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Common Lending Mistakes

Recorded on August 29, 2012

Learning from someone else's mistake is always a good thing. When examiners are finding violations in one institution, they'll look for those same things in the next. Learn what is being criticized so that you can ensure these errors are not happening in your institution when you are examined. This leads to good grades on your compliance report card and fewer criticisms in your Report of Examination.

Mary Beth and Andy have read reports from the federal regulators and heard from countless bankers in emails, Guru Questions, Bankers' Threads and telephone calls pertaining to "what do you know about…?" These situations can sneak up on a compliance officer and those "doing" compliance at the loan and receptionist desks. This is especially true when there is so much emphasis on new regulatory requirements.

We'll discuss everything from Regulation B to Z and provide you with a laundry list of issues others are having problems with. The chances are you may be struggling with the same issues. Finding these errors and correcting them is an integral part of any compliance program. It is a good feeling when the examiner asks about a certain scenario and you can say "We saw some of that. You'll find it in my audit reports from 9 months ago. But we corrected that procedure and haven't seen an instance of it since." Your senior management and board will appreciate the comments as well. Getting the common violations out of the way early on leaves you to devote time to the other things on your "to-do" list.

Here is a list of just part of what will be covered and each represents an area of concern or common violation:

  • Mess-ups under the risk-based pricing rules.
  • Doing the right thing when monitoring information is not provided.
  • Spousal signatures, what to get and when.
  • Failure to properly collect monitoring information.
  • Improper completion of adverse action notices.
  • Erroneous determination of when early disclosures are required for a mortgage loan.
  • Screwing up on identifying finance charges.
  • Messing up the Settlement Statement.
  • Making the wrong call when it comes to issues like whether a loan extension triggers a flood requirement.
  • When using a MPPP plan, determining what letters go out at renewal.
  • Rate sheet issues and deviations.
  • HMDA errors
  • Early disclosures, when and where.

Plus, we'll discuss:

  • How misunderstanding even simple definitions can cost you.
  • How to monitor operations to avoid future mistakes.
  • Steps you can take to avoid repeating others' errors.
  • And much more.

Bob Dylan sang "The times they are a changin'." That was never more true than today.
One change to expect is the tone of your examiners. Since your last exam, they are under pressure to "help" banks better comply. The financial crisis has dealt a blow to all banks and you can expect more regulations, more criticism, and more enforcement actions.

When in the past you may have heard "we only found this violation once so we won't put it in the report of exam" you can now expect to hear "we are citing this single violation of law under…" You must be prepared long before your exam or audit. What better way to plan than to know what to look for in advance!

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