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News Flash: $1M Fair Lending Settlement a Wake-Up Call to Lenders

News Flash: $1M Fair Lending Settlement a Wake-Up Call to Lenders

Posted by Kinsey Sullivan on Apr 27, 2016 11:41:53 AM
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Last Friday, HUD announced a $1M settlement with an NC bank over alleged Fair Lending violations. Some are considering this a wake-up call for the industry.

Discrimination. Community development. Community action and advocacy groups. Complaints. Regulatory scrutiny. These are just a few of the Fair Lending issues raised by a last week's $1M Fair Lending agreement with a bank here in North Carolina. 

No one knows better than we do that compliance officers face a tough job and may be spread thin. But settlements like this are a constant reminder that Fair Lending remains a priority. The risks and potential fines are just too great!

While Fair Lending is complex, and the risks are real, the good news is that it is possible to successfully manage your compliance. First, we'll share the details of the settlement, and then share some tips for how to manage your Fair Lending compliance risk.

The Details:

HUD-logo.pngOn Friday, April 22, the U.S. Department of Housing and Urban Development (HUD) announced a $1M Fair Housing Act-related settlement between a community action group, the Fair Housing Project of Legal Aid of North Carolina and a NC-based community bank. The $1.7B bank filed 59 HMDA LAR in 2014.

This agreement will "resolve allegations the mortgage lender engaged in unfair lending practices against minority applicants," according to the press release.

A complaint brought forward by the Fair Housing Project of Legal Aid of North Carolina (LANC), a HUD Fair Housing Initiatives Program agency, sparked the agreement. The Fair Housing Project, which was the complainant in the agreement, alleged that they were injured by discriminatory acts. According to LANC’s website, the complaint "alleged that African American prospective borrowers were treated less favorably than whites, despite having higher income and other qualifications.” 

HUD's Fair Housing Initiatives Program (FHIP) offers funding to fair housing organizations and other community non-profits in order to help individuals who believe they have faced housing discrimination. In 2014, HUD gave more than $36M in grants; Legal Aid of North Carolina received $325K from HUD. 

As part of the agreement, the bank has agreed to make $1M in investments and community development loans in majority-minority census tracts over the next two years ($500K per year). At least 40 percent of these funds are to promote affordable housing. In addition:

  • The bank will display a HUD Fair Housing poster at its Raleigh branch.
  • Prominently display non-discrimination policies at that branch in English and Spanish.
  • Provide Fair Lending training for the staff in 2016, including employees involved in loan origination, loan processing and underwriting.

What It Means for the Industry:

Fair Lending is still a priority for the regulators. The DOJ has two consent orders in process, one for alleged Fair Lending violations based on disability, and another for alleged indirect auto lending-related violations. HUD also has Fair Lending-related activities in progress, including a $1.2B mortgage lending-related agreement with Wells Fargo and a $2.8M Redlining-related agreement. Just this week, the CFPB released their monthly consumer complaint snapshot, and the focus is on mortgage lending and servicing.

Again, we understand the regulatory pressure that compliance professionals and financial institutions face every day, but if your institution's focus has shifted away from Fair Lending, now may be the right time to bring it back to the forefront. 

How to Manage Your Risk:

When reviewing your institution for Fair Lending compliance, the regulators will start with data analysis. When you analyze your data internally, you can see the potential focal points that may draw regulators' attention and work to manage those risks before they arrive.

Compensation-Fair-Lending-Risk.pngIn particular, focus on analysis that will help you identify potential risks (like disparities) in the 7 key areas of Fair Lending risk: Redlining, Marketing, Steering, Underwriting, Pricing, and Servicing and Loss Mitigation. Remember: pricing is only one piece of the puzzle

You'll also need a strong Fair Lending Compliance Management Program to guide your monitoring, management, mitigation and reporting of these potential risks. Complaint management should be included, as should regular risk assessments and training.

TRUPOINT Viewpoint: At TRUPOINT, our goal is to help you be successful in achieving your compliance goals and managing your risk - regardless of whether you choose to work with us, a competitor, or manage your Fair Lending compliance internally. We hope that this blog and our other free resources are helpful in that process.

In that sprit, below is a free resource that will help you better understand and manage your Fair Lending risk:


Ready to get started improving your compliance, and learn if we might be able to help? Just fill out the form below and we'll be in touch soon with more information for you:


Topics: Fair Lending, Nrisk, Lending Compliance, Risk, Nfairlending, Product Insight, Mortgage Lenders

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