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Living the consumer’s side of compliance

Our compliance expert explores the red-tape jungle in search of a HELOC

Living the consumer’s side of compliance

I recently endured the dubious experience of refinancing a home equity line of credit on my house. It’s been over 15 years since I’ve had to deal with the process, and naturally much has changed in those 15 years (all of which I’m painfully aware of).

Besides having to go through the equivalent of a national security background check and a colonoscopy, at least I was well-schooled in what to expect and was prepared to be patient.

And, this wasn’t even a TRID loan!

Let me just tell you a few of the mildly frustrating aspects of the process from the “consumer’s” perspective, all relating to the compliance regulatory morass.

My “online” experience

First, I completed the application online—and headed to the nearest branch to provide identification documents the next day.

There, I hear some interesting news from the lender. (Actually, this person was not really the lender—actually just the person at the branch of a large national bank that will go unnamed who hands off the application to a processing center somewhere thousands of miles away.)

It seems that the bank will be starting a new promotion in two days for home equity lines of credit. And the big news is that the promotion includes a much better rate and terms than I was offered.

If I cancel my application and do a new one, I could apply under the promotion.

OK, I’m all for that.

Compliance fun begins

Now, my shift becomes a major problem (and conversation with the corporate compliance department) about how to cancel the application:

• Is it a withdrawal?

• Is it a cancellation?

• Is it a modification of an existing application?

This took three days to figure out. And that was good, because by then the new HELOC promotion was in effect.

Next, the lender tells me that the bank is legally required to conduct an full appraisal on the home for a $90,000 loan. Mind you, this deal has a loan-to-value somewhere in the neighborhood of 18%.

I’m told that appraisals are taking 30 to 60 days right now due to the heavy demand.

We could be looking at a long wait. Since I happen to know that the appraisal regulations don’t require a licensed or certified appraisal on a residential loan for under $250,000, I’m skeptical. More likely a case of over-compliance on the bank’s part or lack of knowledge on the lender’s part.

(We got that problem taken care of…)

Paper me, baby

Then begins the large volume of disclosures that start coming to the house for both me and my co-borrower husband.

Each of us receives a separate mailing of each disclosure. And, since there was the original application and the subsequent application days later, we received initial disclosures for both.

The disclosure that makes the least sense to me (as a consumer in this situation) is the Credit Score Disclosure. When you have a credit score that is well north of 800 and they have to disclose four key factors that adversely affected your credit score, they really have to come up with some bizarre factors just to have something to disclose.

After completing the two lengthy applications, I tried to be proactive. I provided everything that was listed on the bank’s checklist of items that would be required for the loan’s underwriting. But there always seemed to be something else that they needed to finalize the decision process.

(There should be a new category of discriminatory prohibited bases—self-employed individuals.)

What about the real consumers?

I’m just glad I knew what to expect. And, the bank and the staff were very helpful, cooperative, and professional.

Yet, if I was a “regular” consumer, I think I would be a much more frustrated with the whole thing because of the regulatory red tape.

Nancy Derr-Castiglione

"Lucy and Nancy’s Common Sense Compliance” is blogged by both Lucy Griffin and Nancy Derr-Castiglione, both Banking Exchange contributing editors on compliance. Nancy, a Certified Regulatory Compliance Manager, is owner of D-C Compliance Services, an independent regulatory compliance consulting services business that has provided expertise in compliance training, monitoring, risk assessment, and policies and procedures to financial institutions since 2002. Previously, Nancy held compliance positions with Bank One Corporation and with United Banks of Colorado. In addition to serving as a Contributing Editor of Banking Exchange, Nancy has served on the ABA Compliance Executive Committee; National and Graduate Compliance Schools board; conference planning committees, and the Editorial Advisory Board for the ABA Bank Compliance magazine. She can be reached at [email protected]

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