We offer a percentage discount on our mortgage loans for automatic payments from a deposit account with us but currently do not increase the rate if automatic payments cease. We are exploring increasing the rate (removing the discount) on our fixed rate mortgages if auto payments terminate with there being one potential rate adjustment, but not on our ARMs (since we would not be able to disclose it properly). Does this raise Fair Lending concerns? Perhaps disparate impact if members of a protected class are more likely to get a fixed-rate loan than an ARM and so would potentially be more impacted by this because ARMs will not lose the discount?

Why could you not disclosure it properly on an ARM? I would think it would be easier on an ARM loan that was already an ARM versus turning your fixed rate loans into ARMs with the early ARM disclosure requirements and interest rate and payment change notices under .19(b) and .20(c).

Seems our platform has issues with the ARM? (So they told us, they said it could be easier done with a fixed, but I’ll definitely look into that based on your feedback. Do you think there would be Fair Lending concerns if we just do it on the fixed rate?

I think it would be based on the demographics of the individuals in the specific products.

I am all for doing this on a car loan, etc. as you want to build the relationship wallet. But offering a .25% discount on a $500,000 mortgage loan is a pricey proposition just to try and gain a checking account. Especially if they are already a customer and already have one. I think foregoing income of $1,250 a year per customer on marketing could be better spent and processing 12 mortgage payments does not even close to that price. I assume that management is totally on board with this and realize the costs and it is not just the marketing department pushing this.

All good points . . . I wonder why they are pushing for this as well. Thank you very much for the feedback!!