How do your loan originators handle a client that calls in and states that their income comes from public assistance? Not sure? Then it may be time to check out if that training gap exists with your originators and origination support staff. Failure to consider this income, not consider it correctly, or deny credit when credit would have been available, is a Fair Lending violation. This issue was specifically mentioned by the CFPB at the MBA Regulatory conference, which tells me it is top of mind to them. Mystery shoppers are calling lenders and posing as potential clients and your loan originator is the first in line to talk to them. They have bumped the public assistance testing up a notch, because they are hearing complaints from consumers that lenders are not returning their phone calls or telling the consumer they cannot help them. These complaints can lead to a “targeted exam”, by the CFPB or an investigation by HUD, if you have too many.
Fair Lending means that everyone that contacts you gets treated fairly and has equal access to credit. It does not matter your race, color, religion, national origin, sex, marital status, age (if the applicant is old enough to enter into a contract), or receipt of income from any public assistance program. Take the time to review your underwriting guidelines for any Disparate Treatment regarding public assistance income. Look at how you accept it, document it and calculate it. Is it per the investor guidelines or do your overlay guidelines that discourage this income? If your underwriting guidelines seem incorrect, take the steps to modify them now. Then, make sure you pass this information on to your origination staff and operations staff, so that you have clearly communicated your company expectations. It may also be wise to test your staff as a mystery caller to see the response that you get. I did this many times with my loan officers over the years, and it really shed light on areas of training I needed to focus on. There are also organizations that are trained in Fair Lending that can mystery shop your staff.
If clients do have public assistance income and you are unable to give them a loan, a little extra documentation goes a long way. May I recommend a second review and detailed notations to the files as standard protocol? You can also add a question to the Optimal Blue compliance checklist to ensure your policy is followed, or require notations to track those specific files.
Mystery shoppers are real and abundant, which is why careful training on the front end saves you a lot of aggravation during exam time.
