CD Secured Loans

We are looking at our underwriting process on CD Secured Loans. Currently we do not pull credit or require income information for a debt-to-income ratio.

Are there any predatory lending concerns with this practice? i.e. - a full analysis may show high DTI or low credit score which could impact repayment ability?

There are no ATR requirements on non-mortgage related transactions. They can either get a loan and make payments or cash in the CD. Not sure why you would need to jump through all the hoops - they can pay either way.

The major concern in that case would be the collateral, not repayment.
Major issues might be an IRS or tax levy which might impair the collateral - anything superior to the bank lien.

Good point Rocky

And at a bank where I worked a CD held as collateral was taken through Civil Asset Forfeiture. Doesn't happen often - but it does happen.

Strangely, ECOA may be your biggest risk. From the creditworthiness standpoint, CD-secured loans are almost 100% risk-free. Eliminating creditworthiness as a variable, regulators can do reliable file comparisons looking for disparities in pricing and other terms attributable to other factors--especially gender, marital status, race, and other prohibited bases. Your policy for these loans must be air-tight and you can afford no exceptions.

Currently we do not pull credit

If the MLA coverage is verified through the credit report be sure you are going to the MLA Website to verify the bororwer's active duty status.