Fair Lending In The Mortgage Industry How You will do Business in 2014?

Transcription

1 Fair Lending In The Mortgage Industry How You will do Business in 2014? Presenter: Tammy Butler, Master CMB and Director of Fair lending and Compliance, Optimal Blue

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3 Time to Prepare for January Was the year of change Will be the year of implementation and reconfiguration of what we once thought was our business model.

4 CFPB

5 CFPB Mission The CFPB is consumer based. They care little about: How your recruiting is affected. How your originator s income is affected. Or, your profit margins. What they do care about is the consumer and the consumer experience. Anything that harms the consumer (in their opinion) will harm you. Think of them as the consumer s Momma! You do not mess with Momma s children!

6 Regulators Are Combining Their Efforts! 6

7 The Laws Prohibited Basis ECOA (Equal Credit Opportunity Act) Regulation B Fair Housing Act Race Color Religion National Origin Sex Gender Identity Handicap Familial Status Marital Status Age Receipt of Public Assistance Exercise of Rights Under The Consumer Credit Protection Act Under Authority Of CFPB HUD Purpose All Credit Types Housing & Residential Finance 7

8 Mortgage lenders are severely under-equipped to handle these changes An ideology shift A Business Model Shift Slimmer Profit Margins which will equate to Higher Efficiency if you are to survive and thrive. Monitoring & Controls

9 To Do This: You will need to add professional compliance managers, counsel and auditing (in house or outsourced) Put systems in place to monitor everything you do and provide statistical results. Train your staff more than ever before. Self-Audit Truly make the Customer King and Prove that you have. (complaint analysis, remediation) Develop new recruiting techniques and new ways to pay people. Employ Fair Lending Techniques that you never considered before. (MSA Diversity) Monitor Pricing Exceptions Improve Data Flow and Integrity Create policies, procedures and workflow diagrams that describe and monitor your work from start to finish (no more boiler plates)

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11 Where Does Fair Lending Start? First Contact With Prospective Client! Marketing Outreach Your Material -Audience Appropriate? Represented Neutrally? Unintentionally or Intentionally Excluding on Prohibited Basis? Phone Call Not Returning Phone Calls Screening Calls Based on Voice Mail Not Returning Visit Stereotyping or Generalizing Not Offering All Program Options 11

12 Case U.S. v. Countrywide Financial Corporation (2012) U.S. v. Wells Fargo Bank, N.A. (2012) WHY? $335 million U.S. v. SunTrust Mortgage, Inc. (2012) U.S. v. GFI Mortgage Bankers Inc. (2012) U.S. v. PrimeLending (2011) FTC v. Gateway Funding (2009) FTC v. Golden Empire Mortgage (2010) U.S. v. Texas Champion Bank (2013) $700,000 U.S. v. C&F Mortgage Corp. (2011) $140,000 U.S. v. Nixon State Bank (2011) $100,000 Settlement Amount $175 million for wholesale, plus potential liability for retail $21 million $3.555 million $2 million $2 million (deferred) $1.5 million 12

13 If the CFPB Finds Problems, Very Broad Remedies: Rescission or reformation of contracts Refund of moneys Return of real property Restitution Disgorgement of profits Compensation for unjust enrichment Damages Public notification of violations (with costs to be borne by the violator) Limits on activities or functions, including suspension & termination Civil money penalties Up to $5,000/day (any violation) Up to $25,000/day (reckless) Up to $1 million/day (knowing) 13

14 Where HMDA & Fair Lending Software Fail HMDA Data and Fair Lending Software Misses: Pricing/Rate Trace (Memorialize each step for each loan) Pricing/Rate Start to LO Pricing Adjustments (Each loan level price adjustment defined) Pricing/Rate Final Results to consumer Re-Lock Audit Trail and Notation Trace as to Reason for Re-lock. Credits (Memorialize fees and credits and show the net affect) Seller Credits Lender Fees Grant/Subsidy credits Pricing Concession/Exception (Resolve with notation as to why) APR More definition on Property type (i.e. Condo, Coop, etc.) Income Type (Certain types of income require specialty investors or guidelines) 14

15 Developing Policy Is policy well thought-out and workflow diagrammed? Is policy applied consistently? How do you monitor policy? What happens when an employee doesn t follow company policy? No program should roll without compliance overview as well. Look at the CFPB exam manual! Follow it to the T. 3 Rules for Every Process! Policy & Procedure Policy Training needs to be thorough and very tight Monitoring with red flags for deviation! 15

16 Fair Lending Trigger Points! 1. Pricing Disparity: Similar borrowers receive different rates/closing costs. 2. Pricing Exceptions: Given to some but not others. 3. Underwriting Disparity: Conditions or denials not consistent. 4. Underwriting Exceptions: Given to some but not others similarly situated. 5. Marketing Disparity & UDAAP Violations 6. Redlining 7. Steering 8. Disparate Impact 9. Data Integrity 10. Client Interaction & Client Parity 16

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18 Is This Your Current Marketing/SM Compliance Plan? The Problem With That Plan is That CFPB Sees It All BEFORE They Even Contact You! 18

19 Marketing & UDAAP-The Unknown! Websites Facebook, Twitter, LinkedIn, et al Print Advertising and Marketing Lead Acquisition What is Your Compliance Management System? What is Your Policy? How is it Monitored? FTC Guidelines: 19

20 Pump The Brakes! Old Way Production Staff Compliance New Way Compliance Staff Production Embrace Change! 20

21 Policy & Best Practices Prevent This! Proper Prior Planning Prevents Poor Performance! 21

22 Free Resource Center

23 Thank You! Tammy Butler, Master CMB Director of Fair Lending & Compliance Join in the Discussion on Linked Group Optimal Blue Fair Lending & Compliance or