Tuscan Club University

Fair Lending Interview

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Hi! It’s Tory Haggerty from Tuscan Club University’s Fair Lending School and welcome to another Fair Lending Short. In this Fair Lender Short I want to talk about performing a fair lending interview.

Now examiners conduct a fair lending interview, usually with their exams. There’s two reasons, one, they want to see if a lender makes any discriminatory comments.  You make think, Tori, why on earth would a lender make any discriminatory to an examiner in a fair lending interview.  The simple answer is often times they don’t know that what they’re doing is discriminatory – they’re just saying how they do their jobs. Number two, is they’re verifying whether lenders are actually following policies and procedures.  

For a quick example, I was doing a fair lending exam one time, and I knew that lenders were supposed to follow the rate sheet. So I asked the lender , “How do you price loans?”

And he says we’ll you know we kind of have a base rate of 6%. And I said that’s interesting because your compliance officer said you have a rate sheet.  He says oh yeah, we have a rate sheet.  And he dug through his desk for several minutes and gave me this rate sheet that was over a decade old.  

I need to perform a pricing analysis to know that lenders at that institution aren’t following the rate sheet.  Now they might still be pricing fairly, but it’s easy to tell that no one is following policy.  And I did that by simply asking the question, how do you price loans? 

Use that tool in your organization, use that with your reviews.  I always suggest using the loan life cycle concept. We teach this in our school. From the moment you take an application, you steer customers into a product, you underwrite the loan, you price the loan, you make a denial, maybe you make an underwriting exception. Walk through the loan life cycle process with your lender.  Ask simple questions and don’t lead them to the answer.  You always get them to sign joint intent, right? Ask them open-ended questions, mark down their answers, and then verify whether they’re actually following policies and procedures.  

I’ve done probably 100 fair lending audits in my career and some of the best results I’ve gotten are from fair lending interviews, just asking simple questions.  Use these in your reviews as well. 

Thanks for reading!

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