Now that QM is flowing along, I’m going to share with you the solutions to what is still a very real issue that is being addressed by few…..Fair Lending! I’m fortunate in that I get to hear the horror stories from many lenders that do not go public. This shows me what is happening across the country and allows me to pass that information on to assist you.
Let me ask you this. How many of you think it is okay to underwrite a loan after closing? How about price a loan after closing? Or, just fill out the paperwork needed by the GSE’s after the client closes. Sounds crazy doesn’t it? Yet if that individual loan is not monitored at lock in and through closing for fair lending issues, your company is doing just that. Fair lending is not just about the aggregated trends of your company. In the CFPB world it is also the individual experience of the consumer and their personal protection.
No lender wants to face the CFPB on Fair Lending issues. They are costly, time consuming and with only the HMDA data you will always look guilty whether or not you are. If your company is monitoring fair lending after a loan closes you are elevating your Fair Lending Risk. Below is an excerpt from the CFPB Winter 2013 Supervisory Highlights.
“The CFPB and these other federal regulators do not anticipate that a creditor’s decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair lending risk. Creditors should continue to evaluate fair lending risk as they would for other types of product selection decisions, including by carefully monitoring policies and practices and implementing effective compliance management systems.”
Real time (which means at lock and before a loan closes) monitoring can only be done tied into your pricing engine. If your company is not doing that, they are missing out on the “effective compliance management system” part. Also, please note the words “absent other factors”. Those “other factors” are the items that elevate your fair lending risk.
Stay tuned as I take you on a journey of real life issues that are being effectively solved. My goal is to help you learn what other lenders are facing so that you can fix it before an exam. Just because other lenders were fined and paid a bunch of money in attorney fees and consultants, doesn’t mean you have to.