Going to the conferences allows me to spend time talking with many folks off the record. This is helpful because it allows me to get the news out to you without references to who it is happening to. These conversations are also helpful because it separates Fact from Fiction.
I’ve talked with 2 separate companies about the same issue and I believe that many of you can benefit from their woes.
When loans are priced and you do not produce a Par price, you are left between two worlds. Determining what your company does with the credit is where you can either shine in an exam or end up with costly issues. I’ve written previously about this methodology and it seems like the exams are resulting in the most conservative approach; which is a credit is a credit to the client and a debit requires money to be paid to get that rate. Deviation from that policy = a pricing exception.
If your company is keeping the credit you will likely be told that this money needs to be remediated to the borrower. So let’s think about that for a moment. If keeping the credit through pricing to Par has been your policy, you now need to go back to all of those loans and remediate the credit as the CFPB expects self-remediation, not remediation after they catch you.
This finding means that your company needs to start cutting checks and for lenders having to do this, it is in the hundreds of thousands. Not a great thing in a budget constricted environment.
Instead, build your profit into your corporate margin and keep it consistently applied. This is how you earn what your company needs to stay in business. When you follow the practice of “keeping the credit” and making the rate closest to par, you end up with pricing disparity. Pricing Disparity opens up further examination and no one wants that.
Moral to the Story: Pay attention to what other lenders are facing. If it is happening to them, it is likely to happen to your company.
