Credit Union Exam Solutions Presents With Flying Colors

Treichel: Hey everyone, this
is Mark Treichel with another

episode of With Flying Colors.

Today I'm here with Dana
Ginsberg of Compliance Tech.

Dana, how are you doing today?

Dana Ginsburg: I'm doing great, Mark.

Thanks for

having

Treichel: me.

You got it.

I'm excited to have you on.

You know a lot about a lot of very
hot topics that are going on in

the credit union world right now.

If you could, if you'd give us
a little bit of your background

as it relates to your work at
Compliance Tech, that would be great.

Sure,

Dana Ginsburg: um, so I've been with
Compliance Tech, um, on and off since

about 1998, um, with a little bit of a
break, um, for family life and things

like that, but really I've been talking
all things fare lending, HMDA data,

CRA data for quite some time, and I'd
say for the last decade I have been

working as a point person for all of
our Software users, um, as well as

our consulting, um, in that space.

So I'm a point of contact at the
company for both, uh, lenders, um,

regulatory agencies, as well as
housing groups that use our software.

So uniquely positioned because I'm
talking to a lot of different industry

folks about fair lending, um, every day.

Treichel: Well, and it's a topic that.

Is it's a hot topic, I guess, you know,
for lack of a better word, but the

landscape, the current landscape in fair
lending and the credit union industry,

uh, you know, could you kind of describe
what's going on with that and why it's

so important for credit unions to, to be
aware of what's going on regulatory, the

new emphasis, obviously it's always been
important, but what, what's your take on

the current landscape in fair lending?

Um, so I think

Dana Ginsburg: what we've seen over
the last, you know, 4 or 5 years is

probably an increase in the NCUA's
Fair Lending Examination Program and

the information that they've been
putting out to the credit unions.

Um, I myself have been working and
spoken at quite a few, uh, CUNA, I

think they're now the American Uh,
America's Community Credit Union.

They've changed their name, but the
CUNA used to have a fair lending

workshop and I've seen over the last
couple years more information coming

forth more awareness within the credit
union landscape about fair lending.

Um, I think most recently there
was a big story, uh, that caught

everybody's attention that was on.

CNN with Navy Federal Credit Union,
uh, talking about lending disparities,

um, in terms of, uh, their applicants.

So it's definitely even more on
the radar than it has been, uh, but

we've seen, you know, the, the NCUA
also putting out more information,

increasing their level of expectations
from the credit unions themselves.

Treichel: Yeah, that's for sure.

And that, that Navy story in CNNI
think it was, uh, has has got a

lot of attention in the press.

It got a lot of attention at the,
uh, uh, with the banking committee.

Uh, if I remember right, both
the Democrats and the Republicans

individually wrote letters saying,
Hey, uh, the, the all members are

important, but the people who defend
our country are extremely important.

And can you, uh, there, there's
gonna be more coming relative to that

because I think they wrote to the CFPB.

And one of the other regulators
saying, Hey, we'd like to, uh,

have you take a close look at this.

So, and of course, things trickle down.

And you mentioned that there's
a lot of, you know, a lot more

discussion by NCOA about it.

Chairman Todd Harper has, um, has been
a very passionate about this from his

days when he was on the hill and then
when he was the PACA director at NCOA

public and congressional affairs.

And now he, Okay.

Now he's in charge of NCOA as the
chair so he can set the tone and he

has set the tone by talking about it
more, raising the bar relative to that.

Uh, and the budget they, you know,
every year, they keep increasing the

amount of fair lending exams that
credit unions, um, will be having.

So, uh, the, the likelihood of NCUA
coming to do a fair lending exam at

any individual credit union has more
than doubled over the last couple

of years since Todd has come on.

Um, and.

It's quite possible.

It's quite possible that could continue
to increase because now he has a second

vote in his party who also Tanya Otsuka,
who's demonstrated that she is very

passionate about this and that I think
she's her words were this is going

to be a focus of mine while I'm here.

So definitely a hot topic.

Dana Ginsburg: And I think what's really
important, um, is not to cause alarm.

Um, I think that the N.

C.

U.

A., um, in their recent supervisory
highlights for what they're

talking about for 2024, is they are
extremely forthright and forthright.

And open with their communication
and their expectations and what

their, their focus is going to be.

So whenever there's questions, instead of,
you know, having a huge alarm go off of,

oh, my gosh, we have to look at everything
and and we're, we're overwhelmed for

those credit unions that are maybe
building their fair lending program.

They are directly telling folks exactly
what their focus is going to be, and

they outline it, um, in, in those
recent, uh, supervisory highlights.

Dana,

Treichel: that's, that's a great point.

You know, every year, they, in
January, that letter comes out, and

they highlight which regulations
they are going to be looking at.

And of course, fair lending is there this
year, but it's, it's a great point that

they kind of signal what They are going to
be focusing on, uh, so that credit unions

can maybe get a running head start, uh, to
make sure that, uh, or review their areas.

Maybe perhaps is the best way
to say it before NCUA comes in.

And so in that regard, um, if a credit
union is looking at that letter and

they say, okay, here's some things, uh,
that I know NCUA is doing from where

you sit and the things you've seen
and the things that compliance tech

does, what are some proactive Steps
that credit union can take relative to

fair lending monitoring, for example.

Dana Ginsburg: So it's
a really great question.

So we know this year they've put out a
focus of redlining pricing and marketing.

And the biggest thing that I would
say to the credit unions is that

you've got to know your data.

You need to know.

The types of the types of loans
that you are making and be able

to have monitoring in place.

So whether that's home mortgage Disclosure
Act data, that's always if you are

a Honda reporter, that's always the
first place that I would go in terms of

having an understanding of our lending.

You don't want to not have
something that gives you analytics.

Um, and so that's always
the starting point.

But the additional point is to be
able to review the different types

of loan segments that you have and
make sure that you have a sufficient

monitoring in place, whether that's.

For mortgage lending, consumer lending,
auto lending, and auto lending has

been called out by the NCOA as part
of their supervisory highlights.

So if you are doing auto lending, if you
have relationship with, with dealers and

you allow dealer markup, those are all
things that you want to take into account.

To be proactive in your monitoring.

Treichel: That's a great point.

And so you mentioned hum to data and
you reminding me of a conversation I had

with the credit union recently that had
gone through a fair lending examination.

And so N.

C.

U.

A.

As part of.

I'm going to get this mostly correct
as part of how they determine

who they're going to look at.

They'll do a random sample and pick
some credit unions randomly, but they

also look at the HMDA data and they,
they, they, for outliers and you know,

whether that's statistically, you know,
your X number of standard deviations

away for this particular category,
or this data looks a little bit.

Different than other credit
unions or is alarming.

They will look at the actual data.

And in this instance, what triggered that
credit union from getting a visit from N.

C.

way was that they had, um, recorded, uh,
incomplete applications were recorded

as withdrawals of the application,
which was technically not correct.

But the number.

Um, looked weird when it was categorized
as that and that led to NCUA coming for

a visit at which, which led to in the
end, a visit is not a bad thing because

it can lead to you serving your members
better, but it led through an intense

period, um, where that one action.

Uh, had led to a review that
then, you know, when they show

up, they don't just look at that.

They look at everything, uh,
as part of the fair landing.

So, um, any thoughts relative to that
comment before I ask you a couple

of follow ups on the auto landing?

Well,

Dana Ginsburg: that specific topic in
terms of the HMDA data being the entry

point and sort of the most important
thing to have a handle on, um, we

have seen that be the focus, right?

High withdrawn rates, high.

Just, uh, just, you know, denial rates.

Um, also when there is missing
government monitoring information.

Uh, so, you know, the race, the gender,
um, things like that, that are missing.

So anything that is going to throw
your institution into focus, and

there are tools out there that can
help you see if you are an outlier.

And I think NCUA was probably that one
of the first agencies in the past 20 some

odd years with that focus of outliers.

And I remember I wrote
about it a long time ago.

I think you could probably still
find it online, you know, Dana

Ginsburg, credit Union Outliers.

Um, but that's really sort of
sorting through the thou, you know,

the couple thousand credit unions
who are reporting the HAMDA data.

And they sort it in different ways, excuse
me, to be able to see are you an outlier

and you can know that ahead of time.

Um, with HMDA being reporting, you know,
HMDA's due in less than a, about a week,

a week from Friday is the filing deadline.

You want to know what your
2023 HMDA data looks like.

You don't want to wait till
it's publicly available.

So in case you do have coding issues
or you have things that are going

to call attention, you want to have,
you want to know ahead of time so

that you're prepared for potential
questions that might come forward.

Treichel: Makes sense.

Makes sense.

Now.

Pivoting to from, from Hamda to
the auto lending, uh, and you

mentioned relationships with dealers.

Um, that's where things I, when a credit
union makes a loans and, and they, they've

trained their own people and it's someone
down the hall, or it's someone at their

own branch, you know, that creates.

Um, a different set of challenges
as opposed to having a relationship

with, you know, name it, 20 dealers
who are out there, um, making loans

and offering, you know, your credit
union, your someone ability to join

your credit union as an indirect loan.

Uh, any, any thoughts relative
to what you're seeing relative

to that or how a credit union.

Can be proactive in either of
those scenarios, the in house

or the, the indirect type

Dana Ginsburg: of, um, so when it comes
to your auto lending and that portfolio

or that portfolio of business, you want
to make sure you're looking at all of the

policies and procedures wrapped around.

The auto lending that you're doing, and
the biggest risk is going to come from

the question, and it's a yes, no question.

Do you allow dealer markup?

And you immediately eliminate or reduce
your fair lending risk significantly.

If the answer to that
question is We don't, we don't

allow discretionary markup.

Um, if you have discretionary markup
and it is permitted, that's where

the analysis needs to happen where
you need to look and make sure that

there aren't differences in who.

And how large those markups are
across the prohibited bases.

So that's where the monitoring and
if you, if you do allow those dealer

markups, that's where you need to have a.

A program and a plan in place to
monitor to make sure that there isn't

anything popping to the surface in
terms of those dealer relationships.

Treichel: Got it.

Um, you know, as as you're kind of
explaining that I'm thinking about,

you know, the risk ultimately,
uh, potentially is a class action

lawsuit or lawsuits where members
are are saying, Hey, I was wronged.

Um, are are you seeing, um, in that arena?

I'm not sure if this is
anything you can speak to.

Are you seeing me?

More news stories relative to that or
more decisions relative to that, where,

uh, which could be a highlight of,
you know, it's the right thing to do.

But oh, by the way, you, it can cost
you money if you don't do it right.

I think

Dana Ginsburg: years ago, there were
there were some things that 1st landed

this on the radar, like, in the late
90s and things like that early 2000s.

Um, recently, we haven't
seen too many cases.

However, the, the.

Scrutiny is there, and we know
that all of the agencies are

reviewing auto lending data.

Um, so it definitely, it just takes, you
know, 1 sort of complaint, um, 1 sort of.

Decision or, or something
like that to cause issues.

So it's not again, not to cause alarm.

I think that where I'm sitting is I attend
all these conferences all of the time.

I am not a lawyer by background.

I feel like it's very important to
make sure that credit unions have the

information and we sort of simplify down.

Well, what are we being asked to look at?

How can we.

You know, help with telling you what data
points you need to look at and sort of let

folks know that this is, you know, this
is something that you can take on and it

doesn't need to be a huge analytics team.

You don't have to have statisticians
on staff that it's a very doable.

Um, you know, as long as you have a
resource, you can find the tools out

there to make sure that you are just.

Not going to be surprised down the road
when somebody else looks at your data.

Treichel: Sure.

No, that makes sense.

Yeah.

You want to understand it before
someone asks you to see it.

That's a.

, that's for sure.

Mm-Hmm.

. So, so pivoting to, you know,
another, another topic that I see

in the news a a lot recently is,
uh, relative to appraisal bias.

And there was, I believe there was
an F-F-I-E-C guidance that came out

recently relative to, uh, appraisal bias.

Uh, and then also of
course, um, redlining.

Sure.

Uh, are, you know, what are the key
considerations for credit unions

relative to appraisal bias and redlining?

And then, uh, what.

Kind of tools.

Does can you at compliance tech provide
to credit unions or other institutions?

My listeners are credit unions, obviously.

But what what kind of tools out there?

Do you have that can help the
credit unions achieve that?

Sure, that's

Dana Ginsburg: a big question.

A lot of pieces.

So let's talk redlining 1st.

And I think what's really important from
the credit union perspective as that N.

C.

U.

A.

made it very clear in there.

I think that a webinar February 8th,
you can go down, load the slides.

They talked about redlining being
a focus for joining us today.

Community charter credit unions,
as well as credit unions that

have a multiple common bond.

So, if you are a community charter credit
union, or you have a multiple common bond,

you will need to focus on the red lining.

And make sure that you're looking
to see, you know, where you are

lending in your communities.

Who are you lending to and have certain.

Analytics in place to be reviewing
potential redlining issues.

Um, so from that redlining perspective,
and I can talk about some of the,

the tools, but I think it's really
important so that that we kind of

narrow down, you know, who, who is
being held accountable to serve.

their community.

So that's kind of one of
those, uh, caveats there.

Um, so that's important when
we're talking credit unions.

Um, and when it comes to the
appraisal bias issue, there are

some things that you can do to make
sure you're doing a second review.

Now you can't conclusively
know from your HMDA data.

Exactly, if you have
appraisal bias, right?

But there are certain, certain little,
um, insights that you can gleam, uh,

best practices and what we've found.

And we, again, we write about it
on our blog, um, which is on the

compliance tech website, uh, but we
give some hints on how you can use it.

Look at loans, right?

1 way is to back into looking at loans
that were tagged, denied for collateral

and look at those loans that are
in majority minority census tracts.

So, when you have a loan denied the
hundred denial reason for collateral.

And you have them in majority
minority census tracts.

I'm not saying at all that conclusively,
there's an appraisal issue going

on, but that's 1 way to say to your.

And examiner, part of our review is
looking at loans denied for collateral

and majority minority census tracts and
just taking a 2nd, look to make sure that

there wasn't something going on there.

Now, I learned something
learn something, um.

Actually, quite interesting that
in some companies, and this was a

mortgage company that I was talking
to that sometimes the loans don't

even make it to that close denied
status at this particular institution.

They were sharing with me that
sometimes they are finding that the

appraisers may be doing something
to maybe dissuade a full appraisal.

So sometimes the.

Loans are being withdrawn or tagged
incomplete in and so 1 way to back into

it is in the data and to be able to
just say, let's take a sample of loans.

You know, if we know straight up
denied for collateral in the majority

minority census tracks, and maybe
we also add to that a sample of.

Withdrawn and incomplete.

In the majority minority census
tracks, perhaps married with the

appraisal appraiser name again, I'm
not suggesting at all that, you know,

conclusively by looking at the data,
but it's an extra layer of review

because I think lenders are struggling.

Wait, there's this huge
issue of appraisal bias.

We know it's happening.

There is a lot of documentation.

There are all of these subcommittee
hearings on in Washington

DC where I'm very close to.

So it's one, one kind of tip that I can
give to credit unions to add that layer.

Just like you want to add a layer
of reviewing your complaints and

make sure that your complaints
are not fair lending related.

And that's another layer just
to build into your fair lending

program and your review.

Treichel: Interesting, you know, and
as you're walking through that, I, so I

moved around, my family and I with NCUA
moved around the country a lot and, and

when that happened, we'd have to sell the
old, you know, you'd buy the new house,

it'd get appraised and, and you'd sell
the old house and it would get appraised.

And, um, you know, once I
hit a certain level at NCUA.

Uh, NCOA had this program where they
might have to buy the house if I couldn't

sell it, uh, quick enough, right?

And so, in those scenarios, I would,
you'd have to get two appraisals and they

would be, sometimes they'd be real close
and sometimes they would be different.

And you'd wonder, I'd look at them, I knew
it wasn't redlining, but I would say, hey,

why is this one higher and this one lower?

And they had a policy that if
they didn't If they weren't within

10%, the two that you got, you
had to go out and get a third one.

And it was just always, uh,
sometimes it was frustrating.

Sometimes it was fascinating just
to look at that data and what

were the comparables they used.

And a lot of judgment, I guess my point
is a lot of judgment can go into those.

And if you have that layer of
reviewing it, different people.

Use different, there's the rules and then
there's the judgment that they can apply.

And, um, you know, just kind of
thinking out loud, if, if, if you, if

you're reviewing it and you're seeing
that loans in a particular area done

with, done by a particular appraiser
are coming in lower by then loans in

that particular area done by another
appraiser, there's the whole concept of

independence of the appraisers, but, um.

And that's their responsibility.

Uh, and yours, I guess, but ultimately.

You could look at, you know, having in
one area using 5 or 6 different appraisers

or ultimately the, the, the, the, the
pre the pre approved list is something

that I would think you're, you're kind
of saying that's what you'd want to be

looking at and looking at that data to
make sure there aren't any anomalies that

put you or the members in harm's way.

Am I interpreting that right?

I think

Dana Ginsburg: so, I think it's
a, it's within the, the data.

So kind of making it something tangible.

I'm all about practical.

So, instead of having a general, we're
going to do a review of appraisal bias.

Well, what can you practically start with?

And what we've found and my colleagues
and I have found is that the data.

You know, isolating those
applications that are denied.

Or collateral in majority minority census
tracks is a beginning point because if you

have a borrower who is equally or better
qualified and a member of a prohibited

basis group in a majority minority
census track, and they were denied.

And you matched up, right?

You need to then be able to say,
well, why and ask those questions.

And so from the data is a good
starting point to see if you

can isolate that information.

And there are tools out there.

Compliance tech has tools that
help with that type of analysis.

So it's.

Important to to kind of look from
a data data component, because

otherwise it becomes so overwhelming
for credit unions to build out.

What is this monitoring that we're doing?

So we try to give practical guidance as
to how you even begin to implement it.

Um, and the same thing goes for
complaints and complete monitoring, right?

You can go to the CFPB.

They have a complaint database for
every single lender in the country,

and you can type in the lender name
and download the complaints do a quick

pivot table and see what the subject
of the complaints are and start to see.

If you have fair lending
related complaints, and again,

I'm all about the basics.

These things are available online.

So if you don't have a sophisticated
complaint monitoring system,

you can start with something and
examiners are always so receptive

to folks that are being proactive.

They want to partner with you.

They want to help you.

And so those are the types of things
that I share, just because I'm

dealing with lenders all of the time.

Treichel: Sure, sure.

Well, Dana, I think you also, you
offer a free ebook at Compliance Tech.

Is it on this topic or is it, uh,
what does that free ebook, uh, Oh,

Dana Ginsburg: so yeah, so we
have an ebook for credit unions.

It's on our website.

Um, and if you type in the search on
our website and you type in ebook,

um, it's there and it gives fair
lending tips across all different

subjects, um, beyond the ebook, right?

We have a guide on
mitigating fair lending risk.

Um, there's a lot of resources
up there to help you.

Begin the process, you know, we can help
lenders that have a robust fair lending

program and need software analytics.

But if you're also just getting started.

There's a lot of information on our
website as well as well as, you know,

ideas about how to get how to get
started and those resources that you need

Treichel: online.

Excellent.

That's that.

I'm going to, I'm going to download
that myself when we get done here.

Sounds good.

So, um, you know, the,
a lot more, a lot more.

Emphasis on all of these things
in the banking world right now.

Um, it's possibly that that,
you know, there could be an even

further increased emphasis along
the lines of what I, um, said, I

believe Chairman Harper's goals are.

But, you know, moving even further,
1, 2, 3, pick a number of years,

the future of fair lending.

Uh, where do you see that heading?

And based on where you see that heading,
how can credit unions kind of stay ahead

of of where the regulators may be going?

Dana Ginsburg: Um, so I think as the
regulators across all types of lenders.

gain the tools, whether that's internal
or external tools that they use, the

technology is going to allow them to
review so many more lenders than they ever

were able to do, you know, where, when
more than they had previously been able.

So as the technology and the
capabilities increase, right?

So to the lenders need to be able to
have access to the same types of tools.

You can't be doing this Manually
right by the time you are a reporter,

you need to have tools in place
to help you with the analytics.

And so I, you know, in my opinion,
I feel like the good news is, even

though there's more regulatory
scrutiny, there are so many.

Tools and folks out there that are
able to help you do this and that

you're and the tools have gotten.

So good that right again, you
don't need a statistician.

You don't need to necessarily have that.

You know, you can be trained.

There's wonderful fair lending training
out there analytics training, um, so that

the credit unions can have those tools.

So I just think it's so
important to be proactive.

Don't be afraid.

Of the data, there are people like me that
help explain the data all of the time.

Um, so I think that that's the
biggest thing, uh, to make sure your

board, your credit union board is
on board with helping you get the

resources dedicated to fair lending,
whether that's, you know, software

or consulting or a hybrid approach.

Um, I think that that's really important.

Um, and some of that just comes from.

Also board training, making sure your
board is trained on fair lending basics,

not to mean that they are not going to be
trained in fair lending advanced topics,

but really just understanding why it's so
important to do the monitoring and provide

that training to them so that you get the
resources in place for those compliance

folks out there that are listening.

That's

Treichel: great advice.

That's great advice.

Well, Dana, this has been chock full
of a lot of good information for me and

hopefully for the listeners in the credit
union community, uh, that that may be

listening to this, uh, any, any questions
that I did not ask you, uh, that I should

have asked you or any last advice, uh,
for credit unions on all of these topics.

Dana Ginsburg: Um, so my parting advice
again is to make sure you take use of

all of the resources that are online.

I do want to point folks
to our our website.

We have a link to the N.

C.

U.

A.

where they have a checklist for their,
they have a fair lending manual,

let's say, and it has I looked today.

38 question.

Checklist right of what
their examiners are asking.

So use that build your own internal
risk assessment and use those

questions as a, as a launch pad to
see how you answer those questions.

How the examiner may
answer those questions.

And that really gives you a
road map to where you need.

Um, and then if you have questions, uh,
find me on LinkedIn, uh, Dana Ginsberg.

It's you are G.

I.

N.

S.

B.

U.

R.

G.

Uh, find me on LinkedIn.

I'm posting things all of the time.

Fair lending related credit union related.

So I try to put a lot of
great resources out there.

And you can also look, uh, visit
the compliance tech dot com website.

Treichel: Great, great
advice on both those.

I saw recently on LinkedIn, you
just completed a, a, a marathon.

So congratulations on that.

And I do follow you on LinkedIn
and you do have a lot of great

information you put up there.

Dana Ginsburg: I appreciate
it very much, Mark.

for having me and until next time.

Treichel: Yes, indeed.

Dana, thanks for being on and listeners.

I want to thank you for listening.

I hope you'll listen again soon.

This is Mark Treichel signing
off with flying colors.