During a recent compliance examination, regulatory examiners found that the bank was not conducting flood hazard area determinations before closing on construction loans. The compliance professional has reviewed the files and agreed with the examiners' finding. What should be done FIRST?
The first step is to review the bank's flood policies and procedures to determine where the compliance failure occurred. Understanding the root cause of the issue is essential in order to address it effectively and prevent future occurrences. Once the policies and procedures are reviewed and the reason for the compliance failure is identified, appropriate corrective actions can be taken.
Before taking any further action, it's important to understand why the compliance failure occurred. Reviewing the bank's flood policies and procedures will help identify any gaps or deficiencies that led to the failure to conduct flood hazard area determinations for construction loans. This initial step is essential for addressing the root cause of the compliance issue and developing an effective plan to remedy it. Once the cause is identified, appropriate actions such as conducting a risk assessment, preparing an analysis for bank management, or reviewing loan files can be undertaken as necessary.