Title: Don’t End Up in Fair Housing Jail!
Here’s a story that is happening more and more as the CFPB hires more people to “police” FAIR HOUSING – Can you defend yourself in case of an audit?
Examiner: Mr. Mortgage Company: can you please tell me why this client did not receive the lowest rate offered to her on this day?
Mr. Mortgage: Uh, well let me call the loan originator. Oh, he is not here anymore, okay I’ll call the processor. Oh, she is on maternity leave. Can someone look in the LOS and tell me if you see any notes on that file? None about rate, huh! Well, we will pull that file, get the rate sheets from that day and review everything. I’m sure there was a good reason.
Examiner: Fantastic, and while you’re at it, can you also pull the data together for these 350 files? We have questions on those too.
Sound like a nightmare? For many lenders this is a reality. Yes, I know Fair Housing audits are not the most exciting topic; however it is the most important item you can focus on when it comes to making an exam easier.
We’ve created a Fair Housing Compliance Checklist and at the end of this article, you’ll find a “partial list. Email Karen@mortgagecurrentcy.com for the complete 3-page checklist.
Here is how it works. The loan originator answers the questions on the checklist. The answers can be “yes,” “no” and/or a comment. If they do not give you the answer that you have set up as a rule, then it needs to be noted in the file.
I have several pages of example questions; you will have to determine which ones you want to use. The goal is to get your team brainstorming regarding the questions that you want to memorialize.
Here are some ways other lenders are using the Compliance Checklist function:
- Requiring explanation when the loan originator gave the client a higher rate (assuming equal price) than one of the offered programs. This might be as simple as one lender taking the loan and another will not. The examiner is searching for the reason.
- Requiring written explanation when a loan is re-locked. What changed on the file that the program or rate needed to change? This prevents any notion of baiting and switching.
- Reining in your TPO’s to get written reasons for loan selections.
- Ensuring that internal workflow is followed. As an example, do you require a fully completed loan application prior to a lock in?
- Can the loan be locked only with this investor, or any investor? If limited, why?
These are just a few ways the Compliance Checklist functionality is being used. I cannot urge you strongly enough to get this started. Ask anyone who has been through an audit and they will tell you that notations about what happened and when are so very important – and save you an enormous amount of time.
Oh, one more thing, they are monitoring real estate agents too. A real estate agent recently got a letter that he was violating Fair Housing rules when he advertised a home as “adults only—no one under age 16” on the listing.
CFPB is out there and they have the people to monitor, audit and fine you!
Fair Housing Compliance Check List – Pricing Questions
Prices being equal, did you offer the client the lowest rate option available to them?
Is this a re-lock? If yes, what changed on the file that it needs a re-lock?
Is this file dependent on the underwriting guidelines of the
investor you selected? If yes, what specifically?
Is the length of the lock being requested compatible with the time to close?
If you are requesting a 15-day lock, is the loan clear to close?
If you are requesting less than 60 days for a refinance or short sale, is that time frame realistic? If yes, please indicate the loan status in the notations.
Is your final price par?
If your final price is above par, are you charging any discount points? If yes, are you giving a lender credit? If yes, then how much is the lender credit?
Is your rate lock within (x% – lender determines) of the initial disclosed rate?
What are the client credit scores? Please list (lender decides which scores they want listed in the notation).
Is this loan a pre-qualification? If yes, when is closing anticipated?
Is this loan under contract? If yes, what is the closing date?
What are the lender credits? Require notation.
If the price is below 100 or outside of your LO contract, did you receive prior exception? If yes, by whom? Did you document the reason for the exception in the loan file? (Lender sets what they mean by “document.”)
Does the requested pricing meet the parameters of your LO contract? If no, give reason and who authorized lock.
Has this loan been locked with us during the last 120 days?
If you are requesting a re-lock, is the rate going up? If so, is this based on a credit verification issue? Notation needed for explanation.
If you are requesting a re-lock, and the rate or price are increasing, do you have written documentation in the file as to what changed and how that resulted in a higher rate or price? Require notation.