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Fair Lending Violations By Jonathan Pinard & Bonnie Nachamie


here can be no more noble a mission than to create a society where all people are afforded equal treatment, regardless of their background. And yet, more than 200 years after our nation’s founding and almost 50 years after the enactment of our nation’s key fair lending laws, we are still working to “get it right.” State and federal regulators have renewed their focus in the fair lending arena and are committed to enforcement of the fair lending laws. Improvements in technology and more detailed reporting requirements, such as Home Mortgage Disclosure Act (HMDA) reporting and Nationwide Mortgage Licensing System (NMLS) Call Reports make fair lending violations easier to detect. There are three types of fair lending violations described in the law (the first two are generally easy to avoid): N Overt Discrimination: This is where one or more groups of people are excluded from receiving financing. N Disparate Treatment: This is where a particular group is singled out by imposing a different standard of treatment. N Disparate Impact: This happens when there is a policy or procedure that ends up impacting members of a protected class in an adverse way and where there is no legitimate business reason to do so. An example of disparate impact is when customers are charged a higher fee for loans in one county over another and that county has a higher concentration of minority borrowers and there is no legitimate business reason for the higher costs. Disparate Impact Violations are usually unintentional which make them the hardest to avoid.


How do you protect your organization from the expensive process of defending claims of discrimination?

JULY 2011 


N Implement and maintain a Fair Lending Policy: Every organization should have a detailed Fair Lending Policy. The policy premise is simple: Do not discriminate. However, it is a carefully crafted fair lending plan describing the rules and procedures that are to be followed will help guide your employees in maintaining a discrimination free environment. The plan should be comprehensive and remain relevant. Procedures concerning advertising and marketing strategies should be addressed. N Provide fair lending training for your employees: Without adequate training and education, a fair lending program cannot succeed. Fair lending compliance is fed by an educated staff. Employees can only carry out their duties and responsibilities if they understand what those are. N Implement a non-discriminatory pricing policy: “Put your money where your mouth is” by ensuring that all persons have equal access to credit opportunities. Setting standards for loan price and fees helps ensure such equality. N Test to ensure non-discriminatory practices or pricing: Implement a procedure to review loan files and loan data to detect patterns or trends which may indicate disparate results of lending activities. Self-testing and monitoring limits a company’s liability and encourages corrective action, when necessary. This review should include not only closed loans, but applications that are either withdrawn or denied. N Put it in writing! Fair lending policies, like all policies, should be written documents. Avoiding fair lending violations is inexpensive; violating fair lending laws is very expensive. Even the mere allegation of a violation can cost thousands of dollars in legal fees, fines and penalties. By incorporating a meaningful fair lending plan into day-to-day business operations, mortgage brokers and bankers can take a giant step towards preventing allegations of wrongful discrimination. There are several compliance companies including, First National Compliance Solutions, that can provide you with the necessary tools to remain compliant. Take a proactive approach to fair lending compliance and protect your reputation and your profit margins! Jonathan Pinard is president and Bonnie Nachamie is chief executive officer of First National Compliance Solutions Inc. in Merrick, N.Y. Jonathan may be reached by phone at (800) 400-4134 or e-mail Bonnie may be reached by phone at (800) 400-4134 or e-mail

Your Team Defines You


s a professional paid to perform mortgage services for your client, you may or may not realize that you are only as good as the team that surrounds you. You rely on your support team to help complete each section of the loan transaction effectively and efficiently, thus each member has a direct influence on your client’s experience. Team members can be anyone from a loan processor to a real estate agent and everyone in between. In order to gain the most momentum for a positive reputation and future referrals, you must ensure that you are working with the right individuals. It’s also important that everyone understands the client is ultimately their employer and excellent performance is required. Let’s break down teams into two categories: Internal and External.

Internal team Your internal team is simply your place of work and those who surround you. This could be your manager, co-workers, assistants, processors, etc. Your internal team is very important because they have the most direct influence on your daily operations and potential for success. More importantly, they will influence the experience of your client even with any filters you attempt to apply. As mortgage loan originators, we’re in the driver’s seat. If you get a flat tire (such as a delayed closing due to underwriting missing a condition), you must always take the responsibility. Never put the blame on others in front of your client since you’ve made the decision to have them on your team. It’s always the frontline that needs to take responsibility and make corrections or adjustments when needed. In recent years, many LOs have been seeking new companies to partner with during our wild industry changes. Remember to carefully consider your team and environment when making

any changes. It’s best to avoid changing your business identity too often by doing your homework and truly understanding the pros and cons before you

“Coming together is a beginning. Keeping together is progress. Working together is success.” —Henry Ford

make the jump. The biggest mistake is when people do little research on a company or new opportunity and are artificially motivated by money or fearbased recruiting. It’s great to have opportunities and act on them, but make sure you get to know the people and company you’re potentially teaming up with. Always remember, selfbranding is better than company branding if you are a career-minded mortgage professional working by referral.

Key points

 Only surround yourself with people who have a positive attitude.  Only put yourself in an environment that is productive and teamoriented.  Do your research when selecting a company or hiring an employee/assistant.  Always work with those who have strong ethics and integrity, no exceptions. If you personally lack these values, you might consider another career.  Avoid and do not participate in steering for financial gain or potential Real Estate Settlement Procedures Act (RESPA) violations.  Have weekly or monthly team meetings to make sure systems are efficient.  Always have a plan and system in place from application to closing.  If you’re not enjoying your environment continued on page 6