Question

New regulatory requirement imposed on banks and financial institutions may have impacted a bank’s ability to generate mortgages for home buyers by increased requirements for disclosures, notices, statements, and documents related to lending. Evaluate the pros and cons of increased regulatory requirement, indicating the impact to the lender and the buyer. Provide support for your answer.

Answer 1

RBI directs the regulatory requirement of banks in India,As for the USA its the federal government that regulates the mortgages, through acts that are passed on by Congress.Mortgage lenders are expected to follow certain rules set by the central government. The rules require the lenders to treat the borrowers as equal and justificably. The regulation Z truth lending act provides as a way for customers to protect themselves of shady, malicious and unfair practices of the lenders.The lenders are asked to make full disclosures of the interset rates,fees, terms of credit,and other provisions. Am separate guidelines of steps is provided to the customers to make sure that they do not fall into traps.Its a win win for both the parties as the customers are well informed of the disperancies and the mortage lender gets the credit card payment from the customer.

RESPA is another act that enforces the loan providers from abstaining from demands for large Escrow account.

The Consumer financial protection beureau (CFPB), The US Department of Housing and urban development(HUD), The Federal Housing Administration (FHA) works together in conjugation with banks, mortgage lenders and mortgage buyers to provide an safe and level playing feild to all the parties.

The drawbacks of having so many parties involved are-

• Confidentiality of the mortgage rates, time period etc is leaked out/could be leaked out.
• Customer and banks has to consult with different parties regaring the mortgage, this leads to loss of time and finances.
• The process is not economical as lot of consulations takes place among the parties.