"The most terrifying words in the English language are: I'm from the government and I'm here to help."
- Ronald Reagan
We don't often get the chance to see exactly how much harm is done by politicians and bureaucrats who "help" us by issuing burdensome new regulations that throw a wrench into the workings of the institutions (in this case banks) that make a living by actually helping us. Here's a chart which provides dramatic evidence that the Consumer Financial Protection Bureau's new, 1888-page TILA-RESPA rule (mandated by the notorious Dodd-Frank legislation), which went into effect October 1st, has had a huge impact on mortgage lending:
The chart above shows an index of new mortgage purchase applications (as distinct from refinance applications). Last week it jumped 25.5%—but that's hardly good news. What it means is that mortgage lenders were so terrified of the new paperwork, compliance burdens, and legal liabilities they faced as a result of this rule that they significantly accelerated the processing of new mortgage applications in order to get them in the pipeline before the date the new rule took effect. The rule is so burdensome and costly that many small banks and lenders may be forced to exit the business. Moreover, we're likely to see a huge decline in new purchase applications in the weeks to come, since any failure to comply with the new rules exposes lenders to liabilities of as much as $4,000 per borrower. Meanwhile, for the past year or so banks have been forced to hire expensive outside consultants to help them understand the new rules and revamp their systems and procedures. All of this just to "combine and simplify new mortgage disclosures."
This is just one example of how Dodd-Frank has burdened the financial industry, harming consumers in the process, all in the name of "protecting" consumers.
If you're interested in seeing how "hip" today's bureaucrats can be, take a look at how the CPFB whiz-kids attempt to explain in plain language what it is they're doing and why, here, and here. Sample: "'Why does it take so many pages to create something that’s supposed to be easy to use and understand?' This is a great question, one you’re not alone in asking — 1,099 is a lot of pages, as those of us who were involved in writing them can attest."