Assess whether a model update needs a fair-lending revalidation (664533)

Situation

Second-review underwriter owns a model update needs inside a credit union rolling out a special-purpose credit program with CRA assessment-area versus lending footprint as the only packet. A notice that cites 'other' as the principal reason 40% of the time is what changed the clock for this Fair Lending Examination and Notices file.

Decision

Second-review underwriter in a credit union rolling out a special-purpose credit program must choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold using CRA assessment-area versus lending footprint after a notice that cites 'other' as the principal reason 40% of the time.

Hypotheses to test

• Second-review underwriter can defend Remove access or reverse the item from CRA assessment-area versus lending footprint after a notice that cites 'other' as the principal reason 40% of the time in a Fair Lending challenge.
• Second-review underwriter cannot defend Remove access or reverse the item from CRA assessment-area versus lending footprint; Temporary compensating control is what the extract actually supports after a notice that cites 'other' as the principal reason 40% of the time.
• A notice that cites 'other' as the principal reason 40% of the time never reached the population in CRA assessment-area versus lending footprint — reopen intake, do not close a model update needs.
• Two facts in CRA assessment-area versus lending footprint after a notice that cites 'other' as the principal reason 40% of the time conflict for second-review underwriter; hold this Examination and Notices file.

Analysis required

• Check HMDA coding and underwriting policy against a model update needs.
• Compare CRA assessment-area versus lending footprint to similarly situated files, second-review notes, and reason codes after a notice that cites 'other' as the principal reason 40% of the time.
• Flag any disparate-impact table second-review underwriter cannot explain from CRA assessment-area versus lending footprint.
• For this Fair Lending Examination and Notices file, read CRA assessment-area versus lending footprint against a notice that cites 'other' as the principal reason 40% of the time and write the one fact that would move a model update needs for second-review underwriter.

Recommendation