■ ■ ■ Optional Products and Services (e.g., debt cancellation, biweekly payment plans, payment protection, or credit protection).
Determine whether each optional product or service is offered
by the bank. Take a close look at how these services are provided
once the customer has chosen to participate in them to ensure
they are serviced in a manner consistent with ECOA. Targeted
marketing of these products on the basis of race, for example,
may indicate an increased risk of potential ECOA violations
and require further inquiry. Or be aware of the potential for any
disparate treatment effects for what may turn out to be classes
of customers who obtain them even if there was no intentional
targeting to any class of customer by the bank.
■ ■ ■ Servicing Policies and Procedures. Review servicing policies
and procedures to ensure they are facially neutral and do not
pose an adverse effect on a prohibited basis group. Approved
policies should be clearly stated, and procedures should provide the appropriate level of guidance for employees so that
discretion is limited. If exceptions are allowed, documentation,
approval, monitoring and reporting of exceptions should be in
place to mitigate the risk of disparate treatment.
■ ■ ■ Disparate Treatment in Loss Mitigation. Review a sample of
consumer servicing records in default or at imminent risk of
default to assess loss mitigation activity. Be mindful of activities
that may indicate disparate treatment of consumers in violation
of ECOA. Review the procedures outlined in the CFPB’s
ECOA Examination Manual, and the Interagency Fair
Lending Examination Procedures and loss mitigation
requirements addressed in the Real Estate Settlement
Procedures Act and Truth in Lending Act.
■ ■ ■ Disparate Impact in Loss Mitigation. If examiners determine
a review for disparate impact is warranted, they will analyze
information and data related to loss mitigation outcomes for
borrowers who are part of a prohibited basis group against the
pool of delinquent borrowers. Items subject to review include:
reinstatements, repayment plans, forbearance, loan modifications, short sales, deed-in-lieu, and foreclosure. Loan modification attributes will be reviewed for compliance including
interest rate, principal, and monthly payment reductions. They
will also examine the rate and timing of foreclosure activities
to assess consistent levels of assistance across all delinquent
borrowers with a focus on those within prohibited basis groups.
■ ■ ■ Limited English Proficiency (LEP) Borrowers. Review policies and procedures for servicing loans to borrowers with LEP.
Does the bank address the following:
• Identification of borrowers who may require non-English
• Options for customer service calls in a language other than
• Availability of customer service personnel able to help in a
language other than English; and
• Translations of English language documents to LEP borrowers?
Because servicing involves many complex processes that are
unique to borrower situations, fair servicing risks and controls
are more difficult to identify than other operational processes.
The compliance team must take a holistic and proactive approach to identifying potentially unfair, deceptive, or abusive
acts or practices related to products and the servicing of those
products. Having a good grasp of servicing operations, risks
and controls, and areas of regulatory focus will help facilitate
identification of critical activities and the associated risks and
controls. Strong detective controls will help ensure controls and
processes continue to operate as management intended—fairly
and with the highest level of quality. ■
ABOUT THE AUTHORS
LIZA WARNER, CPA, CFS, CRMA, is a managing director at
CrossCheck Compliance LLC and a bank internal audit, compliance
and risk management executive with over 30 years of experience
in the financial and professional services industries. Previously
Liza was the chief compliance and operational risk officer for a
mid-size regional bank and has consulted with institutions of all
sizes on their internal audit and compliance needs. She started
her career in the internal audit function of what is now one of
the largest national banks. Liza can be reached at lwarner@
KAREN CULLEN, CRCM, is a director at CrossCheck Compliance
LLC and a compliance and fair lending leader with over 25 years
in financial services including fair and responsible banking, mortgage banking and electronic payment services. She has expertise
in compliance program implementation, quality control program
management, fair and responsible banking program management,
risk management, process development and improvement, training, and team member development. Previously, Karen held compliance leadership roles at mid-size regional and large banks. Karen
can be reached at firstname.lastname@example.org.
Identifying servicing issues is only the first
step to successful fair servicing. Strong risk
management procedures to monitor risks
and test the efficacy of controls are vital to
managing fair servicing compliance risk.