Banking training is crucial so that the employees don’t cause any loss to the consumers.
For example, banks have to be careful while extending loans to consumers because any unlawful practice can land them in trouble.
For example, banking training must include the Truth In Lending Act(TILA) which states that loan providers must disclose certain facts to the borrower while issuing a credit card to him. This is necessary for the borrowers because hiding any charges from them is not ethical. This includes disclosing what the interest rate on such credit cards is. When consumers know what the APR on a credit card is, they can compare it with similar products.
Also,credit card companies also can’t levy an unusually high amount of penalty on the customers when the payments are delayed unless they have been disclosed before.
This kind of disclosure requirement also exists for other kinds of loans such as car loans which are close-ended because a borrower has to repay a specific credit amount.
Who is a loan originator?
A loan originator is also a very important person in a mortgage and HELOC. The loan originator can be a loan officer of the bank or any person working for a mortgage broker who has links with several lenders. He is the one who helps home buyers get the correct kind of loan depending on their income.
Also, the loan originator must provide the borrower with loan options with different kinds of lenders with whom he works. Generally, the borrower has no idea about which kind of mortgage options are present in the market and it’s the loan originator’s responsibility to make him aware of the same.
The loan originator is an important component of the mortgage agreement because there are various complications included. The lenders need various procedures to be completed. They can complete all the formalities which include submission of the financial documents and answering the relevant questions by the borrower.
With the loan originator at their end, the borrowers are easily able to close the loan.
They must help the customer and should not suggest those loans to the customers where their compensation is the highest. When the borrower is providing compensation to such a loan originator, he should not get compensation from any other party for the same loan.
Also, the banks that have hired such originators and pay compensation to them for closing the loans must have such records for 2 years so that no confusion is caused later.
Regulation Z about mortgages:
- Transparency in transactions:
The banking officers have to be cautious with their advice.
As per this regulation, they can’t advise the customers about mortgage loans and home Equity line of credit(HELOC)which means paying a higher rate of interest even when making the latter get such a loan means a higher commission/compensation for the former.
In HELOC, the borrowers and lenders can establish a credit line at the time of the former taking a loan. When he repays his loan amount, his credit line is recharged. But he can only take a loan against the equity in his house till a certain time (draw limit). After that, he has to start repaying the debt portion of his house (repayment period).
Duties of the loan originator:
The loan originator must provide the buyer with the correct loan options as per his repayment capabilities and budget. It’s the duty of the loan originator as per regulation Z of the TILA act to prescribe the loan with the best options to the borrower. These options include a loan that has the cheapest interest rate and also no penalty on the borrower in case he prepays the loan. Also, the options must include the loan with the lowest compensation for origination.
Ability to cancel/rescind the loan:
The banks must also impart banking training to loan officer to inform customer of the right to rescission. The TILA also protects the customers in the case when they feel that the lender has pressurized them into getting a loan.
They can immediately give up all the rights to the loan and withdraw from it. For example, if the home buyers have taken a loan against the existing equity in the loan, they can back from this loan before the closing period. The borrowers have the right to cancel the loan 3 days before the closing period. This is an excellent option for home loan borrowers who have a certain amount of equity in their purchased property.
Banking training can protect the banks from suffering any jail term due to violations of the TILA act which can be 3 years.