All in Fair Lending

ECOA Incomplete Application Notice

Adam Witmer
Regulation B, Fair Lending

An incomplete application can create unique challenges for a financial institution.  For example, many financial institutions have a difficult time just understanding what an incomplete application really is.  To understand what an incomplete application is, we must first understand how Reg B defines a completed application.  Under Regulation B, a completed application is an application in which a creditor...

Fair Lending Risk - Disparate Impact

Adam Witmer
Fair Lending

Disparate impact is when a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis.  In other words, a specific policy of your financial institution can not inadvertently discriminate.  

Fair Lending Risk - Comparative Evidence of Disparate Treatment

Adam Witmer
Fair Lending

Comparative evidence of disparate treatment occurs through an analysis of loan files where the result is that a protected class received less favorable terms than a control group.  When an auditor or examiner is looking for this type of discrimination, they will will conduct a test called a “comparative analysis.”  In simple terms, a comparative analysis is when you compare the “best” denials against the “worst” approvals in an attempt to find overlap.  In other terms, a comparative analysis looks at

Fair Lending Risk - Overt Evidence of Disparate Treatment

Adam Witmer
Fair Lending

Overt evidence of disparate treatment is the first type of discrimination recognized by the courts and probably the easiest one to identify in an organization.  This type of discrimination is defined as when a lender openly discriminates on a prohibited basis.  This means that a lender publicly makes a statement or publishes an advertisement that is a blatant statement of discrimination.  A simple example of this would be if...

Assessing Fair Lending Risk

Adam Witmer
Fair Lending, Compliance Management

Fair lending is one of the hottest topics in regulatory compliance.  As the dust has settled from TRID and the examiners haven’t quite focused their full efforts on the new HMDA rules, fair lending scrutiny is as intense as it ever has been.  In fact, it always has been a hot topic and will always be one.  One trend new trend that I have been seeing, however, is a demand for community banks and credit unions to conduct a fair lending risk assessment.  

Loan Exception Tracking

Adam Witmer
Compliance Management, Fair Lending

Loan exceptions occur any time a loan file does not meet the established standards for a financial institution.  Lenders typically have guidelines they must follow, and when those guidelines are not exactly adhered to, an exception occurs.  There are typically two types of loan exceptions: 1) Policy exceptions and 2) underwriting exceptions.  Policy exceptions occur when...

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