Several years ago, I began a conference presentation by making the statement: “To be successful at fair lending, you must learn how to properly discriminate.” The statement was obviously meant to be provocative, and it must have worked because it was quite some time before I was invited back (just kidding). The statement, however, is […]
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In a previous post, we addressed the importance of customer service as a component of managing fair lending risk. While it is important for an institution to have efficient processes in place to facilitate the lending process, equally important is the recognition that business is relationship.
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Missing data is a common problem in econometric analysis in general and fair lending analysis specifically.
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A formal complaint filed against a financial institution with a regulatory agency often results in some type of inquiry or investigation of the institution in order to resolve the issue. If the nature of the complaint involves a potential violation of fair lending laws, it can often cause a formal fair lending review of the […]
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Fair lending laws and regulations are broad and cover every phase of the lending transaction. This includes the initial inquiry and loan application process through the servicing and ultimate settlement of the debt. Accordingly, there are nearly an infinite range of possible pressure points that a lender may need to evaluate in order to assess […]
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Most financial institutions have rate sheets that provide pricing guidance for various loan products. Loan pricing is often in the form of a matrix in which the appropriate rate is determined by a combination of two or more values.
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Fair lending compliance remains treacherous waters for financial institutions. The advent of Dodd-Frank added a multiplicity of compliance challenges to an already significant regulatory burden. This has left fair lending just one of many issues with which banks must contend, meaning efficiency is an absolute necessity in order to be successful.
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In a whitepaper entitled “BISG Methodology and Its Impact on Regression Analysis,” we study the use of proxy methodologies as applied in regression analysis designed to test for potential discriminatory practices. In that study, we ran a number of simulations to test various aspects of proxy methods including accuracy and examining different ways to quantify […]
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The use of proxy methods in fair lending analysis – and in particular fair lending enforcement actions – has drawn much attention. In an article entitled “BISG Methodology and Its Impact on Regression Analysis,” we studied the use of proxy methodologies as applied in regression analysis designed to test for potential discriminatory practices.
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In determining whether discrimination occurs based on race or ethnicity, particularly with regard to fair lending, it is obviously important to know the race or ethnicity of the applicant(s). However, for some non-mortgage products lenders are not allowed to collect these data. Therefore, one must use proxies for race and ethnicity.
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