Industry Letter

Mortgage Brokers: Fair Lending Examinations

September 13, 2006

TO: The Mortgage Broker Addressed

RE: Fair Lending Examinations

The New York State Banking Department (NYSBD), as part of its ongoing effort to strengthen understanding of and compliance with Executive Law, Article 15, Human Rights, Section 296-a, New York State’s fair lending statute, is providing the guidelines below to assist mortgage brokers in preparing for fair lending examinations. We want to remind mortgage brokers of the Department’s authority to perform examinations of their business for compliance with fair lending and other laws. With adequate preparation on the part of the registrant, the examination can proceed smoothly with a minimum of disruption to regular operations.

Therefore, in order to facilitate the exam process, mortgage brokers are encouraged to perform self-assessments to ensure that books and records are complete and are retained for a time period of at least three years, as required by Part 410 of the Superintendent’s Regulation. Particular attention should be paid to the following points:

  • The central application log should contain the application date, the applicant’s name and address, a unique file identification number, the property address, the source of the application, an itemization of all fees collected and/or distributed, and the final disposition of the application, including the lender with whom the loan was placed and any associated fees received.
  • A separate file should be maintained for each application that includes all documents relating to the credit, underwriting, and pricing decision. Each file should also contain a copy of the HUD-1 settlement statement.
  • The broker should have lending policies relating to loan pricing, including overages, discount points and/or origination points, and yield spread premiums. The exception granting process should also be defined. Pricing matrices and documents reflecting the establishment of credit grades should be retained.

As part of a fair lending review, the Department may request access to some or all of these records under Part 410. To the extent that the broker chooses to maintain these records in electronic format, the examination review will be greatly expedited. Therefore, brokers may want to consider upgrading their document storage systems from paper records into electronic records.

If you should have any questions regarding this communication, we invite your written inquiry and would welcome the opportunity to meet with you to discuss your questions or concerns.

Very truly yours,


Steven F. Kirchgraber
Deputy Superintendent of Banks
Consumer Services Division

cc: Rholda Ricketts, Deputy Superintendent of Banks, Mortgage Banking Division