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58 I N D U S T R Y I N S I G H T / J E F F D I C K S T E I N Following the financial crisis of 2008, the United States government sought to enact legislation to protect American consumers and prevent such a crisis from happening again. e result: the Dodd-Frank Wall Street Reform and Consumer Protection Act, more commonly known simply as Dodd- Frank—2,300 pages of legislation that significantly impacted the financial system. A decade after it was signed into law by President Barack Obama, how is Dodd-Frank affecting the appraisal industry, and how must the industry evolve in response? WHAT IS DODD-FRANK? Dodd-Frank is the most comprehensive piece of financial reform since the Great Depression. At its core, it is designed to do three things: 1) to provide stronger consumer protections; 2) to regulate derivatives and their underlying assets such as bonds, commodities, currencies, interest rates, and market indexes; and 3) to reduce taxpayer risk and requirements to finance bailouts of massive corporate financial institutions. Dodd-Frank was written to deploy over time, with some regulations just going into effect this year. Amid ongoing battles over the law, there are currently 16 components to which banks and other financial institutions must adhere. Consumers have likely encountered aspects of Dodd-Frank in dealing with their banks, financial advisors, or credit card companies. Mortgage paperwork and terms had to be rewritten to be more comprehensible. Banks stopped awarding higher commissions for loans with higher fees. e whistleblower program on Wall Street has received over 4,500 tips hoping to curb financial wrongdoings. Finally, all public companies must disclose the ratio of CEO salaries compared to that of the average employee. As many point to the housing market collapse as the primary cause of the financial crisis, several of the law's requirements impact the mortgage industry. Title XIV, the "Mortgage Reform and Anti-Predatory Lending Act," was written to hold mortgage lenders to a standard of only lending to borrowers who can pay their loans and to streamline data collection for underwriters. Subtitle F of Title XIV was designed to regulate appraisal management companies (AMCs) and appraisal activities within the housing industry. However, it has presented some unforeseen consequences. WHAT DOES DODD-FRANK REQUIRE OF AMCS? To curtail predatory lending practices and better regulate the mortgage system, stricter regulations were put in place for lenders, appraisers, and AMCs, including appraiser independence regulations and higher-risk loan requirements (such as requiring a physical property visit). A decade after the housing market's collapse, some impacts of the Dodd-Frank Act on the appraisal industry are only beginning to be felt— and not all of them were anticipated.

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