TopMortgage Compliance Update (1)
 

April 23, 2012

 


Fair Lending Compliance - Some Red Flags


Subscribe-Blue
Newsletter-Blue
 Website-Blue
 Forums-Blue
Twitter-2
Facebook-1
Linkedin-1
Banging Head Let us help!
Isn't it time to bring in the professionals? 
Contact Us-1-Beveled-160

Our Website Forums

LCG-Square-CC-1  

CFPB Forum-CC-1  

OCC News Forum-CC-(134x134)  

BSA News Forum-Logo  

Mortgage Compliance Forum-Main  

Dodd-Frank Forum-CC-1  

NMLS Users Forum-CC-1  

FHA Forum-CC-1  

Veterans Mortgage Forum-Main  

516-442-3456  

Home-Website-LCG(160x27)-1
Compliance-Website-LCG(160x27)-1
Presentations-Website-LCG(160x27)-1
About Us-Website-LCG(160x27)-1
Clientele-Website-LCG(160x27)-1
Articles-Website-LCG(160x27)-1
Newsletters-Website-LCG(160x27)-1
Library-Website-LCG(160x27)-1
Contact Us-Website-LCG(160x27)-1
Greetings! 

The Consumer Financial Protection Bureau (CFPB) will make Fair Lending a focus of its examinations.

I have written extensively on these examinations.

Our firm is committed to providing comprehensive audit and due diligence reviews in preparation for the CFPB's Nonbank and Bank Supervision and Examination.

And my firm offers, freely, a Compendium of all parts and each section of the Examination Manual.

Our Compendium provides:
  • Directory: All Sections
  • Contents: Links to Compendium Text
  • Contents: Links to CFPB Website Text
In preparing our Audit and Due Diligence procedures for our clients, we have combined all three parts into a single Directory with links to each section's Compendium texts and CFPB's website texts. There are over 700 pages in this Compendium.

A central feature of the CFPB exam is the review of a company's Fair Lending compliance. In preparing your firm for a CFPB examination, it is important to explore how Fair Lending is practiced by your firm.

The term "Fair Lending" has been around for many years and is used as a catch-all phrase for several regulatory compliance requirements.

Let's consider four areas affecting Fair Lending compliance - areas to which financial institutions sometimes do not give sufficient consideration.

I will provide a brief list, grouped by category, and suggest some potential risks that should be considered.

The list is not meant to be comprehensive - I have chosen just four categories - but this exercise should guide you toward expanding the scope of your Fair Lending initiatives.

Please keep in mind that state banking department examiners and federal prudential regulators will also look for these potential infractions when conducting examinations.

Regards,

Jonathan Foxx
President & Managing Director
 Back
 In This Newsletter-1 
  
RedliningRedlining 
Some Potential Risks
  • Community Reinvestment Act (CRA) assessment areas do not comply with Regulation BB and/or exclude minority areas.
  • Branches and expansion plans disfavor minority neighborhoods.
  • Marketing strategies exclude minority geographies.
  • Complaints about redlining by consumers or community advocates.
 BACK 
PricingPricing
Some Potential Risks
  • Overages, fees, yield spread premiums, and pricing exceptions.
  • Lack of specific guidelines for pricing (including exceptions).
  • Use of risk-based pricing that is not based on objective criteria or applied consistently.
  • Broad pricing discretion, such as through overages, underages, or yield spread premiums.
  • Lack of clear documentation of reasons for pricing decisions (including exceptions).
  • Lack of monitoring for pricing disparities.
  • Financial incentives for loan originators to charge higher prices.
  • Pricing policies or practices that treat applicants differently on a prohibited basis or have a disparate impact.
  • Loan programs that contain only borrowers from a prohibited basis group.
  • Complaints about pricing by consumers or community advocates.
 BACK 
Some Potential Risks
  • Stricter underwriting policies, such as tighter credit standards in certain specific geographic markets.
  • Lack of specific underwriting policies for Fair Lending risk, including both disparate treatment and disparate impact discrimination.
  • Lack of monitoring and/or policies to manage disparate impact risks caused by varying origination channels or geographic areas.
 BACK 
Regulation B, the implementing regulation of the Equal Credit Opportunity Act (ECOA), prohibits using assumptions related to the likelihood that any group of persons will rear children or will, for that reason, receive diminished or interrupted income in the future.

Some Potential Risks
  • Assuming that a woman will not return to work after childbirth.
  • Not implementing underwriting policies that treat applicants on maternity or parental leave and applicants on other types of leave similarly. 
  • Failing to consider the requirements for verifying the income of an applicant on maternity or parental leave. 
  • Failing to review and respond to complaints by consumers who were on maternity or parental leave at the time of the loan application.
  • Not incorporating remedies into a policy statement regarding maternity or parental leave.
 BACK 
  Professional AssistanceLCG 
Contact Us-2
 BACK 
LibraryLibrary
Law Library Image
Consumer Financial Protection Bureau

Our Library

 BACK 
Suite of ServicesSuite
LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the United States specializing exclusively in outsourced mortgage compliance and offering a full suite of services in residential mortgage banking for banks and non-banks.

Pioneers in outsourcing solutions for mortgage compliance. 
 
 

Professional guidance and support to financial institutions!  

Mortgage Compliance
CFPB Examination Preparation
Anti-Money Laundering Compliance
Legal and Regulatory Compliance
State Banking Examinations
HUD/FHA Examinations
Loan Originator Compensation
Licensing Compliance
HMDA/CRA and Fair Lending
Information Technology & Security
Training and Education
Quality Control
Prefunding Fannie LQI Audits
Platform Development
Retail and Wholesale Compliance
Correspondent Compliance
Servicer Compliance
Affiliates Compliance (RESPA)
Business Development
Advertising Compliance
Loss Mitigation Strategies
Forensic Mortgage Services
Sarbanes-Oxley Compliance (Part 404)
Audit and Due Diligence Reviews
Regulatory and Sales Training
Portfolio Risk Management
Credit Risk Management
Loan Analytics Audits
Compliance Audits
Policies and Procedures
Due Diligence Reviews
Portfolio Purchase Audits
GSE Applications
Ginnie Mae Applications

This communication is sent to our valued clients and colleagues, who regularly receive our Mortgage Compliance Updates, Compliance Alerts, Commentaries, and related publications.

These publications are free to subscribers. Information contained herein is not intended to be and is not a source of legal advice.

� 2006-2012 Lenders Compliance Group, Inc. All Rights Reserved.