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Financial regulatory changes and enforcements that affect you
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Local and Federal financial administrative branches have been addressing insurance solvency and mortgage lending issues for the purpose of helping the insured stay insured and protecting consumers from bad corporate financial practice. The reasons this has become an issue lately are that since the credit crisis began, some insurance companies have found themselves receiving more claims than usual in addition to increased public scrutiny regarding mortage lenders. In particular, insurance companies that involve heavily depreciated financial instruments such as mortgage backed securities have experienced solvency problems, and mortgage lenders that have engaged in questionable lending practices have become more heavily regulated. In Washington D.C., the Department of Insurance, Securities and Banking (DISB) has taken several steps to create a more stable insurance and securities environment. According to the DISB, this has involved adjustments to several of the following key areas:
• Disclosures to investors
• Improved licensing and financial review
• Compliance with securities laws
• Mortgage marketing guidelines
• Securities fraud prevention
• Consumer awareness
• Captive insurance development
These adjustments affect you, the consumer in a variety of ways since they help protect you from financial scenarios that private companies don’t want you to know about in order to keep your business. For example, through captive insurance an insurance company’s investment insurance division can better protect itself from unreliable or high risk insurance provisions it offers to a commercial banks investments. In other words, development of enhanced insurance practices and requirements enabled through captive insurance law.
Another pertinent development affecting the consumers is the increased participation of State financial departments in the Nationwide Mortgage Licensing System. Since the District of Columbia joined the Nationwide Mortgage Licensing System, it has been better able to monitor and prevent fraudulent lending practices and ill qualified mortgage lenders from obtaining licensure. As of the date of this article, the States of Virginia and Maryland are not member states in the NMLS.
According to the Commonwealth of Virginia, State Corporation Commission’s Bureau of Financial Institutions, the State has not simply sat by idly letting mortgage fraud and illegal practice proliferate. Rather, the Virginia Bureau of Financial Institutions has implemented enforcement of mortgage licensee penalties and license revocations for reasons such as non-disclosure of annual financial information, and failure to maintain surety bond i.e. insurance requirements. Maryland also enforces State regulation of mortgage related financial wrongdoing. This is evident in the Maryland Insurance Administration’s revocation of Maryland Title’s operating license as reported by the Albuquerque online business journal. The extent of how well a local administration enforces insurance company’s financial practices and licensing is a factor that can affect consumer protection.
It is encouraging that the District of Columbia has engaged in the prevention of fraud and the practice of building a more sound financial system in which both local and non-regional companies may operate. To be better informed about how the Metro D.C. area financial authorities attempt to protect you as a consumer it can be a good idea to be aware of compliance with State regulations when engaging the services of a mortgage lender or insurance company.
If a company is unable to produce or demonstrate licensure with the State, financial good standing, and/or some kind of corporate history of business integrity, then that company might be worth a second look. Even in cases where all the necessary documentation for a company is apparent, there may still be some underlying legal issues or pending lawsuits that shed light on a company’s operating practice. Hence despite the positive benefits of State regulation on you the consumer, a little due diligence into one’s insurance provider(s), mortgage lender(s), and financial institution(s) might prove to be good measure on your financial security.
