PUB. 11 2021-2022 Issue 2

coloradobankers.org 8 “Affirmative influence” means recommending, directing or steering a consumer to a certain provider. Often, true leads are lists of customer contacts that are not conditioned on the number of closed transactions resulting from the leads or any other considerations, including the endorsement of a settlement service. To mitigate the risks associated with RESPA violations, banks could provide training to executives, senior management, and staff responsible for and involved in mortgage lending operations. Banks can also perform due diligence when considering new third-party relationships — the bank or any individuals employed at or under contract to the bank enters — that generate leads or identify prospective mortgage borrowers. Lastly, the bank could develop a monitoring process for identifying, assessing, documenting and reporting risks to executive and senior management. The Truth in Lending/Real Estate Settlement Procedures Integrated Disclosure (TRID) Rule also led to many violations. The Loan Estimate helps consumers understand the key features, estimated costs, and risk of the mortgage loan for which they are applying. The Closing Disclosure helps consumers understand all of the actual costs of the transaction and provide them with the opportunity to review cost and resolve any problems before closing. Under the TRID rule, the Loan Estimate is based on the “best information reasonably available” at the time the disclosures are provided to the consumer, and the bank must exercise due diligence in obtaining this information. The Closing Disclosure is based on an accurate disclosure standard. The FDIC found multiple instances involving Veteran Administration loans where banks failed to comply with the “best information reasonably available” and due diligence standards under TRID by issuing loan estimates based on unavailable interest rates and loan terms. Additionally, examiners found potentially deceptive practices when banks represented specific terms for loans that were not generally available. Mitigating risks for TRID violations also include providing training to executives, senior management, and staff responsible for or are involved in mortgage lending operations. Additionally, the bank should establish policies and procedures to help staff comply with regulatory requirements when preparing disclosures. Finally, the bank should also consider implementing a centralized process to complete or review disclosures to ensure accuracy. Fair lending was also a big concern when evaluating bank compliance. During the 2020 examinations, the FDIC found a bank that would automatically deny the application if the applicant was under 30 years of age. Furthermore, the source of income was provided using a drop-down menu, and any applicant who did not choose employment was denied. Another case where a credit-scoring model scored younger applicants more favorably than it scored elderly applicants. It also negatively considered applicants on maternity leave. Additionally, there was a bank policy that provided that the loan officer should use the highest credit score of the two applicants when the applicants were married, but the primary applicant’s credit score would be used when the joint applicants were unmarried. To address the fair lending risks, banks could consider regularly reviewing credit policies to ensure the Equal Credit Opportunity Act and Regulation permitted such considerations. The FDIC finds that a strong compliance management system helps ensure financial institutions treat consumers more fairly. Moreover, the bank should review any filers or other criteria used for online leads, website applications, and/or credit scoring models. With such an unprecedented pandemic sweeping across the nation, many areas needed adjustments to adapt to the changing environment. Regardless of the impact of COVID-19, banks should continue to set up and monitor compliance programs to ensure that the banks are complying with the appropriate regulations for their business activities. Kevin Kim, Associate General Counsel Kevin Kim joined Compliance Alliance after graduating from the Benjamin N. Cardozo School of Law in 2019. He currently serves our members as one of our hotline advisers, where he spends his days guiding our members and writing articles for our weekly and monthly publications. Before CA, he worked at Galaxy Digital and Refinitiv (formerly Thomson Reuters Financial and Risk) as a law clerk. He also opened a cryptocurrency mining farm and founded an after-school program business in his native New York City. His unique experience and outlook have brought an invaluable new dimension to our group. cont inued f rom page 7