Over the last several months, I have had the opportunity to talk with many mortgage lenders. Aside from TRID implementation in October, they all noted that developing or growing their Community Reinvestment Act (CRA) strategy would be one of their most significant initiatives this year.
CFPB, DOJ Stepping Up Interest in Redlining Cases” in National Mortgage News.)
Now let me be clear, CRA and Redlining are two very different things. CRA lending promotes responsible homeownership while redlining denies this opportunity. That said they are often bound together. Are our lending partners concerned by that association? Based on what I’m hearing I would say, yes they are. I met with a couple of financial institutions late last year that had documented affordable housing goals in the communities they serve yet they were investigated by their state attorney general for potential unfair lending practices.
Based on my experience, I think it’s safe to say that the renewed interest in unfair lending practices by regulators is prompting some lenders to review their lending efforts and practices within their assessment areas to ensure compliance.
Many lenders are doing it the right way, and the results benefit the lender and the communities they serve. Considerations for a successful program include:
1. Developing focused strategies that include specific resources, like sales, compliance and operations teams, that have exclusive responsibility for executing strategies devoted to enhancing and delivering products that meet the needs of low- to moderate-income and underserved communities.
2. Monitoring the products and services they deliver in low- to moderate-income and underserved communities.
3. Structuring compensation models in a way that isn’t tied to the loan amount.
4. Implementing products that address the unique needs of low- to-moderate income and underserved areas.
5. Relying on mortgage insurance providers like MGIC, whose pricing model remains clear and consistent, whether in a low- to moderate-income area or not. This allows our partners to easily explain the annual percentage rate that they ultimately provide to all of their borrowers.
We wouldn’t be talking about this if it weren’t important to you, our partners. The need to develop strategies that address CRA requirements and avoid unfair lending practices is critical to appropriately serving all communities and preserving your reputation and goodwill in the communities you serve.
Doing it right requires a high level of vigilance and innovation, but it doesn’t mean reinventing the wheel. For nearly 60 years, MGIC has been helping lenders develop community outreach strategies and programs for serving low- to moderate-income borrowers.
Talk to your MGIC Account Manager today about how we can work together to develop products and strategies that support outreach in the communities you serve.Tags: Community Reinvestment Act, CRA, Mortgage Industry, Mortgage Opportunities, Mortgage Strategies