Likely Compliance Issues
Release of the HMDA data puts fair lending and CRA front and center. The numbers are not particularly good for the industry and this means that fair lending issues are likely to get a great deal of attention. Financial institutions will have to take action on two fronts. First, defensive action will be necessary to explain the numbers. Second - and more important - institutions must work hard to change their numbers.
Closely related to fair lending and CRA issues are the current concerns about predatory lending. This, together with attention to unfair or deceptive trade practices, is likely to be a front-burner compliance issue in the foreseeable future.
While scanning the horizon for coming compliance issues, we would be fools to ignore flood insurance. You can bet it will be at the top of the examination list for your next exam. If you haven't reviewed flood insurance compliance recently, this would be a very good time.
Historically, Truth in Lending problems have occurred in an environment of increasing rates. As the Federal Reserve gradually increases rates, the wise compliance manager should be keeping an eye on loan programs and the temptation for lenders to be more creative to stay competitive. This is where discounted variable rate mortgages (and huge sums of restitution) came from.
Increasing rates aren't the only issue to watch. Housing prices are at an all time high. This can have ramifications on borrower qualifications and the structure of mortgage loans. It can also make affordable housing harder and harder to find. Add to this the probable increase in the costs of fuel - to heat homes and to have transportation to jobs. These market changes can affect safety and soundness, CRA and Fair Lending.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 11, 10/05
First published on 10/01/2005