Statement Of Edward Kramer
Financial institutions can have a great deal of control over the practices of their third-party mortgage brokers, especially for compliance with fair-lending laws, pricing policies and the use of credit-scoring models. There is a very close relationship among the traditional financial institutions, mortgage brokers and real estate agents. Brokers know where to get their clients financed, and lenders have a history of doing business with certain mortgage brokers and real estate agents. It is a...
Kathleen Muller
Ms. Muller is the executive director of the HOPE HomeOwnership Center in Evansville, Ind. She has been with HOPE for about 12 years. HOPE provides counseling on housing to residents throughout the entire Evansville metropolitan statistical area. For 35 years, HOPE has been providing credit and budget analysis for families to help them determine their ability to buy a house. HOPE also has been certifying their eligibility for special innovative loan packages. During the past year, HOPE served...
CREDIT SCORING AND FAIR MORTGAGE LENDING Gzh
T he Third insiaikmenl a F a F ive inslal Imeni aeries h y ihe Federal Reserve System's Martgoge Credit Farlnership Credit Scori ng CommiMee Credit scoring is an underwriting tool used to evaluate the creditworthiness of prospective borrowers. Used for several decades to underwrite certain forms of consumer credit, scoring has come into common use in the mortgage lending industry only in the past 10 years. Scoring brings a high level of efficiency to the underwriting process, but it also has...
The First Installment Of A Fiveinstallment Series
The Federal Reserve Bank of St. Louis Mortgage Credit Partnership Credit Scoring Committee Credit scoring is an underwriting tool used to evaluate the creditworthiness of prospective borrowers. Utilized for several decades to underwrite certain forms of consumer credit, scoring has come into common use in the mortgage lending industry only within the last 10 years. Scoring brings a high level of efficiency to the underwriting process, but it also has raised concerns about fair lending with...
Response Of James Wheaton
Neighborhood Housing Services NHS of Chicago Along with the pressures to increase profitability, comply with complex regulatory requirements, and contend with new and ever more aggressive sources of competition, mortgage lenders like other businesspeople also must manage rapid change in technology. In the lending arena, this change is evident in the approval of loans through automated underwriting, made possible in part by the use of credit scoring. The past few years have seen a dramatic...
Statement Of Stanley D Longhofer
One of the most significant developments in the mortgage market over the last decade has been the formation and growing acceptance of computerized credit-scoring models as a supplement to or a replacement for traditional manual underwriting techniques. Programs such as Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Prospector incorporate performance information from literally hundreds of thousands of mortgage loans to provide a fast, objective and statistically reliable method for...
Statement Of John M Robinson Iii And Ken Dunlap
Review loan files and denials for adequate documentation. Look at all forms, documents and disclosures in the files. Given the increased reliance on automated underwriting, what should lenders do to ensure that their lending policy is strictly observed and that any assistance offered to loan applicants or prospective applicants to improve their credit score is offered equitably Lending policies must be observed to ensure sound financial business decisions and to avoid any potential disparate...
Background On Credit Scoring Issues Examined
To gain an understanding of industry, advocacy group and regulator concerns, the Federal Reserve Banks of Boston, Chicago and San Francisco conducted focus groups in their home cities during the winter of 1998. Committee members developed nine issue statements that encapsulated the findings of the focus groups. 1. In developing credit scoring policies, a lender may neglect to a. Establish clear risk-tolerance policies and consistent guidelines for how scoring cutoffs are determined and loans...
Statement Of Chris Aldridge
Within predominately minority neighborhoods, subprime financing accounts for more than 50 percent of the mortgage lending activity. Separate HUD and Fannie Mae studies have found that many of these borrowers up to 50 percent would have qualified for prime or near-prime financing. This situation has generated a flurry of local lending regula tions, and it has refocused attention on the impact of credit scoring on the availability of prime-rate products in certain markets. The perceived negative...
Statement Of Dan Immergluck
As a researcher and an advocate for fair lending and community reinvestment, I have shared the concerns of many over the ubiquitous use of credit scoring in the mortgage lending process. Many of my concerns have been articulated by others in earlier articles in this series. For example, in the first installment, community reinvestment consultant Cal Bradford points to the disparate impact of credit-scoring systems and questions where the threshold be set in determining whether a scoring system...
Calvin Bradford And Associates
Calvin Bradford has been a fair lending, fair housing and community reinvestment consultant for over 25 years. His firm engages in research, training, program development and evaluation, and expert witness work for government, private industry, public interest and community-based clients. Representatives from each of these organizations received a request to comment on the following statement A variety of research studies, emanating from the Federal Reserve System, other regulatory and...
John M Robinson Iii And Ken Dunlap
Mr. Robinson is the audit director compliance officer and Community Reinvestment Act officer for Midwest BankCentre in St. Louis. Mr. Robinson has 16 years of banking experience, with the last 10 in internal audit and compliance management. He is a graduate of Westminster College, of Cambridge University's master's program and of the American Bankers Association's National Compliance School. He is chairman of the Missouri Bankers Association Compliance Committee and a board member and speaker...
Statement Of Christopher A Lombardo
Before addressing a financial institution s relationships with mortgage brokers, we ought to identify three undeniable facts that represent changes in the mortgage business landscape over the past decade. First, financial institutions increasingly rely on fee income. Interest rate spreads are, and are likely to remain, razor thin. Second, automation including credit scoring , securitiza-tion and specialization have revolutionized who does what and how they do it. Third, financial institutions...
Christopher A Lombardo
Mr. Lombardo is the assistant director for compliance in the Office of Thrift Supervision s Central Region. Based in Chicago, he manages the compliance examination, community affairs and consumer affairs programs impacting savings institutions in a seven-state area that stretches from Tennessee to Wisconsin. Mr. Lombardo has 18 years of regulatory experience, which includes examination and examination management work with the Office of Thrift Supervision OTS and its predecessors regional office...