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Secondary marketing is the epicenter of information needed to monitor your fair lending, before a loan closes. Compliance helps secondary by uncovering issues that may cost the company millions of dollars.  Both departments need to join hands to accomplish this goal together.  I have spoken with companies where both departments understand the need for this new workflow, and others who do not understand the importance.

Generally, those who do “get it” are the ones who have been examined, are under supervision or know someone that has been examined.  I find that they are actively working on a compliance management system for real time fair lending and compliance solutions.

Here are some tips from those lenders about what they are doing or what they are required to do under supervision.

1.  When a file is locked, use the compliance checklist to document whether or not the client received the best interest rate (price being equal).  If not, the loan originator should explain why, so that the file is notated at the time of lock.

2.  Each time a file is re-locked, your loan originator should be required to tell you why and this information should be stored.  The last thing you want is an examiner who asks why a loan started at 3.25% and closed at 3.75% for a protected class client, and you have no immediate information.

3.  Document the exact programs and pricing the LO was offered for a client.

4.  Do a secondary “double check” to make sure the originator didn’t just say “yes” to a question to get the loan locked quickly.  Fix any discrepancies at that time.

5.  Analyze any loan (before it closes) outside of the “norm” to see if the client qualified for other programs that would have been more beneficial.

6.  Perform an underwriting “double-check” to make sure the client is in the most cost efficient loan based on their financial circumstances.  Cost efficient is not just rate.  Total cost of the loan, monthly payment, closing costs and rate should be considered.  If there is a disconnect, then the loan gets bumped up to a manager.  It does not mean that the loan originator did a bad thing; it may just mean they did not know another program was suitable.

7.  Track every pricing exception and underwriting exception!  Any deviations should be logged and supplemental information attached to substantiate the exception.  Exceptions should be reviewed by compliance to ensure that exceptions are applied fairly across all classes.

8.  Scrub your data, train your staff!  Your staff needs to be monitored to make sure they are doing their job in the data department.  The last situation you want to be in is pulling thousands of files to find out the real story.  Think about it this way.  You already paid someone to do a job, now you’re going to pay someone else to clean it up?

9.  Don’t be so protective of your domain or it may cost you your job!  Isn’t it better that compliance has checked out what secondary is doing so that the CEO doesn’t have to write a check for millions of dollars?  Remember, secondary is part of the company just like any other part, and pricing decisions need to be checked just like any other part of the company.  P.S.  compliance should report directly to the CEO or board and no one else!

10. CEO’s, you are going to be drilled when the examiners show up.  If you are not fully informed about the state of your company regarding compliance; or you have not made it a priority to make sure everyone in the sandbox is playing nicely together, then you will not appreciate the outcome from the exam.

I hope you find these tips helpful!  With just a few minor adjustments in your organization, you can produce exceptional results during an exam.

Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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