AUDITING & ASSESSMENT
Fair Lending
The Fair Lending assessment includes observation, interviews, and reviews of transaction files, including a comparative file analysis of originated loans, denied applications, and withdrawn/approved not accepted applications. The file analysis focuses on variances in underwriting criteria, pricing, and overall treatment of applicants as they move through the application process. The purpose of our assessment is to evaluate the Client’s compliance with the Fair Housing Act (FH Act), Equal Credit Opportunity Act (ECOA) with the CFPB’s Regulation B. Areas of review include:
- Comparative file review to include three sections: pricing comparison of originated target group loans to originated control group loans, adverse action of target group applications compared to originated loans of control group borrowers, and fall-out patterns of target group borrowers.
- Sampling of appraisals to determine they are free from obvious signs of appraisal bias.
- The client’s secondary review process for denied applications.
- Sampling of all loan application forms used by lender for various loan products for adherence to Regulation B.
- Sufficiency of Fair Lending training and documentation of training provided to staff and Board members.
- Marketing plans and marketing materials to assess whether lenders outreach strategies are disproportionately excluding majority minority area census tracts.
- Advertisement copies to identify if there are potential Fair Lending issues related to products, markets, or sectors.
- Branch lobby and website for prominent display of ECOA and FH Act disclosures.
- Complaint log to determine if there were any consumer complaints alleging discrimination.
- File exception logs to help identify potential discriminatory practices and/or fair lending violations.
- MLO territory assignment and written MLO compensation plans to determine if compensation structures have the potential to contribute to fair lending concerns.
- Special Purpose Credit Programs established by lender for adherence to regulatory guidance.
**This assessment is not intended as a self-test for streamlining purposes.**