HUD stands for the Department of Housing and Urban Development. It is a federal agency responsible for enforcing housing laws and addressing national housing needs.

In the mortgage industry, HUD is involved in:

Supervision of the Federal Housing Administration (FHA).

Oversight of the operations of Fannie Mae and Freddie Mac.

Direction of the Government National Mortgage Association (Ginnie Mae).

Enforcement of the Real Estate Settlement Procedures Act (RESPA) and fair housing regulations.

HUD is primarily responsible for setting and maintaining ethics and accountability standards to ensure proper service and transparency throughout the housing and mortgage industry.

Established in 1913 by the Federal Reserve Act, the Federal Reserve is composed of 12 Federal Reserve Banks, each serving one of the 12 Federal Reserve Districts. The Federal Reserve supervises and regulates member banks within these districts. All nationally chartered commercial banks are members of the Federal Reserve.

Methods by which the Federal Reserve regulates member banks include:

Reserve Requirements: Federal Reserve District Banks (FRDB) can manipulate reserve requirements, which is the percentage of overall funds a bank must keep on deposit with its FRDB. Raising or lowering this requirement increases or limits the amount of money circulating in the economy.

Discount Rate Adjustments: FRDBs can adjust the discount rate, which is the interest charged on a bank's loan. Banks borrow from their FRDB by pledging commercial paper as collateral. Many banks base their prime rate (the interest charged to highly qualified borrowers) on the discount rate. Higher discount rates generally lead to higher rates for all borrowers, resulting in less available credit.

Federal Reserve Rate: The Federal Reserve may loan money to a member bank without collateral. The interest on these short term or overnight loans is the Federal Reserve rate, which serves as another standard for setting borrower interest rates.

Open Market Operations: The Federal Reserve can manipulate the money supply by purchasing and selling government securities. Selling securities slows the economy, while purchasing them adds money to the economy, increasing the credit available for home loans.

The Federal Reserve also maintains compliance with the Truth in Lending Act and Title I of the Consumer Protection Act of 1968 throughout the mortgage industry.

The Federal Deposit Insurance Corporation (FDIC) directly supervises over half of the banking institutions in the U.S. (approximately 5,300 banks and savings banks). While state chartered banks have the option of joining the Federal Reserve Banking System, it is not required. The FDIC serves as the primary regulator for state chartered banks that do not join the Federal Reserve.

The Federal Home Loan Bank System (FHLB) regulates the nation's savings associations, commonly referred to as thrifts. Like the Federal Reserve, it operates through 12 Federal Districts. The Office of Thrift Supervision (OTS) oversees and regulates FHLB member banks. Because the OTS operates in all 50 states, its regulations take precedence over state laws. Thrifts are significant in the mortgage industry because they play a valuable role in the single family residential loan market, basing lending on accumulated savings.

The Office of the Comptroller of the Currency (OCC) is an agency under the Treasury Department that supervises over 2,500 national banks to ensure compliance with federal banking regulations. It also supervises licensed branches of foreign banks. National banks represent approximately 28% of all commercial banks in the U.S. and hold 57% of total assets in the banking system. The OCC encourages policies that prevent abusive, deceptive, or unfair banking practices.

The OTS is the primary regulator of federally and state chartered thrifts, including savings banks and loan associations. It is financed by fees and dues paid by the institutions it regulates and operates through four regional offices.

The U.S. Treasury Department shares responsibility for maintaining economic balance. The management of government income versus spending directly affects the money supply and interest rates. When the Treasury experiences shortages, it borrows money by issuing and selling securities.

Types of Securities:

Treasury Bonds: Long term debts paid off in 10 years or more.

Treasury Notes: Debts of indeterminate length, usually between two and 10 years.

Treasury Bills: Short term debts paid off relatively quickly.

The Treasury Department and the Federal Reserve work together to regulate the money supply. When the Treasury issues securities, money is removed from the economy; as these securities are repaid, more money becomes available. The Treasury Bond is a common benchmark for setting interest rates on 30 year mortgages.