Every lender should maintain a responsible lending policy as a part of their quality control program. Here is a sample:
Lender is committed to conducting its business in a professional, legal and ethical manner. Lender is sensitive to abusive practices in the residential mortgage lending industry and has adopted the following best practices to insure that borrowers are treated fairly and ethically:
General
Laws and Regulations: Comply with all applicable state and federal laws and regulations including, but not limited to, the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act, the Truth-in-Lending Act and the Real Estate Settlement Procedures Act. Lender does not allow Section 32 refinance transactions or high cost loan transaction per state law.
Confidentiality: Respect borrowers’ privacy rights by complying with federal and state privacy laws.
Compliance: Establish internal procedures to promote compliance with these best practices and applicable law and to provide that senior management is promptly made aware of any significant problems or failures to comply as appropriate, and that management takes appropriate steps to rectify such problems.
Procedures and Training: Establish internal compliance, fair lending, servicing, quality, audit and disciplinary procedures. Provide training to employees and communicate these procedures to company personnel, brokers and others with whom the company does business.
Equal Treatment: Treat all consumers fairly with regard to loan pricing, underwriting and servicing regardless of race, color, age, gender, marital status, familial status, religion, disability or national origin.
Non-Discriminatory Pricing Guidelines: Adopt and apply consistent “risk based” and service based loan pricing to consumers in a non-discriminatory manner with respect to rates, fees and terms.
Report Violations: Encourage every employee to report to senior management violations of these best practices or questionable activities in accordance with company procedures, which provide that no employee will be subject to disciplinary or retaliatory action for a good faith reporting of a suspected violation.
Internal Review: Review, on a periodic basis, random samples of files to determine compliance with these Fair Lending and Consumer Best Practice guidelines and applicable law.
Application and Underwriting:
Underwriting Policies: Implement and disclose sound underwriting policies and procedures.
Flipping: Lender explicitly prohibits the practice of “flipping” a consumer loan, which is defined as making a refinance loan to a borrower when the new loan does not have a tangible net benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the borrower’s circumstances.
Credit Insurance: Lender does not offer Credit Life Insurance to its customers.
Ability To Repay: When making or negotiating a loan, take into consideration the financial ability of the borrower to repay the loan and to determine whether the borrower could reasonably be expected to repay the loan in the time and manner provided for in the loan contract. Lender does not offer financing to customers with the intent to encourage default.
Disclosure: Provide consumers with accurate and timely disclosure of terms, costs and fees, in accordance with law.
Servicing and Collections:
Collection Policies: Establish and disclose reasonable and ethical debt collection practices in accordance with law.
Due Diligence:Monitor delinquent accounts in an effort to minimize serious default.
Complaint Resolution: Provide training for personnel in handling disputes and promptly follow up on all borrower complaints and inquiries in a good faith attempt to obtain customer satisfaction.
Notices: Provide borrowers with all notices within the timeframes as required by law.
Loss Mitigation: Seek to help borrowers in default and/or foreclosure by working with them and utilizing forbearance, reformation and other loss mitigation tools, when appropriate.
Training: Train personnel to treat borrowers in default with respect.