Welcome to the Compliance Cohort. We are a group of compliance professionals working to make compliance easier. Our goal is to take complex compliance concepts and put them in simple terms that apply to the real world. We are glad you have found us and look forward to collaborating in the future.
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All in Adverse Action
In this Compliance Clip (video), Adam discusses what denial reasons should be used when an applicant does not meet a minimum credit score. He explains that there are sometimes reasons that are easily listed on the Adverse Action notice, but other times, the reasons for a low credit score may not be as clear. If your financial institution has a minimum credit score requirement, this video is a must watch.
On May 26, 2022, the CFPB confirmed that federal anti-discrimination law requires companies to explain to applicants the specific reasons for denying an application for credit or taking other adverse actions, even if the creditor is relying on credit models using complex algorithms. The CFPB published a Consumer Financial Protection Circular to remind the public, including those responsible for enforcing federal consumer financial protection law, of creditors’ adverse action notice requirements under the ECOA.
In this Compliance Clip, Adam discusses whether or not a customer withdrawing a loan for a low appraisal is really a denial, even if they have expressly withdrawn by providing written notice of their intent to withdraw.
Adam uses this Compliance Clip (video) to answer the question as to whether a Mortgage Loan Originator’s unique ID - i.e. the NMLS number - needs to be included on Adverse Action Notices. The answer is quite simple, but how we arrive at that answer is a bit confusing.
In this Compliance Clip (video), Adam answers a question about whether or not an adverse action notice is needed on a commercial loan application where a lender verbally counter-offers but the applicant declines the counter-offer and then asks to withdraw the application.
On April 29, 2020, the CFPB released a factsheet to explain the coverage requirements under the Equal Credit Opportunity Act “Valuations Rule” and addresses frequently asked questions the CFPB has received since it went into effect. As a background on this, the Bureau published the original Rule in 2013, which amended Regulation B to require creditors to provide applicants free copies of all appraisals and other written valuations developed in connection with an application secured by a first lien on a dwelling and to notify applicants of their right to receive copies of appraisals within three business days. The new factsheet addresses all three components of coverage and discusses common questions received regarding the three criteria for coverage.
GUEST POST! This is another feature article by one of our Compliance Cohort members, Jennifer Johnson. Jennifer is a Vice President and Chief Risk Officer at a $225 million community bank, and shares her years of experience in multiple banks with us in this fantastic article on the 30-day Reg B rule.
In an ideal world, loan applicants would come to us fully prepared with all the documentation we need to make a loan decision. I don’t know about you, but I certainly do not live in that ideal world. More commonly, applicants come to us with a loan request and bits and pieces of what we need, which can lead us to stash applications on the shelf while we wait for more information. Time passes, and before you know it, we have violated Regulation B’s 30-day rule. “Wait!” you may say, “what are you talking about? I didn’t have a completed application! How could I have violated ECOA’s 30-day rule?” While it may be true that you didn’t have a completed application, if you stop there, you’re missing some of the important nuances of Regulation B’s notification requirements…
In this Compliance Clip (video), Adam discusses the adverse action requirements under Regulation B including the requirement to provide reasons as well as specific requirements around provide the actual ECOA adverse action reasons.
What do your lenders do when a suspected criminal (who is about to be arrested) applies for a loan? You deny them of course! But the real question is, how do you deny them without tipping them off or getting them upset? This Compliance Clip (video) explains how to deny a criminal without causing more PR problems than necessary.
This Compliance Clip (video) discusses the difference between two denial reasons found on most adverse action notices: 1) Excessive Obligations in Relationship to Income and 2) Insufficient Income for the Amount of Credit Requested. Adam discusses why most denial forms have these two different, but distinct debt-to-income (DTI) options and explains the best practice for when to use each reason - which might not be what you think.
