My goal with this series is to give you checklists to break down the risk assessment into little pieces. Additionally, if you take these checklists and add them to your procedures, you will have developed a strong compliance management system, that shows the CFPB how organized and on top of things you are. Of course, there is one caveat. You actually have to act on them. We cannot get away with just having the policy in place anymore. You may also want to consider taking these tasks and questions to the Executive Management meetings, to discuss who will perform the tasks associated. This demonstrates that your CEO/Board is highly engaged in the risk assessment. The CFPB demands this from mortgage bankers, so you might as well demonstrate how wonderful you are! I know that many of you work with TPOs so I decided to start with that. The American Bankers Association has published tremendous information, which was written in conjunction with a fair lending examiner. While it was written for banks, I’m going to modify it slightly to fit mortgage banking operations. As many of you are finding out, the CFPB is regulating mortgage bankers in the same vein as bank mortgage operations. Remember, as the lender, you are responsible for fair lending activities for any loans that you accept from your TPO.
Part One: Due Diligence Checklist for TPO Risk Assessment
⃝ Make a list of your brokers.
⃝ What is your evaluation process for the TPO control structure, and how they manage their processes? This needs to be detailed and written. What metrics do they need to send you? Have you visited their facility? When do you review the metrics to ensure they are still on the same page?
⃝ Do you have a “Fair Lending” portion to your contract with your TPO? Does it contain their obligations to fair lending?
⃝ Do your agreements define who is responsible for what? Do you make them accountable? If so, how?
⃝ Do you have explicit contractual warranties in the agreement regarding Fair Lending?
⃝ What due diligence is performed prior to the execution of the contract? How is due diligence maintained throughout the relationship.
⃝ Have you reviewed the fair lending compliance program at the broker? Do you know what their policy is and how they monitor fair lending?
As part of this process, many lenders are putting vendor managers in place to manage vendor oversight. Depending on your size, you may be able to do this or contract the work out.