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Who Regulates Mortgage Lenders?

As the mortgage market continues to thrive, who keeps them in check and ensures they’re fair to their customers?

According to recent research, mortgage debts increased from $9.1 trillion to 10.3 trillion in 2020. This is a record high. But as the mortgage market continues to thrive, who keeps them in check and ensures they’re fair to their customers? Below are some of the institutions responsible for regulating mortgage lenders.

Consumer Financial Protection Bureau (CFPB)

CFPB is the main government agency responsible for protecting consumers’ rights in the financial sector. The government created this agency back in 2008 with the sole intention of preventing banks and other lenders such as mortgage companies from maltreating their consumers.

The bureau relies on laws passed by Congress to enforce regulatory measures in the mortgage sector. Some of these laws include:

  • Real Estate Settlement Procedures Act – This is one of the major acts in the mortgage lending sector. The act asks mortgage lenders to disclose details of a real estate settlement process to borrowers, including the total settlement costs. RESPA also prohibits interested parties from receiving kickbacks from a lending institution for recommending their mortgage services.
  • Truth in Lending Act – The TILA is among the oldest acts to protect consumers from unfair and malicious practices by lenders. This law requires mortgage lenders to provide their borrowers with information concerning a home loan before making a final decision. The details should include interest rates, terms of service, fees, steps to filing a complaint, and other loan provisions. The TILA helps consumers get the information needed to compare loan terms for different companies and make their preferred choice.
  • Equal Credit Opportunity Act – ECOA seeks to protect borrowers from discriminatory practices by mortgage companies based on color, religion, sexuality, age, marital status, and race. This means a mortgage lender cannot deny you a loan if you qualify for it. Also, they shouldn’t discourage you from applying for a loan or offer less favorable terms than candidates with similar qualifications.

Department of Housing and Urban Development (HUD)

HUD is the primary government agency that ensures Americans have access to affordable home opportunities. This agency’s core responsibility is to enforce the:

  • Fair Housing Act – The Fair Housing Act, or FHA, is among the few acts to undergo several amendments to ensure total consumer protection. One of the main functions of this act is barring discriminatory actions against people during house financing.
  • Federal Trade Commission – The Federal Trade Commission (FTC) is an independent government agency whose primary role is to ensure the protection of consumers. The commission regulates mortgage companies engaging in deceptive and unfair practices that affect their consumers. Such actions include omitting essential facts to encourage individuals to take house loans, deceptive actions like overpricing fees, or misleading statements.

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