Robert Polcyn
Office of Consumer Protection
NCUA’s Fair Lending
Examination Program
Management Association of Carolinas
Credit Unions Conference
October 2014
For training purposes only.
Topics
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Examination History
Monitoring and Selection Process
Examinations
Supervision Contacts
Common Findings
On the Horizon
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Examination History
• 1994 – Agencies Issue Joint Policy Statement on Lending
Discrimination
• 1996 – Government Accountability Office Recommends
Agencies Adopt Uniform Fair Lending Examination
Procedures
• 1999 – FFIEC Interagency Fair Lending Examination
Procedures (updated in 2009)
• 2000 – NCUA Instruction Addressing Its Fair Lending
Examination Program (Regionalized)
• 2010/2011 – Fair Lending Examinations Transfer to OCP
(Centralized)
• 2013 – OCP Started Performing Supervision Contacts
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Monitoring and Selection Process
• HMDA Outlier Reports
• Recommendations and Information from Field
Examiners
• Member Complaints
• Whistleblower Complaints
• Prior Regulatory Violations (primarily Regulations B,
C, and FHA)
• Call Report Data (specific products, new loan
programs, high growth rates, etc.)
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Examinations and Supervision Contacts –
Laws/Regulations Covered
• Equal Credit Opportunity Act (implemented
by Regulation B)
• Fair Housing Act
• Home Mortgage Disclosure Act (implemented
by Regulation C)
• * Servicemembers Civil Relief Act
* Examinations only
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Examinations (25)
• On-site review of fair lending compliance
management system
– Board of directors and management oversight
– Policies and procedures
– Training
– Monitoring and corrective action
– Member complaint response
– Compliance audit
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Examinations (25)
• Review HMDA Loan Application Register (LAR) for
accuracy
• Review designated “focal points” (e.g., real estate
denial disparities, lack of government monitoring
information (GMI) data)
• Review compliance with the Servicemembers Civil
Relief Act
• Involve transaction testing (review of loan
files/applications)
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Supervision Contacts (50)
• Off-site review of fair lending compliance management system
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Board of directors and management oversight
Policies and procedures
Training
Monitoring and corrective action
Member complaint response
Compliance audit
• Generally will not involve transaction testing (no review of loan
files/applications)
• Analyst may recommend an examination after a supervision
contact, if fair lending risks justify a more detailed review
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Common Findings – Compliance
Management System
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Inadequate fair lending policies and procedures
No fair lending risk assessments
No analysis of HMDA data for potential disparities
Weak or nonexistent fair lending training program
Lack of internal fair lending reviews (e.g., second review of
denied loans, comparative/side-by-side file reviews)
• Inadequate controls over loan underwriting and pricing
discretion/exceptions
• Lack of third party (when applicable) oversight
• No independent fair lending audits
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Common Findings – HMDA
• No written policies and procedures
• Incorrect reporting of a preapproval program
• Errors when reporting action taken codes ‘2’ (approved but
not accepted), ‘4’ (withdrawn), and ‘5’ (closed for
incompleteness)
• Failure to collect and report GMI (e.g., ethnicity, race, sex) in
accordance with regulatory requirements
• Insufficient training for staff with reporting responsibilities
• Inadequate validation system for ensuring complete and
accurate LAR data (e.g., no transaction testing)
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On the Horizon
• CFPB HMDA Proposed Rule
– http://files.consumerfinance.gov/f/201407_cfpb_proposedrule_home-mortgage-disclosure_regulation-c.pdf
– Coverage changes include: new loan volume threshold of 25 originated
loans, in addition to current reporting conditions (for depository
institutions)
– Data fields include: property value; term of loan; total points and fees;
age; and credit score
– Comment period ends October 29, 2014
• Updated NCUA Fair Lending Guide
• More frequent consideration of consumer lending
examination “focal points”
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Resources
• NCUA Fair Lending Resources
– http://www.ncua.gov/Resources/CUs/Pages/ConsumerCompliance/fai
r-lending-compliance.aspx
• Interagency Fair Lending Examination Procedures
– http://www.ffiec.gov/PDF/fairlend.pdf
– http://www.ffiec.gov/PDF/fairappx.pdf
• A Guide to HMDA Reporting: Getting It Right!
– http://www.ffiec.gov/hmda/guide.htm
• CFPB HMDA Data Portal
– http://www.consumerfinance.gov/hmda
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Office Contact Page
Feel free to contact our office with questions or
comments.
Primary Staff:
Robert Polcyn
CCPO Analyst
rpolcyn@ncua.gov
Office Phone:
703-664-3916
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Questions
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