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Missed Opportunities: How Compliance & Marketing Can Work Together to Increase Loan Volume & Reduce Lending Compliance Risk

Missed Opportunities: How Compliance & Marketing Can Work Together to Increase Loan Volume & Reduce Lending Compliance Risk

Posted by Kimberly Boatwright, CRCM, CAMS on May 5, 2021 6:00:00 AM
Kimberly Boatwright, CRCM, CAMS
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Marketing and compliance do not always have the best relationship. The marketing team may think compliance exists just to hinder their creativity and challenge their plansCompliance may see marketing as a group of rogue operatives that does not realize how its actions can create regulatory compliance issues. 

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It does not have to be this way. When the compliance and marketing teams openly communicate, they can not only help each other, they can also help themselves. This can result in more focused campaigns to increase loan volume and reduce potential compliance problems.    

Here are a few ways that compliance and marketing can work together:  

Find new loan opportunitiesMost lenders hear the phrase “fair lending data analysis” and worry about finding disparities, but did you know that analyzing your data can also help uncover growth opportunities? 

You might assume a specific geographic market area does not have much demand for loans, but how do you know for sure? Some lending analysis tools can help identify where peers are making loans, which aids in confirming or refuting your assumptions.  

For example, you can map out your institution’s loan footprint and compare it to similar institutions to see if there are areas, down to the zip code, with loan demand that you have overlooked. (See the missed opportunities in the example below) 

FI Assessment Area:
Loans & Deposits

Competitor Loans in
Assessed Area
 

View 1 – assment area with loans and dep.

Assmet area with competitor

 

The marketing department is constantly looking for new ways to reach potential borrowers and encourage them to contact a loan officer or fill out an online application. Sharing loan demand information with marketing gives the marketing department insights and intelligence that can inspire new campaigns to proactively reach underserved areas. 

Related: CRA and HMDA Data: A Marketing Gold Mine

Insights into marketing campaign performance. If an institution is not getting applications from a specific area, it means you are most likely not marketing to that area. Or, if you are marketing to it, something about the campaign is not working. 

Using lending analysis software lets you see where your institution’s applications are coming from. For example, marketing might be sending advertising messages depicting what interest rates and payments would look like for a $400,000 mortgage, but the penetration is lacking with no impact on application flow from a particular area or zip code. The lack of response is the marketing teams indication that the campaign is not working as intended.   

It needs to dig into the data and evaluate what went wrong to see if it can find a reason the campaign is not working. The team may discover that the targeted neighborhood has home values closer to $200,000making potential borrowers think your institution is not interested in loans to families like theirs. 

Avoiding unintentional redlining and Community Reinvestment Act (CRA) violations. Misguided marketing campaigns do more than cost the institution loan opportunities. They also put it at risk of redlining and CRA violations.  

Returning to the example of the advertisement about the $400,000 mortgage loan, poorly targeted advertisements that imply your institution is only interested in larger loans can create unintentional redlining. The message it sends implies the type of business the FI wants and ends up aliening potential markets. 

Comparing geographical fair lending analysis with marketing initiatives can help uncover oversights and missteps so they can be corrected promptly. Marketing should consider the potential of creating REMAs, if the FI is lending into majority-minority census tracts, and marketing or branch strategies that exclude majority-minority areas. 

Redlining is redlining whether its intentional or not.  

Related: Strategies for Mitigating Digital Redlining Risk 

When marketing and compliance work together utilizing solutions that analyze fair lending data, they can create a stronger institutionWhen marketing takes the time to see where the institution’s loans are really coming from, it helps them hone in and target underserved areas to help your institution do what it does best—lend to its community. 

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Topics: Ncomply, Lending Compliance, Compliance