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Mitigating Fair Lending Risk-Your Partners-Part Three

I’ve covered the first two steps in MSA Diversity, which is understanding your MSA, followed by where you lend within your MSA.

The next step is to engage the individuals that will help you diversify your company, into under-served markets, while at the same time maintaining good quality loans.

The home-buying counselor is an individual who generally works for a non-profit in an under-served area within your MSA.  Their goal is to assist individuals, within their community, in the pursuit of homeownership.  They are the eyes and ears of the underserved community, and they are the light at the end of the tunnel for many who need help.  And yet what most people do not realize is that they are typically more conservative with their client’s homeownership potential than many lenders.

So let’s take a look at why this is an area of business that you do not want to miss and should be considered for you MSA Diversity Action Plan.

  1. The home-buying counselor works with consumers to create budgeting and savings plans for homeownership.  Just like a real estate agent, they reach out to consumers directly.  The difference is that they do a deep dive into the educational components and realities of owning a home with that consumer.
  2. New regulations will require you to send your High Cost loan clients to a HUD-Certified counselor.  As a result of this, you want to do your homework now, as to who you would like to work with.  Not all non-profit organizations are created equal!  Just like mortgage companies there are great organizations and not so great ones.  If you go to those organizations that are affiliated with a national group, you are likely to find higher quality counselors as their affiliates are vetted, monitored and follow similar protocols.  I recommend Neighborworks America, National Council of LaRaza (NCLR) and National Community Reinvestment Coalition (NCRC).  If you go to their websites you will see what non-profit counselors are affiliated with them.
  3. The next regulation that is problematic but can be strengthened by your partnership is that of “rebuttable presumption”.  If you have a loan that is declared non-QM, then the borrower has the ability to sue the lender, stating that they did not have the ability to repay the loan and the lender should have known that.  The only known defense to that is a budget.  The HUD Home-buying counselor is an objective 3rd party who happens to specialize in budgeting.  Every client that they work with has to go through budgeting education as part of their home buying education.  So guess what!  You have a budget and a witness!
  4. They know the stats of the average buyers in your underserved markets!  You could spend all day on websites running numbers, or just ask them where to go because they are in the know!
  5. They are the ones doing mystery shopping and reviewing your HMDA data.  As mortgage bankers we tend to have big Fair Lending holes in the “first contact” portion of our interaction with our clients.  Operations take over at loan application, but the big issues come before loan application.  Understanding what they look for, how you can correct that in your organization and the training involved, builds a great partnership and an advocate for you in those markets.
  6. On the servicing side, they can be your best friend!  If one of their clients starts to go late, the counselor picks up the phone and sets things right.  Engaging them in this process will bring your delinquencies down and cause fewer headaches for all.

These are just a few reasons why you want the counselors to be part of your “action plan”.  I will dive down deeper into how to do this, as we progress through this series of MSA Diversity, so stay tuned!

Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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