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 briefly about loan policy exceptions. Now this is a very complex topic, but what I want to talk about today is those Lenders who go outside of policy, and are very good at it.
What I mean is they’re constantly going outside of policy. I know one Lender who loves to go outside of policy, in fact, in a Fair Lending interview (and if you don’t do those, I recommend that you do. It’s basically just asking them how they do their job) I asked this Lender, how often they go outside the loan policy and he nervously laughs and responds 80-90% of the time. And he seemed proud of that.
I sat back and thought about it, and for somebody that doesn’t follow policy, basically what he’s doing is writing his own policy. When you allow Lenders to go outside policy that often, essentially what you’re doing is allowing them to write their own loan policy, and they’re not authorized to do that. That’s an executive, management or a board level task that should be done and thought about not only from a compliance standpoint, not only from a Fair Lending standpoint, but also from a safety and sound standpoint. So there’s a crossover here. The point is, when you have loan exceptions they should be just that, the exception. It should be 5, 10, 15% of the time.
If you have exceptions more than 50% of the time, they’re no longer the exception, that’s the norm, that’s just how you do business. You either need to make fewer exceptions or you need to re-write your policy that better reflects the way you do business. Do not allow your Lenders to go away from policy that often, because essentially what they’re doing is writing their own policy and that is pretty much the biggest risk you can have from a policies and procedures standpoint as it’s related to Fair Lending.
Thanks for reading!!
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