Exceptions to loan policy are not wrong but they do need to be monitored and controlled. The way in which that is accomplished varies from institution to institution and there is no right or wrong method. One important step that many institutions overlook is reporting this information to the Board. While your Board doesn’t need to review every exception that happens, they do need to have a general understanding of what exceptions are occurring, if there are any trends, whether the exceptions do or do not pose any fair lending risk, if they can be attributed to certain loan officers, etc. We generally recommend that institutions keep some sort of spreadsheet with all the “details” related to the exceptions (just in case the Board wants to take a closer look) but, a higher-level summary outlining the types of things already mentioned and other key points the Board should be made aware of will likely be of most importance. Ultimately, the information being reported to the Board should add value, help them assess the risks and make appropriate decisions. Remember, your Board cannot manage what it doesn’t know.
Published 2026/09/20
