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Dodd-Frank Wall Street Reform & Consumer Protection Act
In response to the housing bubble and the subsequent recession of the US economy, the US Government passed a federal statute entitled the Dodd-Frank Wall Street Reform & Consumer Protection Act (H.R. 4173), or Dodd-Frank for short. Signed into law by President Barack Obama on July 21, 2010, this Act implemented numerous changes to the financial sector of the economy in order to ensure responsibility and accountability, and to protect consumers.
To begin with, the Act created a new independent watchdog with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.
The Act also promotes the transparency and accountability for exotic instruments by eliminating the loopholes that allow risky and abusive practices to go on unnoticed and unregulated -- including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.
Furthermore, the Act enforces the regulations which are already on the books by strengthening oversight and empowering regulators to aggressively pursue financial fraud, conflicts of interest, and manipulation of the system that benefits special interests at the expense of American families and businesses.
In terms of mortgage reform, the Act requires lenders to ensure a borrower’s ability to repay, prohibits unfair lending practices by eliminating the financial incentives for subprime loans that encourage lenders to steer borrowers into more costly loans, establishes penalties for irresponsible lending, expands consumer protections for high-cost mortgages, requires additional disclosures for consumers on mortgages, and establishes an Office of Housing Counseling within HUD to boost home-ownership and rental housing counseling.
Mortgage Relief & Foreclosure Legal Assistance
Two of the most useful programs established by the Act, however, are the Emergency Mortgage Relief program and the Foreclosure Legal Assistance program. Building on a successful Pennsylvania program, the Emergency Mortgage Relief program provides $1 billion for bridge loans to qualified unemployed homeowners with reasonable prospects for reemployment to help cover mortgage payments until they are reemployed.
In addition , the Foreclosure Legal Assistance program authorizes a HUD administered program for making grants to provide foreclosure legal assistance to low- and moderate-income homeowners and tenants related to home ownership preservation, home foreclosure prevention, and tenancy associated with home foreclosure.
To read the full text of the Dodd-Frank Wall Street Reform & Consumer Protection Act,
To read a summary of the Dodd-Frank Wall Street Reform & Consumer Protection Act,