Western Banker - November/December 2016 - 19

'' Balancing lending compliance with ongoing mortgage disclosure changes and the dialogue on new rules for small business data collection will require compliance professionals to get back to the basics on updating lending compliance oversight processes to meet heightened requirements. business data collection will require compliance professionals to grab their pencils and get back to the basics on updating lending compliance oversight processes to meet heightened requirements for passing grades. According to the FFIEC Fair Lending Exam Procedures, redlining is defined as "a form of illegal disparate treatment in which a lender provides unequal access to credit, or unequal terms of credit, because of the race, color, national origin, or other prohibited characteristic(s) of the residents of the area in which the credit seeker resides or will reside or in which the residential property to be mortgaged is located." The mortgage crisis in the Great Recession demonstrated more than a housing bubble that burst; it brought to light complex and challenging types of mortgage loan structures. HMDA and redlining have been connected historically due to the ability to identify from the raw data trends, patterns or the potential for exclusionary practices. Disparate treatment can not only be an indicator of refusal to loan, but in reverse redlining whereby the lender provides more unconventional or higher-priced loans to minority borrowers. The concept of steering is the practice of deliberately channeling loan applications toward or away from particular loan products on a prohibited basis. Redlining Risk Returns Redlining is one issue that has re-emerged recently as a fair lending enforcement priority. The term originated back in the 1960s by community activists in Chicago who outlined the practice of marking a red line on a map to delineate a community or area where banks would not invest. The concept has evolved beyond geographic references to apply to discrimination in lending practices. Basically, regulators and the Department of Justice (DOJ) trigger fair lending enforcement relating to redlining when they believe that a lender has served the credit needs of non-minority neighborhoods to a significantly greater extent than it has served the credit needs of majority-minority neighborhoods. The Home Mortgage Disclosure Act (HMDA) worked to fight against lending discrimination by requiring the Federal Reserve to collect and make public loan data from mortgage lenders and banks. The changes driven by Dodd Frank shifted the responsibility for oversight to the Consumer Financial Protection Bureau and expanded the type of loan data to be collected. While transparency and disclosure to the regulators is designed as a control, organizations need to conduct internal risk assessments to confirm the adoption of their lending policies is not discriminatory or enabling disparate treatment. Red Flags or risk indicators can include: * Lack of applications from or providing lending in minority geographic areas '' * Disproportionately higher denial rates for applications located within minority areas * Arbitrary or policy-driven exclusions of geographies from the bank's market area * Differences in service levels or customer access to services as compared to non-minority areas * Lack of branches or locations within minority geographic areas * A lack of clearly defined standards for referring applications to subsidiaries of affiliates * A lack of standards for classifying applicants as "prime" or "sub-prime" borrowers * Incentive programs that shift applicants to nontraditional or higher priced products * Significant differences in loan penetration percentages of prohibited demographic groups Geography Matters with ZIP Code Compliance Over 50 years ago, the Postal Service put in place the Zone Improvement Plan (ZIP) with the introduction of a five-digit code for each address in the country. The numbering schematic designated a broad geographical area or grouping of states, region or city. Higher population areas contained more addresses, so it created more five-digit ZIP codes. The code was expanded to a ZIP + 4 to provide greater granularity in address identification and efficiency in mail distribution. Western Banker November/December 2016 19

Table of Contents for the Digital Edition of Western Banker - November/December 2016

A Message from the President & CEO
Back to the Future to Manage Portfolio Performance
The WIB App Store
Managing Your Bank’s Reputation by Taking an “Inside-Out” Approach to Communicating News
Interest Rate Risk and ALM: Most Institutions Are Doing it Wrong
Everything Old is New Again — Updating FCRA Compliance in a CFPB World
Professional Development
Secrets to Employee Engagement for Bank Managers
March of the Millennials: Cultivating Relationships Within the Digital Generation
Welcome New Members
Index of Advertisers
Western Banker - November/December 2016 - cover1
Western Banker - November/December 2016 - cover2
Western Banker - November/December 2016 - 3
Western Banker - November/December 2016 - 4
Western Banker - November/December 2016 - A Message from the President & CEO
Western Banker - November/December 2016 - Back to the Future to Manage Portfolio Performance
Western Banker - November/December 2016 - 7
Western Banker - November/December 2016 - 8
Western Banker - November/December 2016 - 9
Western Banker - November/December 2016 - The WIB App Store
Western Banker - November/December 2016 - 11
Western Banker - November/December 2016 - 12
Western Banker - November/December 2016 - Managing Your Bank’s Reputation by Taking an “Inside-Out” Approach to Communicating News
Western Banker - November/December 2016 - 14
Western Banker - November/December 2016 - Interest Rate Risk and ALM: Most Institutions Are Doing it Wrong
Western Banker - November/December 2016 - 16
Western Banker - November/December 2016 - 17
Western Banker - November/December 2016 - Everything Old is New Again — Updating FCRA Compliance in a CFPB World
Western Banker - November/December 2016 - 19
Western Banker - November/December 2016 - 20
Western Banker - November/December 2016 - Professional Development
Western Banker - November/December 2016 - Secrets to Employee Engagement for Bank Managers
Western Banker - November/December 2016 - 23
Western Banker - November/December 2016 - March of the Millennials: Cultivating Relationships Within the Digital Generation
Western Banker - November/December 2016 - 25
Western Banker - November/December 2016 - Index of Advertisers
Western Banker - November/December 2016 - cover3
Western Banker - November/December 2016 - cover4
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