While the regulatory landscape in Washington, D.C., is evolving — as pauses and adjustments occur with changes in administration — consumer compliance should continue to be a part of every organization’s culture. As banks look to protect the consumer, here are five areas to consider for 2025: 1. Compliance Management System (CMS): A complete CMS is crucial for both managing and mitigating risks related to consumer compliance areas. Part of the CMS is oversight by the compliance officer and management. When management presents an idea or way to increase business within the mortgage division, don’t be the “no” person — instead, we must be the “how to” person whenever possible. It is so important for compliance personnel to be part of the processes and help find solutions to mitigate risk. The compliance program should include not only policies and procedures but also training, monitoring and consumer complaint response. Training should be job-specific and include the board. Monitoring should be based on the risk of the institution (internal or external). Complaint response is critical to identify potential risk areas or systematic compliance problems. 2. Resources: Community banks continue to not only recruit but retain experienced compliance resources. Management and the board must determine the risk level of the institution and allocate appropriate resources for compliance-related functions. A compliance officer should have sufficient authority and independence to: • Cross departmental lines. • Have access to all areas of the institution’s operations. • Effect corrective action. The industry is facing the need for efficiencies in the bank’s operational areas and succession planning. Even with automation, the importance of resources within the compliance area remains. 3. Fair Lending: The appearance of discrimination comes from concerning lending patterns, exceptions, lender discretion, lack of monitoring, etc. A few questions to consider for fair lending compliance and successful examinations include: • Are policies and procedures effective and followed? • Is lender discretion controlled and tracked? • Are exceptions becoming the normal practice, or is one group benefiting over another? Does the board or audit committee understand the number of exceptions allowed or patterns by loan officers or branch locations? • Do we understand what the data shows, including lending areas, disparities or pricing differences? • Is the monitoring process effective to look at the data and recognize differences and determine if there are additional risks? Fair lending was important under the first term of this administration, and the need for lending in minority areas and affordable housing continues to be a priority. 4. Ability to Repay (ATR): The ATR/Qualified Mortgage (QM) is not new, but recent findings in audits and exams have identified some weaknesses in the documentation of certain items within the ATR rules. These are specifically in the documentation of income and verification of employment. As a rule matures in bank processes, banks tend to relax controls. Maintaining strong ATR/QM controls will help prevent issues within your CMS, violations and penalties. With noncompliance with ATR rules, there also is a liability for the bank regarding the consumer. Under the rule, there is a three-year statute of 5 Compliance Considerations for 2025 By Shaun Harms, CRCM/CBAP, Principal of Regulatory Compliance Consulting/Financial Services, Forvis Mazars 34
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