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Fair Lending was slightly off the radar screen in 2018 for the CFPB, despite the announcements by Mulvaney that Fair Lending is still essential.  Fair Lending concerns accelerated for those regulated by the FDIC, especially for Redlining.  The State Attorney Generals stepped up in many states to fill in the gap, and the Consumer Advocacy Groups have been busy Mystery Shopping lenders and reporting the results to the media and the regulators.

Here are My Predictions for 2019

The CFPB will finally have the data they need to properly pursue Fair Lending Issues with Mortgage lenders without having to obtain this data through exam or litigation.  The new 2018 HMDA data requirements will roll in during the 1st quarter and evaluation will start immediately.  Information provided by the lenders will offer the data scientists, economists and AI the detailed information needed to pinpoint fair lending issues.

  1. Pricing and Fee Disparity between borrowers will be the biggest minefield for mortgage lenders. The expanded HMDA data will result in Mortgage Lenders who are scoped for an exam that may not have hit the Fair Lending “radar screen” in year’s past.
  2. Pricing and Fee Disparity will force lenders to make hard decision’s regarding LO Compensation and Pricing Exception policy. Individual originator practices can now be evaluated with the new HMDA data, which will cause personal and professional risk directly for the licensed originator.
  3. Redlining will be a growing concern for mortgage lenders, not just financial institutions. Expect to see the first non-financial institution Redlining settlement.
  4. Mortgage Broker practices can now be detected through the expanded HMDA data and will likely cause more mortgage brokers to be examined.
  5. Wholesale lenders will need to evaluate HMDA data from their broker clients to determine how the broker’s lending patterns affect the Wholesale lender’s patterns of practice in order to mitigate the Wholesale lender’s area lending risk. Evaluations of this data will likely result in more broker oversight or wholesale lenders releasing brokers from doing business with them.
  6. Banking Regulators will continue to evaluate redlining and will use the HMDA data for non-exempt institutions to prioritize “High-Risk” lenders. They will also continue to assess REMA and the institution’s logic for why these areas are considered reasonable, and why other low-to-moderate regions may not be feasible for the financial institution.
  7. Small business lending will continue to be a focus as regulators seek to evaluate Disparate Treatment of Women & Minority Owned companies.
  8. Fintech will face more scrutiny for the algorithms used in evaluating creditworthiness on a prohibited basis. The outcomes from the Fintech platform can now be evaluated with the expanded HMDA data to determine possible concerns in the Fintech’s decisioning process.
  9. The State AG’s in large population states will continue to be aggressive in Fair Lending. If the CFPB gets back into the game, then we will likely see the state AG’s turn their focus to other priorities.
  10. Consumer Advocacy Groups will be just as aggressive in Mystery Shopping originators and lenders in areas of concern.

As the industry continues to evolve so do techniques, strategies and training to remedy these issues.

And guess what?  Our clients know that we give them strategies that maintain or increase profitability while at the same time mitigating Fair Lending risk.

To experience how Fair Lending Diversity mitigates risk and maintains profit, contact us to discuss your concerns.

Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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