumer protections to PACE and energy efficiency mortgage products—such as property retrofit loans;
• An exemption from the “Volcker Rule” for banks with: (1) total assets valued at less than $10 billion; and (2) trading assets and liabilities comprising not more than 5% of total assets;
• Safeguards against predatory lending for veterans, surviving spouses, and service members who utilize the VA Home Loan program’s IRRRL refinancing product;
• An amendment to the Federal Deposit Insurance Act which makes clear that a federal banking agency may not subject a depository institution to higher capital standards for of High Volatility Commercial Real Estate (HVCRE) construction loans unless the exposure is an HVCRE acquisition, development, or construction loan;
• Exemptions from certain record maintenance and public disclosure requirements, issued for depository institutions and credit unions which originated fewer than 500 closed-end mortgage loans or 500 open-end lines of credit in each of the 2 preceding calendar years; and
• A requirement for the CFPB to issue clearer authoritative guidance regarding the applicability of TRID as to various loan origination and assumption issues.

The Economic Growth, Regulatory Relief and Consumer Protection Act is accessible here.