Posted by Trey Sullivan on Mon, Jan 30, 2012 @ 03:00 PM
A recent ABA survey of bankers confirmed what I’d long suspected: Fair lending is the biggest compliance challenge facing bankers this year.
Out of the survey’s list of 14 compliance issues, fair lending had 55 percent more votes (at last check) than the second-place group: mortgage-related Truth in Lending Act (TILA) and Real Estate Settlement Procedure Act (RESPA) concerns. Bank Secrecy Act (BSA), Anti-Money Laundering (AML), and Office of Foreign Assets Control (OFAC) were grouped together and earned a not-so-distant third in the survey.
It’s no surprise that fair lending is the top compliance concern for bankers. We’ve been hearing this from bankers for the last year or so. Just a few months ago, Assistant Attorney General Thomas Perez announced that fair lending is a top priority for the Justice Department, a declaration punctuated by the creation of a new DOJ fair lending unit.
With increasing regulatory focus, combined with a growing number of watchdog groups, financial institutions need to do more than brace themselves for potential bad news on the fair-lending front.
Here at TRUPOINT Partners, we have made it our mission to help lenders address the increased fair lending scrutiny in new and more efficient ways. To learn more about a new and more efficient approach to fair lending compliance, request a copy of our white paper, “Profitably Achieving Fair Lending Compliance.” You will learn how to more effectively address fair lending reporting and save both time and money in the process.
To see the results from the ABA survey, visit http://www.aba.com/Compliance/default.htm and click “view results.”
Posted by Justin Smith on Fri, Jan 06, 2012 @ 01:48 PM
Blog by Andy Barksdale Managing Director TRUPOINT Partners
Our friends at Treliant have done a good job trying to narrow down five areas of focus for 2012 in their just-published article “Compliance Needs to Start with the CEO.” We couldn’t agree more with the following statement: “Narrowing down bank regulatory issues to five priorities is inherently difficult in these extraordinary regulatory times, but if these five are in good shape, the bank has a good chance of having a quiet 2012 on the compliance front.”
- UDAAP (Unfair, Deceptive, or Abusive Acts or Practices)
- Comprehensive Fair Lending Check Up (Mortgage and beyond)
- Proactive Redlining Review (Know where the dollars are going)
- Small Business Lending (Data collection)
- BSA/AML Programs Working Effectively
We think this guidance list is right on the money. But we would like to add one other simple reminder for 2012: Data that is reported and associated with activity from 2012 must use new census tract definitions. 2012 HMDA and CRA data collection require the use of new 2010 census tracts.
Compliance does start with the CEO. These five areas (plus one) can become less of a burden with the right analytics partner that can take your financial institution data and make it easy to support your internal policies and regulatory needs. At TRUPOINT Partners, we are here to help. For the complete article referenced above that was posted today in the American Banker, click here. (http://www.americanbanker.com/bankthink/compliance-needs-to-start-with-the-ceo-1045479-1.html )
Posted by Justin Smith on Tue, Jan 03, 2012 @ 02:30 PM
Blog by Andy Barksdale Managing Director TRUPOINT Partners
The team at TRUPOINT Partners is really looking forward to celebrating the coming year. While the age-old practice of making New Year’s resolutions is typically associated with individuals, we feel it is important to post our corporate resolutions for 2012. Here are three key areas where we will continue to invest our time, money and energy this coming year:
1. Quality Reporting. We continue to actively listen and work with regulators, consultants and our clients to improve our reports. Through this feedback-based collaborative approach, we have developed the industry’s best Fair Lending, CRA, geocoding and mapping products available to financial institutions. Markets change, regulations shift focus, and clients’ needs evolve; therefore, we will continue to collaborate and serve the market needs by actively listening. With your input, this will be a continuous journey. We will be launching several new reporting suites in 2012 based on your collaborative input.
2. Best of Industry Service. We conducted a focused client survey in 2011. The feedback we received encouraged us to focus on new products and leverage our strengths associated with service delivery. Our clients said that they loved our hands-on service, when our experts personally walked them through their data and gave them perspectives when requested. Our second New Year’s resolution is to continue to offer hands-on service. And we will be growing our relationship management team in 2012 to make sure that, as our business grows, our expert support, guidance and client service continue to meet or surpass the standards our customers have learned to expect.
3. Simplicity: Ease of Access and Simple-to-Use Reporting. Financial institutions continue to seek ways to make compliance and management more efficient and productive. Historically, we have served these needs by taking responsibility for collecting, analyzing and summarizing the data. Our final New Year’s resolution is to offer reporting on-demand. In late January, we will launch our new TRUPOINT Analytics platform that will: a) provide you on-demand access to your reporting; b) analyze your data and compare it against peers; and c) enable you to seek custom analytics assistance with just a few simple clicks.
These three areas of focus are embedded within our corporate culture. They are not new resolutions, but rather a recommitment for 2012. We are excited about what the New Year brings. At TRUPOINT Partners, we are committed to our clients’ success by providing quality reporting, the best service, and simplicity.
Posted by Trey Sullivan on Tue, Sep 20, 2011 @ 08:00 AM
FDIC Chairman Martin Gruenberg recently announced initiatives intended to help the agency better understand the challenges facing community banks'. The agency has committed to holding a conference early next year on the future of community banking and their impact on the markets they serve.
Studies show that community banking has changed dramatically over the last 10 years. The cost structure and the overwhelming increase in regulatory compliance has turned the traditional business model on it's ear. Fair lending, CRA, and HMDA compliance alone has become a multi-billion dollar a year cost for community banks.
"The FDIC is also reviewing key challenges facing community banks such as raising capital, keeping up with technology, attracting qualified personnel, and meeting regulatory obligations," Gruenberg said. "Additionally, we are looking at our own risk-management and compliance supervision practices to see if there are ways to make the process more efficient" for community banks. Community bankers can only hope Mr. Gruenberg is good on his word.
Read Gruenberg's speech To learn more how TruPoint Partners can help you reduce your cost of compliance, please contact us today or visit www.trupointpartners.com
Posted by Justin Smith on Wed, Sep 14, 2011 @ 01:55 PM
Blog by Andy Barksdale
Jimmy Dean was a reniassance man with a Midas Touch. As you may know, Jimmy Dean was successful on many fronts including a Hall of Fame country music singer, television host, actor and businessman. If you were around back in 1961, who can remember the crossover hit "Big Bad John"? It was an instant classic.
Jimmy Dean succeeded in so many different areas in life, based in-part to how he viewed the world. I saw a wonderful quote that gave perspective on Jimmy's outlook: "I can't change the direction of the wind, but I can adjust my sails to always reach my destination."
Banks, and especially Compliance Officers, have had to maintain a similar mindset in order to survive the last few years. I am confident that this same mindset will be required to master the future. It appears that the winds of change are blowing again and these winds are more than the remnants of Hurricane Irene.
The press headlines signaling change are hard to ignore. How will the foreign banking crisis impact our national regulation? Is it true that Bank of America may be preparing to lay off as many as 30,000 in order to prepare for what the future holds? What about Mobile Banking and Online Services?
One thing is certain, change is omnipresent. Regardless if you are managing your team's Community Reinvestment Act, HMDA, Lending Compliance, Bank Auditing, Compliance or leading the entire enterprise...we have to be prepared to adjust the sails and catch the wind.
TruPoint Partners is busy adjusting our corporate sails to capture the winds of change for the sole purpose of serving you better. New reports, new consulting services, new ways for collaborating to help you get what you need faster, smarter. As we working on making our industry leading approach, better. We would love to hear from you. Help us adjust the sails and provide you what you need! Please send me a note (abarksdale@trupointpartners.com) and let me know how we can help you navigate the winds of change. We are here to help!
Andy Barksdale
Posted by Justin Smith on Mon, Sep 12, 2011 @ 01:00 PM
Blog by Andy Barksdale
On September 8th, 2011, the United States House of Representatives Committee on Financial Services recently sent a request to the US Secretary, Mr. Timothy Geithner. The Committee is looking for an update from the Financial Stability Oversight Council (FSOC- Chaired by Geithner) on what they are doing to identify and eliminate unnecessary or duplicative regulatory burdens. The letter quotes Geithner's speech on June 6th, 2011 where he said we have "a very complicated regulatory structure with multiple agencies, with closely related and sometimes overlapping missions and roles."
The new regulations under the 3,000 page Dodd-Frank Act requires 400 new regulations. It has been estimated by the Federal Register, the first 102 rules will require US firms to spend almost 11 million man-hours per year to comply. In a fun comparison made by the Committe, it only took 7 million man-hours to build the Empire State Building. The Act's new rules deal with everything from lending practices to the quality of assets to documentation, and they will continue to affect the pace of lending and the relationship of local banks to local businesses. The end client will get hit with more paperwork and fine print as a requirement of Dodd-Frank, even as the law sets up a bureau that was specifically designed to eliminate excessive paperwork.
TruPoint partners endorses the need to strengthen and improve protections. However, it must be done with efforts to streamline and simplify. While big banks already have large compliance staffs to deal with CRA, Fair Lending, HMDA and other bank compliance areas, community banks must consider additional compliance staff or move staff from customer care or other productive departments to fill out government paperwork. During our tough economic times, this massive expansion of government into the private sector goes against the old adage that government should “do no harm.”
TruPoint Partners celebrates the fact that the Financial Services committee sees that community banks and credit unions are over-burdened and need relief. There is a clear need to audit old regulation, compare to new regulation, eliminate and clean up outdated or duplicative regulations. Lets hope that Mr. Secretary responds quickly and diligently.
Posted by Trey Sullivan on Wed, Jun 29, 2011 @ 01:50 PM
It’s no secret that fair lending is an ethical imperative as well as a regulatory mandate. And passing your fair lending exam isn’t optional! A negative outcome can compromise your institution’s reputation and impede its growth. Given all that is at stake, your institution must deploy a smart strategy to ensure positive results.
Articulate Your Risk
Before any exam ever begins, your institution should conduct its own fair lending risk assessment. Understand you numbers by running or having statistical analysis run of current and past lending activity. Taking an objective look at your underwriting processes and outcomes can also provide valuable insights. Seeing the types of fair lending risk to which your institution is most exposed, and evaluating the effectiveness of the controls you use to reduce those risks, is the first step to being prepared for an exam. Examiners will ask whether you have done an assessment. If so, and it’s deemed reliable, examiners may skip developing their own.
Know The Rules
By knowing how the exam process works and how you will be evaluated, you can better prepare your team for the examination experience. The publicly available Interagency Fair Lending Examination Procedures http://www.ffiec.gov/pdf/fairlend.pdf provide precise, step-by-step instructions that examiners follow in conducting exams. Knowing how things will be done, from scoping and deciding focal points, to running statistical analysis, all the way through reviewing files and drawing conclusions, helps you assess how the examination is progressing from start to finish.
See What They See
The best approach to knowing how your exam will turn out is to conduct one of your own. Using the Exam Procedures as your guide, replicate the work steps and conduct your own mock exam. Caution is advised in undertaking this process, because it may be considered a “self-test” that produces new data. A “self-test” must be handled in a particular way in order to preserve its confidentiality and prevent its disclosure to examiners. Since results aren’t known until the review ends, protecting results is a prudent step. If you lack expertise or qualified resources in this area, a third party can help you identify best practices for such reviews.
Knowledge is Power
Employing these strategies can help you know what to expect in your fair lending exam. By arming yourself before the examiner comes calling, you can respond efficiently and effectively throughout the exam cycle. Proper preparation can lead your institution to more positive outcomes and favorable exam results
Posted by Trey Sullivan on Tue, Jun 07, 2011 @ 04:23 PM
Since the inception of HMDA and CRA, bankers have grumbled about the effort and expense required to collect and report their lending data. Even with the advent of automated methods for capturing and reporting, this data has been viewed by all but an innovative minority as something done merely to “comply.” For those willing to seek a different perspective, this data represents an untapped marketing resource you can mine with little or no additional expense.
The HMDA Mother Lode
Your institution’s home mortgage lending data reveal a wealth of demographic information.
Not only does it show where you are and are not lending, but it also shows the characteristics of borrowers who are approved versus applicants who are denied, as well as those who fail to complete the application process or withdraw their applications. By plotting this information graphically and numerically, you can analyze it to gain insights such as:
• Borrower and applicant race, ethnicity and gender
• Percentages of loans made to individuals versus jointly
• Specific neighborhoods where you receive few applications
• Neighborhoods that produce a lot of applications
• Average time from application to decision
You should know what various data fields on the HMDA report represent, and how relating them to one another can shed light on where and how your marketing efforts are working (or not). This type of review can also illuminate pockets of additional opportunity for your bank.
The CRA Gemstone
CRA data can provide a roadmap for seeking out new commercial relationships. Knowing how many small business and small farm loans you have made – where, when and to what size enterprises – can enlighten and inform future marketing efforts. If you have had success in a particular market sector, you can build upon it. Knowing where your efforts have been less effective might indicate a need for greater outreach or a change in messaging. Benchmarking your data against your peers can also help your executive team and Board of Directors adjust and refine your competitive strategy.
The Lucky Strike
Finding novel applications for the data you are already collecting distinguishes you from your competition. Not only does it make productive use of otherwise burdensome requirements, but it holds a wealth of information that can inform your business decisions. Using your data for more than “just compliance” can be the lucky strike that energizes your institution’s marketing programs.
Posted by Justin Smith on Thu, May 26, 2011 @ 08:00 AM
I recently reviewed Paying More for the American Dream V that summarized mortgage lending in 2009. It was a collaborative effort between seven community based advocacy groups across the country. The report indicates a stark contrast in lending between minority neighborhoods and predominately white communities.
This report will add fuel to the fire and encourage the Department of Justice and the regulatory agencies to dig deeper into each banks loan data. Given the authors of the report, it is no surprise that it highlights inequalities in the finance system and the impact on lower-income neighborhoods and high minority communities.
Conventional refinance loans to homeowners in predominantly white neighborhoods increased by an average of 129 percent. The report states loan originations in communities of color decreased by an average of 17 percent. Bank compliance officials know, this disparity will further increase Fair Lending and CRA (Community Reinvestment Act) scrutiny.
Compliance officers responsible for fair lending compliance should pay specific attention to denial rates in communities of color. Denial rates ranged from 29 percent to 60 percent in minority communities, as compared to 12 percent to 24 percent denial rates in predominantly white neighborhoods.
A number of our clients have experienced this type of review during their recent examinations. The question we get most often is, "so how should we prepare?" A quick fair lending analysis similar to the following chart should be an excellent start:
As a community bank compliance official, you need to fully understand what your application, denial and fall out rates imply about your lending practices. And understanding what your loan data really says isn't as difficult as you might think...and the vast majority of our clients find it can actually put the bank in a very favorable light.
Posted by Justin Smith on Mon, May 23, 2011 @ 12:41 PM
Prior to the mortgage crisis, regulators encouraged banks to improve their Fair Lending and CRA (Community Reinvestment Act) efforts and market mortgages to poor minorities with weak credit. Now, banks are being persecuted for those same loans for "Reverse Redlining" or "Predatory Lending".
Banks price loans based on risk. Higher risk loans are priced higher. Now these same loans that banks were encouraged to make prior to the mortgage crisis are being targeted for increased scrutiny by the government.
A recent article in Investors Business Daily sums this up. It's a good quick read.
http://www.investors.com/NewsAndAnalysis/Article/572091/201105121901/Holders-Anti-Bank-Witch-Hunt.aspx .
As a compliance officer, a detailed working knowledge of lending by census tract is helpful. One must also review census tract minority composition.
For higher minority census tracts, focus on application, origination and denial numbers (Redlining) and high rate loan frequency and average loan rate (Reverse Redlining).
Community bank compliance officers are in a tough position right now. The only way to combat this sort of double talk is with the numbers. TruPoint Partners can help you with your CRA, Fair Lending, and HMDA compliance. We're always here to help.