Tracking Rate Sheet Exceptions

How does your institution track rate sheet exceptions?

Do you code them in your core system?

Do you use a spreadsheet?

Do you have software?

We aren't HMDA reporters, so we don't have LAR data to look at, but we know that to manage risk we can't just document the exceptions, but we need to track them somehow to monitor for trends. Plus, we know that it's bound to come up in our next fair lending exam.

Any tips/tricks/hints ?

It may be more dependent on the number of loans that the bank processes and the number of exceptions granted.

The bank should have pricing exceptions built into the loan policy (such as: relationship deposit accounts with 6 month average from $100k-250k .25% reduction, relationship deposit accounts with 6 month average from $50k-100k .125% reduction), etc.

As long as pricing exceptions were consistently applied, I would not consider them as "exceptions". Any exception NOT from the policy, I would document (and if the bank is control conscious, present to the compliance committee on a periodic basis.)

AIT: I download everything from consumer underwriting into a spreadsheet so that I can monitor any rate sheet overrides. All of our consumer applications go thru software that will have information on what the rate should have been and what the rate is approved as. According to our policy, any deviation from the rate sheet needs approval by a certain set of managers and must be due to one of a ceratin set of reasons. For example, our policy allows us to match a dealer rate (up to point!) if signed by certain managers. Even though our policy allows it, we track it. I look at the loan file for documentation of the rate we are matching and, as you thought, I look to see who gets the overrides and who doesn't. I also check to see who's approving overrides and who isn't as well as which loan officers are requesting overrides and which are not. All good info to sift through.

I agree with Southern Banker. Establish your pricing tiers and let your lenders know that they are not to deviate from it. If you establish pricing that gives them the ability to provide the pricing they would like based on compensating balances you have just made your life a whole lot easier because you won't have so many exceptions.

During my last exam with an FRB bank we were specifically asked questions like "What is your most common policy exception?" "Which branch/officer has the most policy exceptions?" They want to know that you are tracking exceptions and monitoring them for fair lending issues.

Having a code for all the types of exceptions listed on a sheet that is part of your credit memo makes it real easy to track later. The person in charge of tracking can take the information from the exception sheet and enter it onto a spreadsheet and create reports.

How long should you keep the exception log? Currently, the bank I work for has loans from 2007 on the list. Some of these loans have been paid in full.

Keep it as long as your bank's record retention policy indicates. If not in the policy, I would keep at least until getting the results from the next regulatory examination.

Although the information is helpful, sometimes too much information can be a windfall for attorneys if subpoenaed.

Thanks Southern Banker. That is what I thought the bank is keeping more info than needed.