Bank Regulatory Terms for the Banker and Dealmaker

California Finance Lenders License

Purpose: Provide mortgage brokers and lenders with an exemption to other licenses

Main Function: A required license for different types of consumer and commercial lending

CALL Report

Purpose: A financial report that must be filed by all regulated financial institutions in the U.S. every quarter

Main Function: The CALL Report contains each bank’s balance sheet and income statement and is audited by the FDIC for errors.

CFPB-Consumer Financial Protection Bureau (12 U.S.C § 5491)

Purpose: Preventing predatory mortgage lending, improving clarity of mortgage paperwork for consumers

Main Function: Enforcing federal consumer financial laws; reviewing business practices to ensure that financial services providers are following the law


Purpose: Provide the lender security in the event of a loan default

Main Function: Assets a borrower offers a lender to secure a loan

Dodd-Frank Act-Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. § 5301)

Purpose: Lower risk in various parts of the U.S. financial system to prevent economic collapse

Main function: Monitor performance of companies that are labeled as “too big to fail” Monitor insurance companies that pose an economic risk

Prevent predatory mortgage lending

Restrict bank investments and regulate trading in derivatives

FDIC-Federal Deposit Insurance Company created (48 Stat. 162) (Glass-Steagall Act)

Purpose: Encourage stability in the financial system through the promotion of sound banking practices

Main Function: “Insuring deposits” in banks

Federal Reserve Board (FRB) created (12 U.S.C. § 226)

Purpose: Govern the Federal Reserve System Provide a safer, more flexible, and more stable monetary and financial system

Main Function: Imposing penalties upon banks, setting the Federal Reserve discount rate

Glass-Steagall Act

Purpose: Restore public confidence in the US banking system, Prohibit commercial banks from being involved in investment banking

Main Function: Create FDIC

Hard-money lender

Purpose: Loans that are backed only by the value of the property

Main Function: Short-term bridge loan with higher interest rates than subprime loans that are not given by banks due to the high risk involved

HELOC-Home Equity Line of Credit

Purpose: HELOC enables a borrower to draw a loan of approximately 75%-80% of the home’s value

Main Function: Line of credit that uses the borrower’s home as collateral with a variable interest rate (based on current prime rates) attached to the loan


Purpose: Inform buyer and seller of charges

Main Function: A form used by closing agents to show all charges on a buyer and seller in a real estate transaction.

Intellectual Property (Intellectual Property Protection and Courts Amendments Act of 2004)

Purpose: Patents, trade secrets, and ideas owned and legally protected by a company from outside use.

Main Function: Prevent the theft of trade secrets and enable prosecution for stealing of company knowledge

Loan originator (12 U.S.C. § 1026.36 (1))

Purpose:  Institution that works with a borrower to complete a mortgage transaction.

Main Function: Offer credit terms, negotiating credit terms on behalf of a consumer, obtaining an extension of credit for a consumer, or referring a consumer to a loan originator or creditor.

OCC-Office of the Comptroller of the Currency created (12 U.S.C. § 38)

Purpose: Charter and regulate the national banks

Main Function: Monitors the banks to ensure they are operating safely and in compliance with federal laws

Peer to peer lending

Purpose: Borrowing and lending without the use of banks

Main Function: Allow borrowers that would not normally be approved for a loan to have a form of debt financing

The peer-to-peer loans generate income through interest for the lender, exceeding the amount offered from prime loans

QM or Qualified Dodd-Frank Mortgage

Purpose: Provide restrictions against lenders from issuing loans to borrowers that do not qualify

Main Function: Lenders analyze the borrower’s ability to repay based on incomes, assets, and debts to ensure there is less risk of defaulting on the loan

Regulation D (17 CFR § 230.501)

Purpose: SEC regulation regarding non-public offering exemptions.

Main Function: Allow companies to offer and sell their securities without having to register the securities with the SEC through Rule 504, Rule 505, and Rule 506.

RESPA-Real Estate Settlement Procedures Act (12 U.S.C. § 2601)

Purpose: Inform and protect potential homeowners to become more savvy consumers, Prohibit lenders from paying kickbacks to friendly mortgage brokers

Main Function: Lenders must provide large amounts of information to potential borrowers at points throughout the loan process

SBA-Small Business Administration created (15 U.S.C. § 633)

Purpose: Protect the interests of small businesses and strengthen the United States economy

Main Function: Provide guidelines for loans made by lenders, and a guarantee that the borrower will repay the loans

Shadow Banking

Purpose: Financial institutions  (hedge funds) that are not subject to regulatory oversight due to not accepting traditional bank deposits

Main Function: Take higher risk instruments than regulated institutions such as derivatives, securities lending, risky investments

Regulated institutions operate in shadow banking when they are involved in credit default swaps

Sub-prime mortgage

Purpose: A type of mortgage that carries higher than normal risk of default due to being offered to borrowers with lower credit ratings

Main function: Provide the borrower with a higher interest rate to compensate for the lender’s risk.

State licensed-non-member bank (12 U.S.C. 1813(e))

Purpose: Subject to less regulation than member banks and only with the state in which they are chartered

Main Function: Nonmember banks are not required to purchase stock in the Federal Reserve

TILA-TILA-Truth in Lending Act (15 U.S.C. § 1601)

Purpose: To protect consumers in their dealings with lenders and creditors

Main Function: Requiring the disclosure of the annual percentage rate (APR), term of the loan and total costs to the borrower before extending credit

“Too big to Fail”

Purpose: Prevent the failure of large corporations through a government bailout

Main Function: A government bailout is given to a company as an attempt to avoid economic collapse

UCC Article 9-Uniform Commercial Code-Secured Transactions

Purpose: Provides the rules governing any transaction (other than a finance lease) that couples a debt with a creditor’s interest in a debtor’s personal property.

Main Function: Allows the creditor to repossess the debtor’s property to satisfy the outstanding debt.

Utah industrial bank

Purpose: FDIC-insured financial institutions which can be owned by commercial firms that are not regulated by a federal banking agency

Main Function: Sell certificates called investment shares and accept deposits. Industrial banks invest the funds in installment loans

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