Fair Lending Consulting - Loan Modifications

Consultative Services to Evaluate Potential Lending Discrimination in Loan Modifications

Foreclosure prevention and loss mitigation have become major efforts for financial institutions during the mortgage crisis. ECOA prohibits discrimination in the any credit transaction and the loan modification is a credit transaction. Now more than ever, it is imperative to assess fair lending risk, critically evaluate loan modification policies and procedures, and review loan files for disparate treatment or impact.

Evaluate impact: As the volume of loan modifications increases, the potential for disparate workout scenarios increases as front-line staff evaluate collateral and analyze behavior scores. Before your institution’s loan modifications are evaluated by your regulator, know the answers to these questions:

What criteria are used to determine eligibility?
How are you monitoring and testing to determine eligibility?
What is the impact of each loan modification program?
How are you monitoring and testing loan servicing?

Loan Modification Consulting Services: Our fair lending consultants can help your institution put together a program to evaluate, identify and mitigate the inherent compliance and fair lending risks associated with loan modifications and services. Our four-part approach will prepare your staff and organization to manage the challenges surrounding loan modifications, avoid fair lending risk, and evaluate the effectiveness and fairness of your programs.

Our fair lending loan modification services include:

Program Review:Our consultants will evaluate loan modification policies and procedures with special emphasis on risk identification. Factors evaluated include: sufficiency of staff training on current regulations, policies and procedures; consistency of process for offering, accepting, reviewing, approving, and declining a loan modification among borrowers with regard to income level, demographic, and census tract; appeals process; and complaint management. Our consultants will: 1) provide a detailed analysis of written policies from fair lending perspective; and 2) identify decision making 0pportunities (DMOs) and their associated risks.

Sample File Review: Our consultants will review a representative sample of loan modifications completed and loan modifications denied. Each file will be evaluated for evidence of disparate treatment and impact. Files will be evaluated for evidence of steering issues and disparate impact based on risk of the client (regression).The review will further emphasize evaluation of credit risk, re-structuring process, and resulting even-handedness of workout scenarios.

Complete Portfolio Review: Our consultants will conduct a statistical analysis of all completed loan modifications and denied applications. The review will compare applicants’ race, gender, income, census tract, and ability to repay. The analysis will identify any outliers.

Statistical Analysis Reports: Depending on the data provided,our consultants can generate and analyze in-depth statistical reports, emphasizing the following different areas:

Spatial Analysis

Map by tract income, minority %, etc.
MSA Level

Focal Point Report (Issues related to income, race, ethnicity, & gender)

Single report to provide overview
Test for statistical significance

Customized Analysis

Include regression analysis
Increased data requirements

Fair Lending Expertise from a Trusted Source

Our experienced consulting team includes specialists in all aspects of fair lending. Our highly-skilled team of economists, statisticians, and regulatory professionals has substantial experience with all types of loan modifications and understands the fair lending risks inherent in the modification process. We draw on their expertise to bring a varying combination of skill sets to match the specific requirements of each engagement. Our experienced team will examine your loan modification program and provide practical insights and advice on regulatory compliance best practices. With our blend of regulatory experience, industry knowledge, and state-of-the-art technologies, we are well-positioned to assist you with your fair lending compliance risk management needs.