A new government report suggests that major legislation that was passed in the wake of the financial crisis has had little impact on the availability of credit at small financial institutions.
The
Dodd-Frank Wall Street Reform Act was passed by the House in late 2009. The Senate passed the bill in 2010, and President Barack Obama signed it into law in July 2010.
While
the legislation was intended to prevent many of the practices that led up to the financial crisis, many warned that the law would restrict the availability of credit for U.S. consumers.
But a report
released Thursday by the Government Accountability Office indicates that among community banks and credit unions, mortgage credit availability has been impacted little.
“The results of surveys we reviewed suggest that there have been moderate to minimal initial reductions in the availability of credit among those responding to the various surveys and regulatory data to date have not confirmed a negative impact on mortgage lending,” the GAO said.
This seems to be confirmed by the Mortgage Bankers Association’s Mortgage Credit Availability Index, which stood near its highest level in six years as of December.
But the GAO’s report did acknowledge that it is possible that credit conditions could change in the future.
“GAO developed indicators associated with resources used to comply with regulations and with business lines that may be affected by Dodd-Frank act regulations to provide baselines against which to monitor future trends,” the report stated. “For example, GAO’s indicators suggest that residential mortgage loans as a fraction of assets have generally grown for banks of all sizes and for some smaller credit unions but have decreased for larger credit unions. However, changes in GAO’s indicators may reflect factors other than the influence of Dodd-Frank act rules, such as consumer demand for credit.”
The report also indicated that the origination of loans that don’t meet Qualified Mortgage standards has fallen.
In addition, some of the law’s rules have yet to be implemented, while insufficient time has elapsed to evaluate others.
Also noted in the report was that
community banks, credit unions and their trade groups that were interviewed for the report have cited an increase in the compliance burden associated with these rules.
“This included increases in staff, training, and time allocation for regulatory compliance and updates to compliance systems,”
the GAO stated.
