On Tuesday the ""Commodity Futures Trading Commission"":http://www.cftc.gov/ (CFTC) issued a six-month delay for the finalization of rules and regulations in sync with the Dodd-Frank Act, temporarily checking a host of new requirements that analysts fear will distress the derivatives, financial, and mortgage banking markets.[IMAGE]
The ""Federal Reserve"":http://www.federalreserve.gov/, FDIC, and the ""Office of the Comptroller of Currency"":http://www.occ.treas.gov/ (OCC) fell behind schedule in the lead-up to Dodd-Frank's implementation phase, which goes into effect on July 16 despite that over half of the required 387 provisions need writing, according to _The Wall Street Journal_.
A spokesperson for the ""CFTC"":http://www.cftc.gov/ could not be reached for comment.
David Barr, a spokesperson for the ""FDIC"":http://www.fdic.gov/, faulted ""timeframes"" for the postponement. ""Some [of the new rules and regulations] have longer deadlines than others, others have earlier deadlines,"" he said. ""We have been approaching this from the standpoint of meeting the timelines prescribed by the legislation.""
Barr said that each of the three regulatory agencies ""handle their own regulations,"" despite some overlap and shared responsibility by the ""FDIC"":http://www.fdic.gov/ and OCC. Each agency is ""responsible for issuing [its] own regulations,"" and that affects the implementation of the regulatory structure.
He declined to speculate about how new rules and regulations would impact banks that regulators deemed ""too big to fail.""[COLUMN_BREAK]
Asked how new regulations might affect key economic indicators, including loan origination volume or the $600 trillion derivatives market, Barr said that ""it was up to others to decide.""
Some analysts praised the ""CTFC's"":http://www.cftc.gov/ delay.
""This delay is a better thing,"" said Mark Calabria, director of financial regulation studies at the ""Cato Institute"":http://www.cato.org/, adding that ""ultimately this means we get better rule-making out of this.""
One of the rules proposed by the Fed includes a risk-retention rule, which would require banks to retain 5 percent of the risk stemming from non-exempt mortgage-backed securities. Regulatory agencies extended a commentary period for the rule and a Qualified Residential Mortgage exemption after calls from industry leaders for more time.
Asked whether the ""CTFC's"":http://www.cftc.gov/ delay would give the commentary more heft, Calabria said, ""I think [legislators and regulators are] going to be very tough on this. Legislators have long not had very much sympathy for loan origination.
""I don't think the legislators are concerned that whatever behavior they take is going to adversely impact the mortgage origination industry,"" he said.
The CFTC's ruling follows a ""Barclays Capital"":http://www.barcap.com/ report that forecasts fallout in the broker channel of loan originations as a result of the Dodd-Frank framework. According to the report, new regulations will affect as much as 90 percent of the compensation that brokers receive from lenders, forcing business shutdowns and making a drive to high-balance loans by brokers more likely.
Discussing the Barclays report, Calabria said that the Dodd-Frank framework will force mortgage lending ""in-house. We already saw it before the housing bubble burst. I think we're going to see a very large-scale replacement by brokers with in-house loan officers.
""I don't think that's going to be the end of the broker model,"" he said. ""I think the very large place brokers had in the economy over the past decade is going to shrink"" once the new rules and regulations go into effect.