Top Takeaways from the 2024 Interagency Fair Lending Webinar

Written by Alesha Briley, CRCM | Jan 7, 2025 8:00:00 PM

The Interagency Fair Lending webinar offered a wealth of insights and takeaways for financial institutions navigating an evolving regulatory landscape. The presentations from eight federal agencies covered several emerging topics, from the Combatting Redlining Initiative enforcements to the Equitable Housing Finance Plan Rule.

We gathered our top five actionable insights to help your financial institution (FI) navigate the most crucial fair lending topics, the areas your organization may need to reevaluate, and how to continually monitor and mitigate risk.

Get ready: The CFPB is ‘reinforcing’ HMDA compliance

While the Consumer Financial Protection Bureau (CFPB) has been piling up paperwork and issuing guidance on overdraft fees, illegal auto lending practices, and poor vendor management, among other areas, the Bureau says it has “stepped up” efforts to address Home Mortgage Disclosure Act (HMDA) compliance, citing its recent enforcement actions as proof that it will hold companies accountable for meeting HMDA-related responsibilities.

In 2024, the Bureau resolved its long-term lawsuit—and the first litigated case under the HMDA since its enactment in 1975—with a repeat offender. The case started with a 2019 consent order for intentional violations and the eventual discovery of many systemic deficiencies in its compliance management, monitoring, and audit systems.

The CFPB also filed a consent order against Bank of America because of its failure to provide accurate data. Despite being one of the largest banks in the U.S. and having more resources than most institutions, it routinely failed to ask mortgage applicants required demographic questions, ultimately falsifying reports that applicants had chosen not to answer the questions.

So, how can lenders learn from these financial institutions’ mistakes and remain compliant? The CFPB shared some insights on their process and the items they’re focusing on in 2025 and beyond:

Accurate and complete data. Check all demographic information for accuracy. The CFPB has clarified that systemic errors and intentional misreporting from FIs, including juggernauts like Bank of America, can lead to enforcement actions.

Proper training and awareness. According to the Bureau’s research, over 7,000 loan officers reported that demographic information was not provided by the applicant in 95% or more of their submitted mortgage applications. The research also showed that the worst 10 % of mortgage lenders (often larger lenders reporting more loans and applications) are more than four times more likely to fail to report demographic information than a lender at the median. Ensure employees, specifically loan officers, accurately collect demographic information from applicants and understand the importance of doing this compliantly. The repercussions can be severe if they don’t or if they use misleading practices, such as failing to ask for the information.

Effective compliance management system. Ensure you have an effective HMDA compliance management system with standardized and repeatable data gathering, reviewing, and reporting processes.

Follow new fair lending regulations

Regulators, including the CFPB, the Federal Housing Finance Agency (FHFA), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC), are working together to enforce fair lending laws.

Failure to address fair lending risk can snowball into other areas, including operational, reputational, and financial risks. Here are some regulatory takeaways FIs should consider as they reevaluate their fair lending compliance management systems:

Monitor CRA performance. The Community Reinvestment Act (CRA) promotes fair lending by requiring banks to serve all community segments, especially low- to moderate-income individuals and majority-minority neighborhoods. Ensure your CRA performance is not compromised by discriminatory practices and aligns with fair lending laws like the Equal Credit Opportunity Act and the Fair Housing Act.

Pay attention to CRA assessment areas. Make certain that your Assessment Areas (AAs) meet all requirements under both current and even the new requirements under CRA modernization. Be thoughtful about including vulnerable populations. Avoid arbitrary exclusions to maintain compliance and promote equitable access to credit.

Consider fair lending in business decisions. A proactive approach to integrating fair lending considerations into operations can strengthen compliance and foster goodwill within communities.

Beware of redlining risk

Following a string of redlining enforcement actions, regulatory agencies and organizations, including the Federal Reserve, the FDIC, and the National Credit Union Administration (NCAU), are doubling down on mitigating redlining risk.

Below are some highlights from the webinar to keep in mind as you reevaluate your redlining risk management strategy:

All lenders are susceptible to redlining. The first-ever redlining settlement with a credit union proved any institution can face enforcement. According to the DOJ, there was a “pattern or practice of lending discrimination,” and the credit union violated both the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA).

Monitor loan applications. The Fed cited banks’ reliance on Mortgage Loan Originators (MLOs) as one of the key reasons why outreach trends often exclude majority Black and Hispanic residents. To help monitor MLO activities and mortgage loan applications, lenders should have policies and procedures to regularly evaluate fair lending risk, including fair lending risk assessments.

Comprehensive policies and training are essential. Provide regular training for all employees, especially MLOs, to ensure they understand redlining issues and reach out to their entire AA or credit market area.

Broaden your outreach efforts. Too often, financial institutions inadvertently make homeownership inaccessible by failing to market mortgage credit or not holding outreach events in minority-majority and low-income neighborhoods. Conduct outreach events focused on mortgage lending, such as homebuyer education workshops, in diverse neighborhoods to broaden awareness and reduce redlining risk.

Be intentional in your marketing and outreach strategies

While there are many fair lending risk factors, including lending disparities, complaints, and branching, the Fed focused on the failure to market to and reach the right audience.

Some of the marketing and outreach risks covered include:

Exclusion of Black and Hispanic Census Tracts. The institution may use criteria that exclude residents of majority Black and Hispanic census tracks or minority applicants. For example, marketing materials may only be available inside the branch, or there may be a lack of marketing in Spanish or other languages despite the area’s demographics.

Lack of targeted mortgage marketing. For example, the institution doesn’t meaningfully advertise mortgage credit products in the AA or credit market area.

Non-diverse models in advertising. Digital and traditional print advertising is not visually inclusive. Review advertisements to ensure that pictures used in marketing are diverse in both demographics (race, ethnicity, age). Also make sure the picture matches the message and doesn’t unintentionally exclude people. For example, when looking at an advertisement geared toward low-income individuals, the picture shouldn’t include a multi-million-dollar home. If marketing to a high-minority area, a white family isn’t the best representation.

Neglecting outreach events in minority neighborhoods. Despite giving to local charities or fundraisers, the institution doesn’t offer any outreach events connected to mortgage credit expansion, such as homebuying or homebuyer education or financial literacy.

Top takeaway: Institutions should conduct regular risk assessments focused on marketing and outreach efforts to address these oversights. The risk assessment should include:

Implementing policies to evaluate risks from marketing efforts.

Monitoring activities to ensure they reach diverse communities.

Reviewing criteria used in digital marketing.

Your risk assessment should also include third-party risks. Ensure stakeholders understand algorithms used in advertising that might exclude minority communities and request reports from vendors on the reach of their marketing initiatives to ensure compliance.

Take action to address fair lending risks!

Identifying potential risks is only the first step in the risk mitigation process. Too often, financial institutions identify emerging or potential risk areas but fail to address their learnings and take meaningful action.

As you reevaluate your fair lending risk assessments, policies, and procedures, ensure your team has the proper resources and systems to address these issues in 2025 and beyond.

Want to learn more about the latest enforcement actions and how to prevent them?

Download our 2024 Lending Compliance Exam Findings Summary

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