By Moe Bedard
Today’s ABA Banking Journalelicited 10 steps to insuring that when a bank offers a loan modification to one of its clients at the request of federal regulators that it doesn’t at the same time break further laws when offering a loan modification. Essentially, the article was written by banking experts for bank managers that are feeling the “pressure” to help their clients out of the mess their banks put them in. I found this perhaps the most ironic article I’ve read in quite some time as I don’t make it a practice to typically follow what banks are saying to each other, I mostly follow what banks and representatives tell Main Street.
Here’s the crux of the ten point plan for remaining compliant while offering loan modifications to us poor suckers:
- Make sure you don’t violate the equal credit opportunity act when offering a loan mod! Even when it’s a loan modification we need to remain compliant!
- It’s o.k. to add new co-signers for the purpose of qualifying a loan modification…even if it’s not the borrower’s spouse…but be compliant!
- When you pack fees in to the loan mod remember to remain compliant with regulation Z and RESPA!
- Make sure you disclose that flood insurance costs more than it used to! …and yes…your clients may need more insurance
- Avoid any semblance of unfair or racist practices!
- Re-run fraud reporting software on anyone that wants a mod! We can’t be held liable for fraud even if we didn’t catch it the first time around.
- Make sure you track the records of low income loan mod applicants so you don’t get charged with violating community reinvestment act agreements!
- Make sure you re-evaluate how much money in fees you pack in to a loan mod before you put the fees on paper! Report extra fees accurately!
- Don’t collect government monitoring data on loan mods because they’re not refinances.
- Make sure that when you provide preferential treatment for industry insiders you cover your tracks!
Please read the article from the ABA Banking Journal. It kind of reads like FED Speak a la Alan Greenspan however it doesn’t take a genius to understand what bankers are telling each other to avoid further trouble.
It’s interesting reading insider publications in the banking industry designed with the audience of banking executives in mind. It gives you a clearer perspective on just how dirty the lending business really is.
