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#2270555 - 05/17/22 08:02 PM Secondary Review of Adverse Action Notices
Nanda Offline
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Joined: Nov 2015
Posts: 16
Currently, our Compliance Department performs a secondary review of 100% of NOA letters prior to them being mailed to the consumer to ensure there are no Reg B violations (parts 1002.7(d), 1002.9(a)(1), and 1002.9(a)(2)). This is done after the credit department has performed a first review of the letter that Loan Ops prepared based on the Principal Reason Sheet from underwriting. I feel like the secondary review should be from a second officer in the credit department. And then the Compliance Department could shift to a monitoring review of Regulation B that would review a sample selection. Any thoughts on this review process are greatly appreciated.

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#2270561 - 05/17/22 10:50 PM Re: Secondary Review of Adverse Action Notices Nanda
rlcarey Online
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Joined: Jul 2001
Posts: 78,965
Galveston, TX
It really depends on what you want your compliance department doing. Do you want to keep them more of an independent monitoring group and there to assist groups in establishing their compliance related policies and procedures or do you want them acting as a line operation of the bank? It just depends on how you see their role in the overall operation of the bank. It sort of makes them no longer independent if they are ever having to opine on the adverse action process if they are part of the actual process. It also requires that compliance have underwriting skills. My question might be if there is already one complete review, why do you need a complete second review? How many instances of a potential problem has the second review process identified in the last two years? If you do not know, then that alone tells me that it is worthless as those should be escalated and brought to the attention of senior management and the board.
The opinions expressed here should not be construed to be those of my employer:

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#2270581 - 05/18/22 02:35 PM Re: Secondary Review of Adverse Action Notices Nanda
Rocky P Online
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Joined: Jun 2003
Posts: 7,379
Compliance is "usually" to keep abreast of laws and changes, recommend changes in P&P when there are changes in laws or systems, advise management on laws, risks and mitigation, train, or initiate training, monitor and test and provide management and board with reports.

In smaller institutions, most employees get involved in everything, but like Randy mentioned, there would be a loss of independence, I would try to stepback from the process by creating a checklist for someone in loan ops to follow, and monitoring the results. Start the monitoring by going over the results with the trainee, then when you get confidence, go to random sampling.

(The same for marketing - train someone oh what is required by product type, create a checklist and monitor it. [Caveat, if it does not fit the checklist, call compliance!] It prevents the panic of tracking down compliance on 11:50 AM Friday for a noon submission to the local paper!)
Integrity. With it, nothing else matters. Without it, nothing else matters.

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#2270584 - 05/18/22 02:50 PM Re: Secondary Review of Adverse Action Notices Nanda
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,710
Bloomington, IN
I monitor and track all AANs.

I do not review the file to see if I agree with the decision

I monitor to insure the correct adverse reason is being stated (after all these years there are still loan officers that want to turn down an unsecured loan request for insufficient collateral)

I track the AANs in a spreadsheet and compare them to our loan approval exceptions quarterly.
The opinions expressed are mine and they are not to be taken as legal advice.

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