Compliance

Get Your Whole House in Order

Now’s the ideal time to double-check mortgage policies and procedures.

September 16, 2013
/ PRINT / ShareShare / Text Size +

As credit unions address the systems, policies, and procedures directly impacted by new mortgage regulations that become effective Jan. 1, 2014, it’s an ideal time to double-check compliance with all mortgage regulations.

Two areas warrant the particular attention of credit union staff:

1. Fair lending policies. Examiners have taken a hard line on fair lending compliance recently. Credit unions, with their “people helping people” and community-oriented philosophies, generally aren’t guilty of the kind of overt discrimination that would raise an examiner’s eyebrows.

But a credit union lending team might unwittingly establish policies that indirectly discriminate against a particular group in the local community. “Disparate impact” has come under intense scrutiny by Consumer Financial Protection Bureau (CFPB) examiners.

Credit unions must research the local market and review lending policies at least annually to ensure their employees aren’t unintentionally discriminating.

Staff—or a trusted compliance partner—should pull the Federal Financial Institutions Examination Council (FFIEC) Disclosure Statements and compare data with similarly sized and similarly located financial institutions.

If you find a substantial shortfall in the number of loans granted to minority applicants, lending officers and credit union leadership should dig further, asking:

What policies or procedures might be limiting our ability to serve minority applicants?

What separates us from our peers?

How can we adjust our underwriting or change our policies and procedures to bring our lending record in line with other credit unions our size in our community?

Introducing this annual selfexamination during new mortgageregulation implementation will be a natural fit for some credit unions.

2. Home Mortgage Disclosure Act (HMDA) accuracy. Human and system errors on HMDA forms can cause problems for credit unions. These forms allow government monitoring of fair lending practices across all U.S. financial institutions.

In visiting a great number of credit unions each year, it’s not unusual for me to uncover clerical, software, and human errors in the reporting of applicant data. These errors cause a mismatch in the information the credit union collects and the report it submits to the FFIEC.

In most cases, the errors are unintentional and overlooked. But as we know, in the eyes of examiners ignorance is no excuse.

To avoid these errors, implement the proper policies and procedures for HMDA accuracy. For instance, credit unions should outline procedures for loan officers and data-entry staff to verify, check, and double-check their work.

Also, a credit union can establish a policy calling for annual internal audits to ensure data on the Loan Application Register matches that on the credit union’s mortgage applications. If a credit union performs hundreds of loan applications each year, it’s prudent to perform a routine check more oft en than annually.

For credit unions with faulty software, the FFIEC offers its free 2013 HMDA data entry software.

Another resource staff might find helpful—particularly in the development of HMDA policies and procedures—is the FFIEC’s “Guide to HMDA Reporting: Getting It Right!” In addition to a summary of responsibilities and requirements, the guide includes directions for assembling the necessary tools and instructions for reporting HMDA data.

While it’s imperative credit union staff understand impending mortgage regulation changes, it’s also critical not to lose focus on mortgage lending compliance as a whole. Examiners won’t take it easy on you simply because the compliance burden has been heavier in recent years.

Bringing the entire house into order now—when mortgage compliance is on the radar—will yield the most efficient implementation.

JASON SKEMP is director of compliance solutions for PolicyWorks.


The services provided by PolicyWorks shouldn’t be construed as legal services, legal advice, or in any way establishing an attorney-client relationship. 

Post a comment to this story

heroes

What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive