14May 2018


A new law could make mortgage qualification easier.

On March 14, the US Senate passed a bill aimed at rolling back regulations from the Dodd-Frank Act of 2010. The nation faced a mortgage crisis nearly 10 years ago, prompting the creation of the Dodd-Frank regulations. Currently, the US House of Representatives is considering the bill, which will require final approval from the President. Altering this regulation has the potential to reverse the impact felt by small banks regarding home loans.

The Dodd-Frank Consumer Protection Act

During the financial crisis and housing bubble burst of the last decade, experts realized lax enforcement of banking regulations were part of the reason for the collapse. Many lenders and large financial institutions awarded home loans to consumers who were financially unable to repay the loans. In 2010, President Obama signed the Dodd-Frank Act to create stricter regulations for the banking industry. New regulations included tighter lending laws and increased compliance reporting. The regulation has not had a huge impact for larger banks with a great deal of wealth, but for mid-sized and smaller lending institutions, the new regulations have severely limited business and increased costs.

Dodd-Frank’s Effects on Small Banking

According to critics, the regulations meant to prevent the repeat of large banking placed small banking institutions in the crosshairs. First, small banks cannot as easily afford upkeep of mandatory federal compliance laws. Dodd-Frank enacted heavy compliance reporting requirements on all banks, stretching financial and human assets thin in small institutions. Large banks are held to the same standards but are more financially suited to do so.

The small banking industry has been subject to a decrease in mortgage acceptance. Stricter lending laws caused a loss of business for many rural and small lending organizations. With smaller profits than their larger counterparts, many community banks are struggling to keep doors open or are merging with larger banks. What began as a measure to prevent predatory lending practices became an inadvertent blow to community banks.

Dodd-Frank Repeal Possibilities for Change

The partial repeal of the Dodd-Frank Act would ease banking regulations. The proposed changes include an offer to allow smaller institutions of under $10 billion in assets to offer mortgages with less strict standards. For rural areas, the change would be huge. Community banks would once again have more freedom to award mortgages to customers without overly burdensome regulations. The biggest difference would be that loans generated by smaller institutions will stay within the bank rather than being sold to third-party investors.

Many banking and financial industry experts are enthusiastic about the changes to come. For smaller banks whose lending has been limited by the regulations, the repeal is long overdue. The repeal is expected to pass through Congress, with slight modifications still a possibility.

“Small banks have carried a disproportionate regulatory burden under Dodd-Frank. We welcome legislation that would provide us the opportunity to better serve our customers in underserved communities,” said Daniel C. Diaddigo, Director of First Federal Bank Mortgage National Retail Group.

First Federal Bank Mortgage is dedicated to providing exceptional service, to fulfill the mortgage needs of the communities we serve. Our staff consists of experienced mortgage banking professionals who are committed to providing extraordinary customer service, plus the convenience of a personal touch to every loan. First Federal Bank Mortgage can provide you with the best innovations in the mortgage industry because we offer a variety of loan program options to meet your needs.

Our employees are active members of the community that care about you and your neighbors. So if you are looking for a mortgage company with a long record of dependable mortgage banking, and an even longer list of satisfied customers, then be sure and look our way!

First Federal Bank offers a whole new way of doing home loans, with an attitude that is as independent as you. If you plan to purchase a home soon, contact First Federal Bank for more details about our mortgage lending programs.

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