What would the day be without a little CFPB [Consumer Finance Protection Bureau] chatter? The CFPB has issued "ECOA Baseline Review Procedures to be used by its examiners. http://files.consumerfinance.gov/f/201307_cfpb_ecoa_baseline...The CFPB has labeled the procedures "guidance" and did not add them to its Supervision and Examination Manual. The procedures consist of six "baseline review modules" for examiners to use "during ECOA [Equal Credit Opportunity Act] baseline reviews to identify and analyze risks of ECOA violations, to facilitate the identification of certain types of ECOA and Regulation B violations, and to inform fair lending prioritization decisions for future CFPB reviews." The procedures indicate that ECOA baseline reviews are one of three types of fair lending reviews conducted by the CFPB. The other reviews are ECOA targeted reviews (conducted using the ECOA examination procedures in the Manual) that focus on specific areas of fair lending risk and HMDA [Home Mortgage Disclosure Act] reviews. There are six Modules, too lengthy to list here, but they address things like a company's fair lending supervisory history, fair lending compliance management system, risks related to mortgage lending policies and procedures, risks related to mortgage servicing, and so on. Modules III, V and VI, which address products, contain some common themes. All seek information on whether underwriting policies vary on a prohibited basis (such as by setting stricter income requirements for elderly or younger applicants or unmarried versus married applicants) or contain factors that could have a disproportionately negative, unjustified impact on a prohibited basis (such as requiring a minimum loan amount or restricting types of property as collateral). They all also seek information about pricing policies that could have a similar impact on a prohibited basis (such as pricing policies that vary by zip code), the availability of "tier bump" options (policies that permit upgrading a borrower from a higher cost category to a lower cost category, and so on. CFPB watchers believe that the baseline review procedures reflect the CFPB's intention to use the disparate impact theory to establish a violation of the ECOA and Regulation B. They demand careful review by all creditors subject to CFPB supervision. *****Raise your hand. Who wants to start a mortgage company?
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