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#802690 - 08/24/07 08:48 PM Missing monitoring information
DownSouth1 Offline
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KY
While compiling my HMDA report this month, I checked through our centralized file of denied and withdrawn applications to make sure that anything HMDA reportable was included on my report.

Sure enough, the weather's hot and my loan officer's brain's are on vacation, and I found a handful of applications that should be on the HMDA report!

On several of these apps, the customer's signature is there with no notation of being mailed in or faxed. I feel certain the customer came into the bank, but no monitoring information is collected.

What do I do with that section on the HMDA report? Is it appropriate to use the code for "Information not provided" even though that specifically references mail, phone or internet?

I should also add that most of these applications were done on our one-page consumer application that does not include a monitoring collection section. The officers have been trained to use a separate monitoring collection sheet or the residential mortgage appl when they find that they are dealing with a HMDA-reportable purpose.

How do others handle having missing information in your documentation?

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#802711 - 08/24/07 08:57 PM Re: Missing monitoring information DownSouth1
Truffle Royale Offline

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This type of question comes up regularly in this forum.

First, go back to your LOs and pick their brains. If the customer came in they should be able to recall the Section X info.

If not, call the customer, tell them you need the info to comply with government regulations and go through the HMDA phone schpeel. Then you note it on the application and your LAR.

Last, retrain your LOs. Remind them heat is not an examiner acceptable excuse for missing info.

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#802712 - 08/24/07 08:57 PM Re: Missing monitoring information DownSouth1
Dan Persfull Offline
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First I would find out if these are face to face applications. If they are I would provide the following to the applicant and if not returned within 10 calendar days make the loan officer complete the information based on visual observation recollection. If it was telephone or mail I would also provide the notice and recored not provided if not returned. Thankfully I have not had to use this for 2007. You'll have to edit the format for the GMI area. For declinations I change loan number to application and issued to received.


Dear,

Your loan number ____________ issued in ______ falls under Federal Regulation C – Home Mortgage Disclosure Act, as amended and effective January 1, 1990. This regulation is governed by the Federal Reserve Board. We did not give the information gathering disclosure to you at the time, nor did we gather the necessary information required. The Peoples State Bank asks that you assist us in complying with this regulation by completing, signing and returning the information below.

If you have any question please contact us at (812) XXX-XXXX.

Thank you.



The XXXXXXX Bank


INFORMATION FOR GOVERNMENT MONITORING PURPOSES

The following information is requested by the Federal Government for certain types of loans related to a dwelling, in order to monitor the lender’s compliance with equal credit opportunity and fair housing laws. You are NOT required to furnish this information, but are encouraged to do so. The law provides that a lender may neither discriminate on the basis of this information, or on whether you choose to furnish it. However, if you choose not to furnish it, under Federal regulations this lender is required to note race and sex on the basis of visual observation or surname. If you do not wish to furnish the above information, please check the box below. [Lender must review the above material to assure that the disclosures satisfy all requirements to which the Lender is subject under applicable state law for the particular type of loan applied for.]

Borrower: 0 I do not wish to furnish this information. Co-Borrower: 0 I do not wish to furnish this information.

Race/National Origin: Race/National Origin:
0 (1) American Indian, Alaskan Native 0 (1) American Indian, Alaskan Native
0 (2) Asian, Pacific Islander 0 (2) Asian, Pacific Islander
0 (3) Black 0 (4) Hispanic 0 (5) White 0 (3) Black 0 (4) Hispanic 0 (5) White
0 (7) Information not provided by applicant 0 (7) Information not provided by applicant
0 (6) Other (specify)_____________________ 0 (6) Other (specify) ____________________
0 (8) Not applicable 0 (8) Not applicable

Sex: 0 (1) Male 0 (2) Female Sex: 0 (1) Male 0 (2) Female
0 (3) Information not provided by applicant 0 (3) Information not provided by applicant
0 (4) Not applicable 0 (4) Not applicable

Borrower’s Signature: ____________________________ Co-Borrower’s Signature: _____________________________


PLEASE NOTE THAT IF YOU DO NOT RETURN THE REQUESTED INFORMATION, OR CHOOSE “I DO NOT WISH TO FURNISH THIS INFORMATION”, THEN UNDER THE FEDERAL REGULATION WE MUST MAKE THE DETERMINATION BASED ON THE LOAN OFFICER’S VISUAL RECOLLECTION OR YOUR SURNAME.




Last edited by Dan Persfull; 08/24/07 08:58 PM.
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#802997 - 08/27/07 01:50 PM Re: Missing monitoring information Dan Persfull
Burgess Offline
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How can you go back and contact the customer or for that matter have the loan officer fill the GMI in?? The poster said that some of these were denied applications, and i thought once a credit decision had been made, it became to late to collect GMI.
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#803058 - 08/27/07 02:43 PM Re: Missing monitoring information Burgess
David Dickinson Offline
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Quote:
How can you go back and contact the customer or for that matter have the loan officer fill the GMI in?? The poster said that some of these were denied applications, and i thought once a credit decision had been made, it became to late to collect GMI.

I agree. I also would not want to call a customer after the fact and basically say "We screwed up. Can you help us fix the error." I think the reputation risk to the bank is bigger then the GMI violation.

If the loan officer saw the customer, then can complete the info based on visual observation. If they didn't see them, mark the application as "mailed" "dropped off" or "telephone", as applicable.
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#803067 - 08/27/07 02:50 PM Re: Missing monitoring information David Dickinson
Truffle Royale Offline

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I'm not taking a violation for something like this. During discussions, my examiner directed me to try to get the information so I either called or mailed the customer something similar to Dan's letter.

I don't think it's that big a deal when you're talking about a small percentage of the total number of loans on your LAR. Besides, customers and bankers are all human. None of us walk on water and I've yet to have a customer not understand it was a simple error.

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#804637 - 08/29/07 01:21 PM Re: Missing monitoring information Truffle Royale
Burgess Offline
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But would you contact a applicant on a denied application, and say basically, "sorry about denying your loan request, but on another matter could you help us out here by filling out this GMI request"
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#804678 - 08/29/07 02:04 PM Re: Missing monitoring information Burgess
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We have our bankers do it. With any luck, the next time they take an application they'll do it correctly

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#804833 - 08/29/07 03:23 PM Re: Missing monitoring information Burgess
Truffle Royale Offline

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I have the LOs do it too. LOs can't learn from their mistakes if they don't know they made them.They can always do the 'if things change, please come back and we'll try running it again' schpeel.


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#804896 - 08/29/07 03:53 PM Re: Missing monitoring information Truffle Royale
Dan Persfull Offline
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Bloomington, IN
Quote:
If the loan officer saw the customer, then can complete the info based on visual observation.


I agree with this 100% if the application was submitted on a URLA or a similar application where the required disclosure is present. However, if the disclosure was not present on the application or given to the applicant then it has always been my stance that you cannot report or collect the GMI. This is why for those loan requests received on our standard consumer loan application we use the above if the Loan Officer failed to collect the GMI by using our application addendum which has the disclosure for the applicant to read.

When I first came here in 2001 this letter was used quite often, however in the last 5 years I bet it hasn't been used more than 5 or 6 times. That I'm aware of anyways and I review 100% of our HMDA files.
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#804938 - 08/29/07 04:15 PM Re: Missing monitoring information Dan Persfull
Truffle Royale Offline

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Quote:
When I first came here in 2001 this letter was used quite often, however in the last 5 years I bet it hasn't been used more than 5 or 6 times. That I'm aware of anyways and I review 100% of our HMDA files.


Ditto, Dan...again!
Which only further supports the point that you need to get the LOs involved so they can learn from their mistakes. Otherwise it'll go on ...and on... and then they'll come up with a new one!


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#809181 - 09/05/07 03:05 PM Re: Missing monitoring information Dan Persfull
tickledpink Offline
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I totally agree with David. Why would you want to waste time calling/contacting "denied" customers. Next time the LO's make this mistake hit them in their pockets I guarantee they will get it right the next time.

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#810107 - 09/06/07 02:51 PM Re: Missing monitoring information tickledpink
Truffle Royale Offline

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Originally Posted By: tickledpink
I totally agree with David. Why would you want to waste time calling/contacting "denied" customers. Next time the LO's make this mistake hit them in their pockets I guarantee they will get it right the next time.


Why? Because examiners review your BANK, not individual LOs. If the examinors find the information is missing, your bank is on the chopping block. Make the LO do the contacting and apologizing to teach them the lesson, if you like (or can) but get the information and don't leave blanks on your LAR. That's my job.

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#810847 - 09/06/07 11:22 PM Re: Missing monitoring information Truffle Royale
David Dickinson Offline
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Let's risk rate this. Your bank is NOT on the "chopping block." Almost every bank is missing GMI on a few loans. You need to have a system to train, monitor, etc. You should NEVER embarrass your loan officers by making them call an applicant and basically say "I messed up". Reputation risk is bigger here than regulatory risk. You are not there to "teach them a lesson". You are there to support the bank, train, monitor, etc. THAT'S your job.

Also, remember your job is NOT to eliminate violations (ain't ever going to happen). Your job is to mitigate risks.

If your boss supports you embarrassing your loan officers, then go for it. But I find it hard to believe that the CEO would want the reputation risk. There are better ways to handle it (one is as tickledpink brought up).
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#810886 - 09/07/07 02:50 AM Re: Missing monitoring information David Dickinson
Truffle Royale Offline

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David, I think you're missing my point. Dan's letter is a perfect example of how, imo, to handle the situation.

There's no reputation risk as far as I see it. And I didn't bring up the notion of 'teaching them a lesson'. Part of training is knowing when and how something you do wrong affects on down the line.

Again, let me reiterate, I'm basing this on first-hand experience with my examiners. I was made to go back and get information that was missing if it was more than just a random incident.

With that, I respectfully submit we agree to disagree and let the original poster make his own choice and decide how to support it.

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#811006 - 09/07/07 02:05 PM Re: Missing monitoring information Truffle Royale
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Ditto, David. It's all about the risk and in this intance the reputation risk is bigger than regulatory risk.

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#811047 - 09/07/07 02:28 PM Re: Missing monitoring information tickledpink
Dan Persfull Offline
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I personally don't see the reputation risk unless you're having to do this for a significant number of loan requests, and if you are then the violating lenders (which no doubt have received numerous training classes) deserve to be embarrassed or replaced.

It is true that most banks have missing GMI and in most instances that missing GMI will not cause a regulatory issue, unless there are other reporting issues that when combined with the GMI issue shows an unsatisfactory pattern which can, and most likely will result in CMPs unless you demonstrate a process to correct the violations.

From Page 2 of the GIR

Administrative sanctions. Given the importance of accurate and timely submission of HMDA data, a violation of the reporting requirements may subject the reporting institution to administrative sanctions, including the imposition of civil money penalties, where applicable.

And from page C-7:

(b) Bona fide errors. (1) An error in compiling or recording loan data is not a violation of the act or this regulation if the error was unintentional and occurred despite the maintenance of procedures reasonably adapted to avoid such errors.

You need to have the process in place to avoid potential violations.


As David said this is a risk factor for you to consider. For me the 2 to 4 letters per year that we may have to send is not a reputation risk.
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#811193 - 09/07/07 03:26 PM Re: Missing monitoring information Dan Persfull
David Dickinson Offline
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In my opinion (and that's all that it is worth): Sending a letter to ONE applicant saying you messed up is a reputation risk. I've NEVER seen a bank receive any kind of administrative sanction for missing GMI. You do your best to get it. Sometimes you don't and sometimes it's wrong.

Truffle said:
Quote:
Again, let me reiterate, I'm basing this on first-hand experience with my examiners. I was made to go back and get information that was missing if it was more than just a random incident.

They can't MAKE you go back and get it. That's absolutely wrong. They can site you for missing it, but not make you go get it.

Quote:
And I didn't bring up the notion of 'teaching them a lesson'.
I guess I'm misunderstanding, but not sure how. Your post on 9/6 (#810107) said "Make the LO do the contacting and apologizing to teach them the lesson . . ."

I just made these same comments in the BSA forum (about filing a SAR on an employee for telling someone not to deposit >$10,000 in case to avoid a CTR), but I'm going to cut/paste it here as well (Maybe I'm having a bad week, but I hate to see this kind of mentality):

Sadly, this is why so many compliance officers have adverse relationships with the rest of the bank's personnel. We see it all the time. (I'm sure that statement didn't win me any friends here at BOL). Remember, you're on a Team. It's not "you against them."

This is something I talked about in the Compliance Management webinars I taught in June Part I for Compliance Officers and Part II for Senior Mgt and Directors . I had over a dozen of emails from senior officers and directors that went on and on about how this happens in their banks. The result is that the others in your bank will avoid you, hide things from you, etc. That's not what you want. You want people to come to you and say "how do I handle this situation?" or "I messed this up. What should I do now?"
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#811249 - 09/07/07 04:07 PM Re: Missing monitoring information David Dickinson
Dan Persfull Offline
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David I'm not disagreeing that this a risk factor the bank has to decide how they will handle it.

I also agree that we as compliance officer are "support" for a lack of a better term for regulatory issues, and in an idea environment it should never be them against us. And it took me almost 4 years to get that environment here. And for one particular loan officer 5 years.

And one of the methods used to get that environment was having the loan officers correct their own mistakes. I kept telling them it was easier and more efficient to let me know what's going on and to do right the first time then have to spend three times as much time to correct the problem.

I also agree that the examiners cannot require you to go back to the applicant to collect the GMI. They can cite you for the violation and if there is a consistent pattern of you not collecting the GMI there can be sanctions against the bank if they do not have a process in place to correct the violations and to lessen the likelihood of them occurring in the future. Using the letter was our process to correct the violation. But you also have to understand the type of compliance environment I came into at that time. Basically there was none, the 2000 compliance exam is what created my job in March of 2001.
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#811285 - 09/07/07 04:23 PM Re: Missing monitoring information Dan Persfull
David Dickinson Offline
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Sounds like you have created a great compliance environment Dan. I'm not trying to attack your method, simply the "Let's string 'em up, that'll teach 'em" mentality that we see so prominently at banks we review. I'm very sensitive to this. Frequently, when we go to banks to conduct a review, the compliance officer will tell us all of their problems, who the worst loan officer is, etc. Then they'll say something like "be sure to look at this file. It's a real mess" or "I need you to cite this. They don't believe me that this is a violation." I often pull the compliance officer into a private room and explain to them that they are on the team. If they sink the ship, they should go down with it.

Balancing your situation and the "tattle tale" situation is what I'm trying to do. Unfortunately, I'm probably erring on the extreme end. Thanks for your reply.
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#811308 - 09/07/07 04:34 PM Re: Missing monitoring information David Dickinson
Dan Persfull Offline
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David, I didn't think for a minute you were attacking me. But thanks for your consideration. And I agree with your philosophy 100% that we are a team. There are some environments though that calls for different tactics to get everyone on the team. And I am thankful that I no longer have to use the "strong arm" tactic to get them on the team. I'm also thankful that I had an EVP, now the President, and a couple of other senior officers that supported me. Without their support we wouldn't have been able to get the bank to the compliant position it is now.
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#811573 - 09/07/07 07:33 PM Re: Missing monitoring information Truffle Royale
Steve Doty Offline
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Originally Posted By: Truffle Royale
[color:#990000]I'm not taking a violation for something like this.


Gathering GMI information should be done at the time of application. If you are having your bankers go and gather the information after the loan has closed and put in the file. How is "that" not a violation?

Additionaly, a good compliance program involves a steady schedule of audit-train, audit-train. Not audit and reprimand. By sending the LO back to get the information could be percieved as degrading to LO.

I also believe one should consider the reputation risk. It definitely says "my loan officer messed up" and could possibly cause negative impact on repeat business to that officer. Which in turn means no repeat business for the bank.

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#811612 - 09/07/07 08:05 PM Re: Missing monitoring information Steve Doty
Nanwa Offline
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Sometimes there is no better way than to make the loan officer "uncomfortable" by publicly admiting they messed up for them to remember to get it right the first time.
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#811627 - 09/07/07 08:11 PM Re: Missing monitoring information Nanwa
Steve Doty Offline
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Originally Posted By: Nanwa
Sometimes there is no better way...


The key word would be "sometimes" and I would agree. A risk rating on 1-10,this would not be one of them. Not all compliance issue should be weighed the same. A compliance officer should save the strong arm tactic for matters that will truly have a negative impact on the bank (i.e. Flood)

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#812016 - 09/10/07 01:31 PM Re: Missing monitoring information Steve Doty
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David, I appreciate your comments. Having been in banking and lending for 18 years but now just 5 months in complaince and audit I do remind myself that I am on a team and my job is to teach not reprimand. But, I do have to keep reminding myself that so I am going to print your comments and keep them on my desk. It's like being a parent. Look for the teachable moments, pick your battles and train them to be responsible. But perfection? Not in this world.

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