Fair Lending-2nd review

Posted By: Rangers Fan

Fair Lending-2nd review - 08/13/02 05:53 PM

Is there anything in the regs REQUIRING a secondary review on consumer declinations? We previously had a loan committee that reviewed all declinations (especially real estate)and then the president initialed off after reviewing them. I think it is a good practice to check for redlining, etc., but I can't find specific requirements that we do it with another set of eyes, other than an exam many moons ago that recommended this. We have new senior management and the loan committee in it's previous format was done away with. Any direction would be appreciated.
Posted By: Anonymous

Re: Fair Lending-2nd review - 08/13/02 07:57 PM

I am not aware of a regulation that requires a second review program. In 1993, the agencies came out with guidance on fair lending and issued some suggested fair lending activities. One of which was the establishment of a second review program. Here is a link to the guidance from 1993
http://www.occ.treas.gov/ftp/bb/93-30a.txt

I also believe that there is something in the agencies fair lending examination procedures from March 1999 that alludes to second review programs.

I hope this information helps.
Posted By: Rangers Fan

Re: Fair Lending-2nd review - 08/13/02 08:22 PM

It does help very much. It tells me we didn't dream this one up. Thanks!
Posted By: NMB

Re: Fair Lending-2nd review - 08/13/02 09:13 PM

We just finished an FDIC compliance exam and the exam findings "suggested" we implement a second review program even though there were no fair lending findings to prompt it. I think they "suggest" this to all banks because examiners find it handy to use to for exam purposes.

For what it is worth, we believe we have good control without the second review program and told our board that we will reconsider as we grow and expand our loan programs.
Posted By: Walleye Woman

Re: Fair Lending-2nd review - 08/13/02 09:18 PM

We perform a second review and have been doing it for quite some time. Our examiners, OTS, look for it. As Compliance Officer I perform the second review and it gives me a chance to check up on the lenders and catch any problems before they become a practice. By the way, we are a small bank.
Posted By: Lestie G

Re: Fair Lending-2nd review - 08/14/02 03:50 PM

One very painful lesson that I've learned is that 'suggestions' from regulators when you're a small bank are exactly that. When you get a little bigger, though - they'll get you the next year if you don't implement their suggestions. They'll use inadequate internal control systems or compliance management programs if they don't have a regulation to back them. If you're growing very fast - I'd reconsider that suggestion quickly.
Posted By: Rangers Fan

Re: Fair Lending-2nd review - 09/20/02 03:23 PM

That last one helps me out. We just had our exam and that was one area they felt needed addressing, since we don't use the committee format anymore. The examiner even said I could do the second review since I was independent of the loan area now (but not when I was involved with both. whew-glad those days are over!!)
Posted By: Michelle D

Re: Fair Lending-2nd review - 09/20/02 04:52 PM

In response to:

In reply to:

The examiner even said I could do the second review since I was independent of the loan area now (but not when I was involved with both.




I don't get it, second review does not need to be separate from the lending function, it just needs to be done. Our second review process is that another underwriter looks at the deal along with the chief credit officer (we're a mid sized community bank with no SFR lending). Neither of those are independent of the lending function and the regulators have never said anything. In prior lives when we did do SFR, the second review was also handled inside the lending function. The only thing we did and do at my new place is remove the condition sheet and any notes related to why it was denied so that we get a clean perspective.
Posted By: rlcarey

Re: Fair Lending-2nd review - 09/20/02 05:45 PM

Michelle,

I concur - no need for separation of duties for a "fair lending" type of review. It's quite common to have senior loan officers and underwriters other the orignal underwriter a part of the review committee.
Posted By: Rangers Fan

Re: Fair Lending-2nd review - 09/23/02 06:32 PM

Maybe I should have elaborated more-the examiner didn't say it had to be separate, but since we don't have the number of consumer officers we used to have, it was more difficult to have the lenders review the apps in our situation. We are centralizing our back room functions and all consumer loans go through 1 primary lender and he couldn't very well review his own loans, now could he (although he offered-ha!)? And the commercial officers are swamped with their deals and it was just suggested as an alternative to the committee format that I could do the 2nd review. Didn't mean to mis-lead anyone. We are not a large bank so sometimes we have to be creative with the number of employees available.