by. Bill Vogeney
Fair Lending Initiatives, Part One
This is the first article in a series I’ll write this year on various issues I’m dealing with at the office. There’s nothing easier to write about than what I’m experiencing in my job, and I thought capturing some of these challenges, ideas and solutions could help the members of the lending council survive these crazy times we all face.
Over the last six months, I’ve been working on improving our documentation of Fair Lending practices. It’s not like we didn’t have enough to worry about with the new CFPB mortgage rules; HUD, the CFPB and the NCUA have all released new guidance on either Fair Lending or Fair Housing in the last year. As you may know, there are three recognized types of lending discrimination:
- Overt Discrimination. Typically this is the easiest form of discrimination for regulators to identify, but it’s also the easiest to avoid. Overt discrimination is making decisions on some aspect of lending, from application, to customer service, to loan servicing, that are based solely on the fact the borrower is part of a protected class under the Equal Credit Opportunity Act (ECOA).
- Disparate Treatment typically is defined as treating borrowers differently based on being in a protected class under the ECOA. Compliance may be verified by testers who inquire and apply for a loan, looking to determine whether the institution (or just a rogue employee) might treat borrowers differently based on any type of prohibited basis. Wait times, fees, rates, overall service, etc., are all factors that could be evaluated for disparate treatment.