Fair Lending Refocused: Loan Modification and Loss Mitigation Outcome Reviews


Mortgage loan servicers are under growing pressure from regulators to adhere to traditional fair lending principles in default servicing operations. Among other things, regulators have suggested that servicers proactively identify and undertake measures to en-sure “fair servicing” for all borrowers, particularly where loan modifications are concerned. While examination custom, regulatory guidance, and the Interagency Fair Lending Examination Procedures implemented in the origination context may serve as guideposts, servicers lack clear standards for conducting fair servicing reviews.

This article by Jonice Gray Tucker and Valerie Hletko provides a brief background on the regulatory climate for fair lending compliance in the context of loss mitigation and loan modifications. For servicers whose regulators have suggested or mandated self-testing, the authors discuss a matched-pair “plus” approach, which aims to assess at a basic level whether similarly-situated borrowers are treated equally to address regulatory concerns, while the industry awaits more specific regulatory guidance.

This article was originally published as a Lexis Nexis Emerging Issues Analysis (2011 Emerging Issues 5908), September 2011.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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