CONSUMER_PROTECTION_AND

Consumer Protection and Education on issues
relating to Housing Finance

Discussion Paper No . 1
on
Indian Mortgage Lenders Forum
-Objectives, Role & Activities

PREFACE

Ever since inception, sound and healthy development of the housing finance market has been engaging the attention of the National Housing Bank (NHB). In pursuit of this objective, NHB has sought to play its due role in building, inter-alia, following agenda for consumer issues in housing finance:

Consumers are able to access information which is simple, clear and understandable and not ambiguous or misleading,
Borrowers are treated fairly post disbursement of the loan as well and in particular are informed of relevant changes to their loan terms and conditions, where applicable,
Consumers are capable and confident of understanding the terms and conditions of housing loans,
Consumers are explained by the lenders, the various requirements for taking loans and their interpretations.

Consumers, however, need to take decisions on their own and the responsibility connected with their decisions.

NHB now seeks to launch the following new initiatives with a view to promote customer protection and education in the housing finance field:

Introduction of a system of mortgage counselling,
Promoting a common forum of banks and HFCs which can evolve into a Self-regulatory Organization (SRO) in housing finance sector in due course,
Launching a Housing Portal to provide access to consumers for credible, wide ranging information in housing finance.

This paper dwells on the issues related to the PROMOTING A COMMON FORUM OF BANKS & HFCs. Presently there is no common forum of Banks and Housing Finance Companies (HFCs) that are active in the field of housing finance in India . The Indian Bankers' Association (IBA) is active in representing issues relating to the banking sector to RBI and GOI and as a body for exchange and dissemination of information. Given that there is no comparable body of HFCs, NHB arranges periodical meetings of HFCs and banks. However, there is no platform for on-going sharing of information, best practices amongst market participants and projection of the industry to the general public etc. In this context and in pursuit of its developmental role, NHB has proposed to take lead in promoting a common forum of banks and HFCs which in due course can develop into a Self Regulatory Organization (SRO). The Forum shall be called Indian Mortgage Lenders Forum or by any other name that the members may agree upon. It shall have its main office situated initially in New Delhi, to facilitate interaction with NHB and other agencies.

Main OBJECTIVES of the Forum would be to:

Define and maintain high professional and ethical standards in all areas of operations of the housing finance,
Promote and exchange opinions on best business practices and code of conduct,
Project image of the housing finance lenders as responsive and caring to customer requirements & demands,
Embrace best customer service practices,
Act as a clearing house for professional information exchange & development of suitable data base,
Endeavour for Standardization of documentation of underwriting, new products,
Interact with regulators and government on common issues of housing finance,
Facilitate the functioning and growth of housing finance market in a healthy and holistic manner,
Assist NHB in its efforts for consumer protection, financial education, fairness and transparency in lending,
Organize exchange of expertise and experiences of members for simplifying forms and procedures, for reducing cost of operations, for increasing efficiency and productivity and for such other common purposes as may be necessary or relevant to the housing finance,
Implement the concept of Certified Independent Mortgage Counsellors in India . Make rules and regulations in this regard and enforce them.

BROAD SET OF RULES to facilitate operations and functioning of the Forum are given in the annexure. With a view to meeting the expenses in running the activities of the Forum and ensuring continuity in its operations, it is proposed to create a corpus of surplus funds, to be administered by NHB under the general superintendence of the Steering Committee of the Forum. Expenses of the Forum are proposed to be met out of the income from investment of this corpus in G. Secs. /bank deposits etc. This corpus of funds will be build up through Grants, Donations, Entrance Fee and Annual Subscriptions received. For this purpose, members will be requested to pay a modest contribution in the form of one time Entrance Fee and nominal Annual Subscription as indicated in the Annexure.

ACTIVITIES OF THE FORUM:

In pursuit of its Objectives, the Forum will undertake multifarious activities as may be considered necessary, including the following. While conducting its activities, the Forum will be guided by the mission of developing a sound and healthy housing finance system in the country:

Conduct studies on existing/emerging major issues relevant to the housing finance such as Property valuation techniques, Automation in underwriting, Standardisation of documentation of underwriting, Asset liability management, Title guarantee, Mortgage insurance, Measures to prevent overdues and frauds etc.,
Sponsor papers to be written by experts on relevant topics,
Hold seminars/symposiums on issues of topical interest to the housing finance sector, with a view to facilitate capacity building,
Hold customers meet or invite feedback/suggestions from customers at suitable intervals to have a feel of the level of satisfaction among the home loan borrowers,
Publish News Letter for the benefit of the mortgage finance lenders,
Codify practical experiences of member institutions on best business practices, increasing efficiency and productivity and circulate them among the members,
Hold periodic discussions with the member institutions on issues of major interest,
Facilitate development of database by the NHB, on housing finance in the country,
Hold periodic discussions with National Housing Bank and Reserve Bank of India together, to promote primary lender/consumer protection, financial inclusion, financial education and other contemporary matters of interest,
Submit Pre-budget suggestions every year,
Establish relationship & and promote joint initiatives with like-minded regional/international associations/ forums active in the development of housing finance sector.

With a view to efficiently manage the affairs, business and funds of the Forum; it is proposed to constitute a STEERING COMMITTEE comprising of CEOs of the six member banks and six housing finance companies and one member to be nominated by the Chairman of the Forum. Subject to consent of the Forum, CMD, NHB could be Permanent Invitee to the Meetings of the Forum. It is proposed that the Steering Committee may usually meet once in a calendar quarter. First Chairman and Deputy Chairman of the Forum; and First/Adhoc Steering Committee, are proposed to be elected in the conclave of the member banks and HFCs to be held for the launch of the Forum. We look forward to the whole-hearted support, as in the past, of the banks and HFCs to make this Forum successful!

***

Annexure to Indian Mortgage Lenders Forum-Objectives, Role & Activities

Indian Mortgage Lenders Forum
-Broad set of Rules

MEMBERSHIP ELIGIBILITY

1. i The Forum shall have two types of members as under:

Members
Associate Members

Any Scheduled Bank carrying on the business of, inter-alia, housing finance in India or Housing Finance Companies (HFCs) registered with NHB shall be eligible to become Member of the Forum.
i Any Society, Organisation, or any financial institution which, in the opinion of the Forum is connected with the housing finance industry or any Bank not eligible to become an Member, could be accepted as Associate Member of the Forum.
ii Associate Members will be permitted to attend the General Meetings of the Forum, submit suggestions/opinions but will not be entitled to vote. They will be supplied with copies of the Minutes of the General Meetings and circulars etc. issued by the Forum.

ADMISSION TO MEMBERSHIP

1.ii.i Any institution desirous of becoming a Member of the Forum, shall apply to it in the prescribed Application Form (Annexure-A).

ii. Every application institution for Membership shall be considered by the Steering Committee and the applicant admitted as a Member shall be deemed to join the Forum from the date specified by the Steering Committee.

iii. Every Member Institution shall be represented at the General Meetings through its Chief Executive or through any one of its Authorised senior officers.

REGISTER OF MEMBERS

1. iii.i the Forum shall maintain a Register of Members, incorporating Name and address of each Member Institution and the date of commencement of the Membership separately for Members and Associate Members.

RESIGNATION/CESSATION OF MEMBERSHIP

2. i Any Member institution wishing to resign from the Forum shall give advance notice in writing to the Forum and it shall become effective once it has been accepted by the Steering Committee.

2. ii An Institution shall cease to be a Member if:

it resigns from the Membership of the Forum and such resignation is accepted by the Steering Committee, or
it fails to pay its Annual Subscription or Share in Expenses or Special Contribution within thirty days from the date of receipt of the notice,

Cancellation of Membership on account of non-payment of Subscription/Share can be revoked by the Steering Committee for good reasons shown and upon payment of such subscription.

it a) ceases to be eligible to remain as a Member or b) ceases to exist, or
If General Meeting of the Forum passes a Resolution with two-thirds majority of Members present to the effect that:

ENTRANCE FEE

3. ii. Every Institution admitted or readmitted as an Member, including an applicant seeking change in membership from Associate Member to Member shall remit Entrance Fee as under, alongwith the application or within 30 days from the date of receipt of intimation regarding its admission:

Sr	Banks/HFCs having housing loan portfolio of As at end of the year prior to date of application	Entrance Fee Rs/lakh
1	Rs.2,500 crore and above	4.00
2	Rs.1,000 crore and above but below Rs.2,500 crore	3.00
3	Rs.500 crore and above but below Rs.1,000 crore	2.00
4	Rs.100 crore and above but below Rs.500 crore	1.00
5	Rs.10 crore and above but below Rs.100 crore	0.50
6	Less than Rs.10 crore	0.25

ANNUAL SUBSCRIPTION & SHARE IN EXPENSES

3.iii.i Every Member shall pay Annual Subscription of Rs 75,000 or as may be prescribed by the Steering Committee from time to time. For the purpose of clarity, it may be mentioned that the Annual subscription will be in addition to the Entrance Fee and shall be payable from the year of admission, irrespective of the date of admission, and thereafter.

ii Every Associate Member shall pay Basic Annual Subscription of Rs. 25,000 per annum or as may be prescribed by the Steering Committee from time to time.

Annual Subscription shall be paid by all the members in the beginning of the year.

iii Since there will be nil/negligible income from the Corpus of the Forum in the first year of the Forum's setting up, NHB volunteers to bear establishment expenses in running of the Forum during the current year ending on 31.3.2008. With effect from next year commencing from 1.4.2008, however, if income from the Corpus invested is not adequate to meet its expenses, excess expenses will be apportioned among the Members and the amount thus payable will be remitted by the members within 30 days from the date of communication, by cheque or demand draft drawn in favour of the Forum payable at New Delhi.

SPECIAL CONTRIBUTION

3.iv The Forum may from time to time request members to make Special Contribution for such Schemes, Plans, Projects or purposes; as may be specified by the Steering Committee.

GENERAL MEETINGS

4.i.i An Annual General Meeting of the Members of the Forum shall be held within six months after the end of every year (April-March).

ii Steering Committee may call a Special General Meeting at any time if it thinks it necessary to do so.

iii One fifth Members of the Forum may together request the Steering Committee to call a Special General Meeting of the Forum and the Steering Committee shall call such meeting within one month from the date of receipt of such requisition.

NOTICE

4.ii.i. 14 clear days' Notice for every General Meeting shall be sent to Members specifying there in the date, time, place and objects of the meeting.

ii. An Urgent General Meeting may however, be called at a short Notice.

QUORUM

4.iii.i. No business shall be transacted at any General Meeting unless at least 10 Members constituting the Quorum are present.

ii If on the day and time originally notified for holding a General Meeting, Quorum is not present within 15 minutes of the time appointed, the Meeting shall be adjourned for one hour and if the required quorum is still not present at such adjourned Meeting, the Members then present shall constitute the Quorum and may transact the business for which the meeting was convened.

CHAIRMAN OF THE MEETING

4.iv. The Chairman of the Forum and in his/her absence, Deputy Chairman shall preside and if Deputy Chairman is also not present, any Chief Executive of an Member Institution present may be appointed Chairman of the Meeting by the representatives of Members present, by consensus or majority vote if consensus is not possible.

VOTING

4.v.i The voting at any General Meeting shall be in the first instance by a show of hands but this shall not preclude Members present from demanding a poll.

ii. A poll shall be taken if any five Members present demand it or if the Chairman of the Meeting considers it necessary. The result of a poll shall supersede the result of a vote taken, if any, by show of hands.

iii. Every Member shall be entitled to one vote.

iv. Except where otherwise required under these Rules, all Resolution of a General Meeting will be declared to have been carried if they receive simple majority of votes.

v. In case of a tie, the Chairman of the Meeting shall have the right to give a casting vote in addition to his own vote.

MINUTES

4.vi.i. Minutes of the proceedings of every General Meeting of the Forum shall be made and shall be entered/caused to be entered by the Secretary in the Minute Book kept for the purpose.

ii. The Minutes shall be confirmed and signed by the Chairman a soon as possible after the General Meeting.

iii. A copy of the Minutes so signed shall be sent to the Members for their information.

iv. The Minute Book shall be open for inspection by any Member at all reasonable times.

For the effective conduct of the affairs, business and funds of the Forum a STEERING COMMITTEE shall be constituted which shall function as hereinafter provided:

COMPOSITION & TENURE

5.i. The Steering Committee shall consist of as under:

6 Members Scheduled Banks,
6 Members Housing Finance Companies, and
1 Member nominated by the Chairman of the Forum.

Member banks/HFCs shall be represented in the Steering Committee by their CEOs or any of their senior-most officers deputed by them for the purpose.

Subject to approval of the Forum, CMD, NHB will be a permanent invitee to the Meetings of the Forum

Any vacancy in their composition and omission to elect, appoint or nominate any one or more members shall not invalidate the constitution or the authority of the Steering Committee.

ii).The members of Steering Committee referred to in Rules 5.i.i) and ii) above shall be appointed in every Annual General Meeting except the first members of the steering committee. They shall hold office till the conclusion of next Annual General Meeting. They will, however, continue in office until their successors assume office.

iii. Associate Members shall not be eligible to vote or participate in elections to the Steering Committee in any manner. They may, however, be invited by the Chairman to any Meeting of the Steering Committee, if so required.

The retiring members shall be eligible for re-election/ re-appointment/ re-cooption.

iv. Any member institution, wishing to resign from the Steering Committee may do so by giving a written notice and such resignation shall be effective after it is accepted by the Committee.

5.v.i If any vacancy occurs in the Steering Committee for any reason whatsoever, the Committee shall have the power to co-opt any other member institution from the concerned category for the period of the original vacancy.

FUNCTIONS & POWERS OF STEERING COMMITTEE

5.vi.i The Steering Committee shall have all such powers and shall perform all such functions as may be necessary for carrying on the work of the Forum or for realizing its objects and purposes.

ii Without affecting the generality of the above, the Steering Committee shall, in particular, have the following powers:

To purchase, lease or hire premises for the use of the Forum and to equip and furnish them for the objects and the purposes of the Forum,
To appoint a Chief Executive (to be known as Secretary), other executives, officers and staff; decide their powers, duties and responsibilities, as may be necessary for the business of the Forum on payment of such remuneration as may be determined by the Steering Committee,
To disburse expenses, salaries and outgoings of the Forum and to invest the Corpus & surplus funds of the Forum in such securities or accounts as may be determined by the Steering Committee,
To cause proper books of account to be kept of the dealings and transactions of the Forum and of the assets, credits and liabilities thereof. The books of account shall be kept at the main office of the Forum and shall be in charge of the Chief Executive of the Forum,
To frame or issue Rules and Procedures of working for the purpose of carrying on the business and work of the Forum,
To discharge the Role and functions of the Forum,
To delegate any function or powers to other Committees, sub-committees or persons,
Steering Committee may consult any outside person or authority on any specific topic,
To present a report on the working of the Forum and a Statement of Accounts of the Forum duly certified by the Auditors, at its Annual General Meeting,
To appoint Bankers, Auditors, Solicitors, Tax Consultants and other Professional Advisors to the Forum, and
To do any or all things as may be necessary or expedient.

iii. Every Resolution duly passed by the Steering Committee in accordance with the

Rules and every recommendation or decision of the Committee shall be duly observed by the Members of the Forum.

MEETINGS OF THE COMMITTEE

6. i.i The Steering Committee shall generally meet once in a calendar quarter.

ii Meetings of the Committee shall be held at the office of the Forum, or at other such place and at such times as may be fixed by the Chairman or in his/her absence by the Deputy Chairman. The Chairman or Deputy Chairman shall cause a meeting to be held, if so requested by at least five members of the Committee.

iii Decisions of the Steering Committee shall be taken by a simple majority of the members present and in case of a tie, the Chairman of the Meeting shall be entitled to give a casting vote in addition to his/her own vote.

Minutes of all proceedings and decisions of the Steering Committee shall be made and kept by the Secretary in a Minute Book which shall be open to inspection by members at all reasonable times.

v. Copies of minutes of a Steering Committee Meeting shall be forwarded to members before the next meeting at which the minutes shall be confirmed and signed by the Chairman with such changes or modifications as may be approved by the Steering Committee.

6.ii.i. The Secretary under the direction of the Chairman or in his/her absence Deputy Chairman, shall send by a circular, giving not less than 10 clear days' notice of every meeting to each member of the Steering Committee and shall mention in such notice the date, time, place of the meeting and the important business expected to come before the meeting.

ii. An urgent meeting of the Committee may be convened at short notice if no member of the Committee objects to such shorter period of notice.

iii. Five members of the Steering Committee as follows: two members from banks and two members from Housing Finance Companies and National Housing Bank Invitee shall constitute quorum at a meeting of the Committee.

6.iii The Chairman or in his/her absence, Deputy Chairman if he/she thinks it fit may ascertain the views or opinion of members of the Steering Committee or any member by a circular and act in accordance with the views of the majority of the members so replied.

CHAIRMAN, DEPUTY CHAIRMAN AND SECRETARY

7.i.i The Chairman and Deputy Chairman of the Forum shall be elected in the Annual General Meeting every year.

ii. The Chairman and Deputy Chairman shall retire at the conclusion of the next Annual General Meeting. He/she shall, however, continue in office until his/her successor is elected and assumes office.

iii. Steering Committee shall have power to nominate any member of the Committee to fill vacancy in any of these offices before the end of the full term. Any member appointed in this manner shall hold office of the Chairman or Deputy Chairman as long as the incumbent, in whose place he/she is appointed, would have held office.

iv. Any Chairman / Deputy Chairman who retires from any of these offices shall be eligible for re-election or re-appointment to any of the offices.

7.ii.i The Chairman of the Forum shall lead and guide the working of the Forum and shall preside at and guide the business of all the meetings of the Forum and its Steering Committee.

ii In the event of his/her absence or unwillingness to preside, Deputy Chairman shall preside at the meetings of the Forum, and in the event of the absence or unwillingness of Deputy Chairman, the meeting shall nominate one of its members present to preside for the time being.

8.i.i Chairman of the Forum shall appoint a senior person, having experience of not less than 10 years in the field of housing finance as Secretary, with the approval of the Forum. The Secretary shall look after such of the affairs and business of the Forum as may be decided by the Steering Committee.

ii The Secretary shall be the Chief administrative head of the office of the Forum. In addition, the Secretary may, with the approval of the Steering Committee, appoint such other executives and officers as may be necessary to assist his/her in the working of the Forum.

iii. The Secretary will work under the supervision and guidance of the Chairman, the Deputy Chairman and the Steering Committee in general, and shall be responsible in all matters relating to the Forum.

iv. All executives, officers and staff of the Forum shall work under the general guidance, supervision, superintendence and orders of the Secretary and shall be accountable and responsible to him.

vi The Secretary shall be in charge of all correspondence, documents, funds and properties of the Forum, shall cause the accounts of the Forum to be maintained and shall manage its office and affairs. He/she shall issue notices for all meetings and keep a record of their proceedings. He shall duly notify Members of the Forum, shall cause the Annual Report of the Forum to be prepared and shall get the accounts of the Forum audited.

vii Every Chief Executive, executive, officer or employee of the Forum shall make a declaration of fidelity and secrecy in the form prescribed.

INDEMNITY & LEGAL PROCEEDINGS

9.i. The Chairman, Deputy Chairman, any member of the Steering Committee, Secretary or any Executive, Officer or Staff of the Forum shall not be answerable for anything done or purported to be done on behalf of the Forum or the Committee in the ordinary course of business nor by reason of any error in judgement on their part in the performance of their duties, except for their own fraud or dishonesty. They shall be indemnified and saved against all actions and expenses whatsoever incurred or sustained by them in execution of their power and duties.

9.ii. Suits or legal proceedings by or against the Forum may be instituted or taken in the name of the Chairman, Deputy Chairman or the Secretary of the Forum for the time being.

ALTERATION IN RULES

10. Changes can be made in the Rules of the Forum by a majority of two-third votes of the Members of the Association present at a General Meeting.ROVIDED, HOWEVER, that the two-thirds majority referred to in the above Rule is not in any case less than 51 per cent of the total number of Members of the Forum.

***

Annexure-A

(Please submit this application on letter head of the applicant institution)

The Secretary, Date………………

Indian Mortgage Lenders Forum,
……………………………………
……………………………………
New Delhi

Dear Sir,

APPLICATION FOR MEMBERSHIP

We request you to admit our institution as a Member /Associate Member of the Indian Mortgage Lenders Forum. We give the necessary particulars below:

1	Name of Applicant Bank/HFC/ Institution
2	Head Office Address (With fax & phone No.)
3	Name & phone nos. of the CMD/ CEO
4	Name & phone nos. of the other authorised officer/s who will represent the applicant institution
5	Basic Financials of the institution as at 31 st March, ……(last FY)
	i)	Paid-up Capital
	ii)	Reserves
	iii)	Net profit during last year
	iv)	Total borrowings
	v)	Total assets outstanding of the above,
		a)	Loan assets
		b)	Housing Loans

Undertaking: We undertake to subscribe, promote and further the objects and purposes of the Forum and we shall not do anything which is prejudicial to the interest or objects of the Forum.

We enclose cheque/draft for Rs…… towards Entrance Fee/we will remit Entrance Fee in due course, as required under the Rules.

Yours faithfully,

Authorised signatory

(Name & designation)


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