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It would be a violation to take an individual's mortgage application for a loan secured by an apartment building without gathering this information. Congress enacted HMDA, in part, to collect information to eliminate barriers to fair lending.
You cannot, however, ask questions about race and ethnicity if the applicant is a trust, limited liability company, corporation or partnership. In addition, you cannot collect this data if the proposed collateral is not a residential property.
There are few things more important than keeping clients' personal financial information confidential. Security breaches are everywhere, and you shouldn't be contributing to the problem.
Have you ever dashed into a shop and left your briefcase (with loan files inside) sitting on the seat of your car? Could someone easily steal your laptop from the place where you keep it? The day you have to call clients to explain that their loan files with all of their personal information have been stolen could be your last day on the job.
Also, have you ever given someone information about your applicant over the phone even though you weren't sure to whom you were speaking? Don't fall for telephone scams. Know at all times to whom you are providing confidential personal and financial information.
Never forget that your clients must be able to trust you. That requires that you maintain the highest standards of customer confidentiality.
Fraud and dishonesty
We work under extraordinary pressure, particularly when it comes to closing a loan on time. There are ample opportunities to fudge a bit here or massage some numbers there to get a deal done.
Commercial fraud can involve using straw borrowers with falsified credit and assets. Or brokers might work with crooked title-company officers to borrow money on the same property from more than one lender.
Most of the time, fraudulent behavior is committed by brokers who don't tell the lenders the complete story. They hide a material fact, such as a major property defect or serious issue with the applicant, hoping the lender won't figure it out. Once lenders discover a serious discrepancy -- even if there is a reasonable explanation for the event or issue -- their trust is gone.
And so is the loan.
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The rules in our industry do change from time to time. Local and state broker organizations can be an excellent source of reliable information on the rules and regulations of commercial lending. Chances are the groups in your area offer helpful publications and training. In addition, federal banking regulators such as the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Federal Financial Institutions Examination Council all have Web sites with excellent information.
What is important is that you learn the rules of our industry and follow them. Successful mortgage brokers keep their knowledge up to date and play by the rules.
Fred Hollister and Nathan LaBudde are loan officers at Imperial Capital Bank. They specialize in purchase, refinance (including cash-out) and rehabilitation apartment loans; construction loans; and structured financing for other types of income property.
They bring more than 30 years of combined experience to the art of commercial-property financing. Reach Hollister at fhollister@ImperialCapitalBank.com or (800) 860-0965, ext. 24205 and LaBudde at nlabudde@ImperialCapitalBank.com or (877) 392-2052, ext. 21215.
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