The Social Media Compliance Message – Pay Attention!

By Michael Dunn, CMB

The changes with the Biden Administration have many mortgage lenders on edge. A new appointee to the CFPB, forbearance concerns from the pandemic, and a magnified focus on all things fair lending. So how can C-suite executives and compliance departments sleep well at night? By paying attention to all these risk areas, especially on social media. 

Have you and your compliance team listened to the 2020 Fair Lending Interagency Webinar yet?  You should, and we can tell you a few reasons why.  In addition to high priority given to fair lending concerns by the regulators, the Biden administration has made a few items very clear regarding its agenda on the fair lending front: 1) Increased access to home ownership for minorities will be a top priority; 2) Disparate impact theories will be tested and litigated so this area of law will continue to evolve; 3) FHFA may require Fannie and Freddie to get into the fair lending monitoring business; and 4) Fair lending supervision and enforcement will be one of the CFPB’s top priorities and “…will be exercised accordingly.”  These four agenda pillars will be at the forefront of regulator’s minds as they conduct examinations, and no content is more readily available to an examiner than a company’s social media presence.

Homeownership is widely thought of as achieving the American dream.  And no reasonable person would disagree that the industry should be looking at every possible way to help consumers achieve their homeownership dream.  In a redlining exam, a regulator will consider a lender’s marketing and outreach strategy in addition to its consumer complaint responses.  Therefore, online activity, particularly within the social media world, will be reviewed and documented in your next fair lending exam.  Without a monitoring program, you might just find yourself being told about a particularly egregious marketing post by an examiner instead of your compliance staff.   Monitoring and corrective action documentation will be crucial here.

In Marcia Fudge’s Senate Banking Committee hearing, it became clear that HUD will be focused on disparate treatment and disparate impact – particularly around COVID issues, pricing exceptions and downpayment assistance programs. From a lender’s perspective, clear and accurate communication here is essential.  Are your loan officers making up their own versions of the CARES ACT when they provide forbearance information on their Facebook feed?  Is it in line with your company’s servicing policies?  Are you marketing downpayment assistance programs equally across your lending footprint, or are those programs only marketed by certain branches?  These are questions fair lending officers should be on top of.

If you work for a lender, chances are you’ve experienced the joy of having state exams, Fannie MORA and Freddie CORE reviews, investor due diligence questionnaires, annual audits, warehouse audits, CFPB exams, etc.  Usually, a combination of 2 or 3 of these is happening at any given time.  Now, imagine that Fannie and Freddie will be required to perform their own regression and fair lending analysis of your institution on top of a typical review.  What does that look like?  Will that be part of a new risk-based counterparty oversight framework of the new administration? If I’m reading the tea leaves… looks like that is the direction we are heading.  Seller/servicers should start talking to their agency reps about what they are hearing along these lines.

Finally, we should probably go ahead and take the CFPB at its word.  They have made it abundantly clear that fair lending supervision and enforcement will be a top priority.  This means, there will be hard lessons learned by certain lenders who are pushing the boundaries.  Nobody wants to make the front page of the New York Times as the first mortgage lender “cancelled” over some insensitive social media post made by one of its loan officers. 

Our message today is to pay attention! Listen to and believe what administration officials say when they discuss their top priorities for enforcement.  Control what you can control.  You can’t control every social media post, but you can control your monitoring program and corrective action documentation.  Don’t put your institution in the situation where a state or CFPB examiner is the first one to tell you about your online violations!