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Guidelines for Second Review Programs

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Can you provide some guidelines for establishing a good second review program?

A good second review program should be much more than a review of denials. The real goal of the second review is to determine whether lending decisions including denials were fair. To accomplish this, the program should include both approvals and denials.

The second review should be conducted by senior and seasoned lenders who have policy making authority. One important goal of a second review program is to identify ways that underwriting criteria can be changed to increase the number of loans the bank can make to low- and moderate-income borrowers. Thus, the function of the committee is really to evaluate how well the bank is serving its market. You need policy-makers to accomplish this.

Policy-makers are busy and don't want to sit around every other Friday and review loan decisions. Use their time strategically. Schedule meetings less often - monthly or every other month - and use each meeting to focus on a specific loan topic or product. Some meeting topics include mortgage loan denials and approvals, equity line denials and approvals, analysis of defaults and slow-pays to identify under-writing needs. Establish a goal and an end product for each meeting. Make yourself responsible for writing the report. As for reviewing all loan denials, make that part of your monitoring program.

First published on 2/5/01

First published on 02/05/2001

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Filed under lending as: 

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