When I was in grade school, we received report cards four times a year. It was always a scary event. Bad or good, I had to show my report card to my dad, who would dole out quarters, nickels and dimes to my brother and me based upon our grades in each subject. Getting a Report of Examination from HUD seems like an adult version of report card time, but with significantly higher stakes; HUD, other lenders you do business with, warehouse facilities and a host of others will want to see copies of recent reports.
On the exit interview, before an examiner ever drafts a report, three things can happen. First, an examiner might mention a deficiency that you can clear up right then and it never makes it to the report. Second, an examiner may have deficiencies that you cannot clear up during the exit interview. Those will become the substantive portions of the report. Third, you could have a deficiency so egregious or pervasive that it will make its way to the enforcement division of the agency as soon as the examiner returns to the office. I can’t help you with the third possibility—you need to circle the wagons and bring in the hired guns: outside counsel.
Assuming you’ve provided the information the examiner requested and treated them well while on-site, you will have a good foundation for resolving issues in the report. There is a twist, though: Many times the examiner passes their work papers on to a supervisor who prepares the report.
First, note the due date of the report so you can respond on time and request a time extension if necessary. Next, carefully read each deficiency noted in the report. Are the conclusions correct? You may have to dig back into specific loan files to answer this question. Is it possible that you have a document that will solve the deficiency, but which wasn’t passed on to the examiner?
If you can’t demonstrate that an examiner’s conclusions about a particular issue are incorrect, or that you have additional information that will resolve the matter, then you need to turn your attention to corrective action. It might be a policy change or new procedures for an existing policy, or even training for employees so they properly follow adopted procedures. Whatever the case, carefully spell out what action you’ve taken and why that will prevent similar deficiencies from occurring in the future. Remember, the exercise of examination is about more than just making the government happy. It’s just as much about doing compliant, fair and high-quality business.
When you respond, the examiner will only see what you’ve included in the report. Address each issue in detail and provide sufficient additional documentation to demonstrate to the examiner that they can consider the issue resolved. Finally, make a professional presentation. Sharp-looking cars sell faster for a reason—the exterior sends a message of confidence about the inside.
Following these suggestions won’t solve all of your examination woes, but they will help you do all that you can to resolve any matters raised in regulatory examinations.