The “10 Steps to Defusing Loan-Mod Bombs” article (published online at www.bankingexchange.com and in the May print and digital editions of Banking Exchange) cautions banks about the compliance traps that banks need to watch out for when helping consumers with mortgage refinancings and modifications, including the prohibition under the Home Mortgage Disclosure Act (HMDA) against requesting government monitoring information (race, sex, and ethnicity) from borrowers for loan modifications. Banks that are following the Obama Administration’s new Homeowner Affordability Modification Program (HAMP) have additional compliance challenges in knowing when the normal rules don’t apply.
On April 21, 2009, the U.S. Treasury Department issued Supplemental Directive 09-02 that makes an exception to the normal rules concerning requests for government monitoring information for mortgage loans. The new directive requires loan servicers who are participating in the HAMP to request, as part of the HAMP Hardship Affidavit, the borrowers’ race, ethnicity, and sex, even if the loan is not normally subject to data collection compliance requirements.
The process is familiar. The loan servicer is required to request the government monitoring information. If the borrowers elect not to provide the information, and the Hardship Affidavit is completed in a face-to-face interview, the servicer is required to record the information based on visual observation or surname. If the Hardship Affidavit is handled over the telephone, by internet, or through the mail, and the borrowers refuse to provide the information, the servicer is required to ask for the information, but not required to record it based on visual observation or surname.
The directive explains that the additional request for government monitoring information is authorized under the Equal Credit Opportunity Act and Regulation B, which allows a creditor to obtain information required by a regulation, order, or agreement issued by, or entered into with, a court or an enforcement agency (including the attorney general of the United States or a similar state official) to monitor or enforce compliance with the ECOA, Regulation B or other federal or state statutes or regulations. The Treasury Department intends to use the borrower characteristic information to monitor loan servicers’ compliance with fair-lending laws.
- State Street: From Block Chain to Digital Assets
- The Department of Justice Increasing its Investigation into a Multi-Billion Dollar Money Laundering Scandal
- In 2020, Improve Your BSA/AML Program by Focusing on These 4 Areas
- Saxo Bank’s 2020 Predictions May Win the Prize for Being Bold
- Why Goldman Sachs Bought $50 Billion of Assets from Deutsche Bank