15.Roles of Federal Agencies

In this lesson, you will become familiar with the roles of federal agencies responsible for overseeing financial institutions.

There are a number of federal agencies tasked with overseeing and regulating financial institutions. In the last unit you learned about some of the agencies specific to mortgage industry regulation. 

Now, let's take a look at a higher level view of additional federal agencies. The goal of financial institution regulation is to protect consumers and investors and create reasonable regulation of the markets. 

The goal of financial institution regulation is…

… to protect consumers and investors and create reasonable regulation of the markets. 

Financial Institution Regulatory Agencies

The Federal Reserve Board

The Federal Deposit Insurance Corporation (FDIC)

The Office of the Comptroller of the Currency (OCC)

The Securities and Exchange Commission (SEC)

The Consumer Financial Protection Bureau (CFPB)

The Federal Reserve Board

• The Federal Reserve Board (The Fed) is primarily responsible for influencing overall credit conditions and liquidity. 

• Decisions by The Fed can affect both the primary and secondary mortgage markets. 

• When The Fed changes its funds rate, it affects the interest rate banks pay to borrow money. 

• Adjustable rate mortgages may be affected by fund rate changes but fixed mortgages track the 10 year Treasury note so are less likely to be affected. 

• The Fed also influences the secondary mortgage market through monetary policy. When the Fed buys or sells securities in the marketplace, that could affect MBSs.(1)

The Federal Deposit Insurance Corporation (FDIC)

• The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress in the wake of the Great Depression. 

• Their mission is to maintain stability and public confidence in the nation’s financial system. 

• This agency provides deposit insurance that guarantees depositor accounts up to $250,000 at any of its member banks.(2)

The Office of the Comptroller of the Currency (OCC)

• The OCC ensures the stability and safety of the US banking system by processing corporate applications for banks and offering charters, and supervising and regulating banks operating in the US.(3)

The Securities and Exchange Commission (SEC)

• The SEC enforces federal securities laws and oversees much of the securities industry. 

• The SEC plays a part in the oversight and regulation of the secondary mortgage market and mortgage backed securities. 

• Securities firms are considered "nondepository" institutions because as financial intermediaries they cannot accept deposits but bundle payments, in the form of premiums or contributions, and invest or provide credit to others with it. 

• Examples of nondepository institutions include insurance companies, pension funds, government-sponsored enterprises, and finance companies.(4)

The Consumer Financial Protection Bureau (CFPB)

• As you know, the CFPB plays an important part in consumer protection through its financial institution oversight and consumer education. 

• The CFPB directly impacts the mortgage loan industry as well as other financial service industries both depository and nondepository.

• The CFPB is the primary federal regulator for non-depository mortgage lenders and depository institutions with assets of over ten billion dollars.(5)