Freebies from the Feds

The federal banking agencies are continuing their promises to provide support for the compliance efforts of banks and thrifts. One of the most recent efforts is a consumer information brochure on shopping for a mortgage.

The brochure advises consumers to obtain information from several lenders, identifies specific cost information that consumers should collect, and gives some advice on how to negotiate for the best deal.

The brochure was developed by an interagency task force including representatives from HUD, FTC, and DOJ as well as the bank regulatory agencies. This means that the brochure includes information considered advisable or necessary by the prosecuting agencies as well as the bank regulatory agencies.

What the brochure tells customers
The brochure gives customers information that is important in shopping for and understanding the mortgage. The brochure includes information on types of lenders - including banks, thrifts, and mortgage brokers.

The brochure advises consumers to shop for a loan from several lenders and includes information that the consumer should obtain and compare. There is a list of questions to ask about the rate. This includes a brief explanation of the APR. There is also some useful information about points, fees, down payments, and private mortgage insurance.

No consumer brochure would be complete without information about fair lending. This one contains a brief summary of consumer rights under both ECOA and the Fair Housing Act.

The brochure includes a worksheet for consumers to use in shopping for a mortgage. The worksheet contains all of the questions they should ask and the terms they should compare.

Finally, there is a brief but important discussion on identifying and correcting credit problems. The brochure includes instructions on how the consumer can obtain a copy of their credit report.

Compliance implications
There are several ways that banks and thrifts can use this brochure to go beyond to intended purpose of consumer information. You can use it to support regulatory compliance. For example, the brochure clearly explains how to shop. Lenders could distribute the brochure whenever making a referral to an affiliated business. The brochure would not only clarify the message in the affiliated business arrangement notice, it would also help customers to understand the notice by explaining how to comparative shop.

The brochure also explains mortgage terms. It even explains what the APR is, so a customer can take the brochure home and read it slowly and carefully. If you have any concerns that explanations offered by your lending staff are less than perfect, the brochure provides a back-up compliance technique.

Perhaps one of the most important uses is to support the bank's CRA and fair lending efforts. The greatest challenge for both CRA and fair lending is to identify ways to generate customer skills and knowledge so that they can obtain a mortgage that meets their needs and budget capabilities. This brochure can give the customer important advice on shopping and negotiating. If the customer has the opportunity - provided by the bank - to become a more knowledgeable customer, the bank's role in that help should count toward reducing any questions of discrimination.

How to get it
Copies of the brochure are available from each of the agencies that participated in its development. The brochure is up on all of the agency websites. You can also order copies from the consumer Information Center, Pueblo, CO 81009.

Copyright © 1999 Compliance Action. Originally appeared in Compliance Action, Vol. 4, No. 3, 3/99