Dodd-Frank Act

Dodd-Frank Act — formally the Dodd-Frank Wall Street Reform and Consumer Protection Act — is the landmark 2010 federal legislation enacted in response to the 2008 financial crisis and the collapse of the mortgage-backed securities market. Among its most significant provisions for the secondary mortgage note industry, the law created the CFPB, established the Ability-to-Repay (ATR) rule for mortgage origination, and introduced heightened oversight of mortgage servicing practices.

For note investors purchasing loans originated after Dodd-Frank's effective dates, the law's origination requirements — particularly the ATR and Qualified Mortgage (QM) standards — affect the enforceability of the underlying debt. Loans that were originated in violation of ATR rules may expose the current holder to borrower defenses and potential liability. On the servicing side, Dodd-Frank's provisions codified requirements for loss mitigation outreach, dual-tracking prohibitions, and borrower communication standards that every servicer handling investor-owned loans must follow. Understanding which Dodd-Frank provisions apply to a given loan — based on origination date, loan type, and property type — is part of thorough due diligence.