Assess whether a model update needs a fair-lending revalidation (d9d3b6)

Situation

A manufactured-housing lender with dealer-originated files cannot treat a vendor score change with no disparate-impact test as color commentary on appraisal-gap outcomes in majority-minority tracts. Exam-response coordinator must close a model update needs from that extract under Fair Lending / CRA and Special-Purpose Programs.

Decision

Exam-response coordinator in a manufactured-housing lender with dealer-originated files must choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold using appraisal-gap outcomes in majority-minority tracts after a vendor score change with no disparate-impact test.

Hypotheses to test

• A vendor score change with no disparate-impact test is noise around an already-controlled CRA and Special-Purpose Programs process in a manufactured-housing lender with dealer-originated files, given appraisal-gap outcomes in majority-minority tracts.
• A vendor score change with no disparate-impact test is the event in appraisal-gap outcomes in majority-minority tracts that forces Remove access or reverse the item for exam-response coordinator under Fair Lending.
• Appraisal-gap outcomes in majority-minority tracts shows a one-file miss after a vendor score change with no disparate-impact test, not a CRA and Special-Purpose Programs program failure.
• Appraisal-gap outcomes in majority-minority tracts cannot decide a model update needs yet after a vendor score change with no disparate-impact test; hold is the only Fair Lending close a manufactured-housing lender with dealer-originated files can defend.

Analysis required

• Match the adverse-action language to the facts in appraisal-gap outcomes in majority-minority tracts.
• Check HMDA coding and underwriting policy against a model update needs.
• Compare appraisal-gap outcomes in majority-minority tracts to similarly situated files, second-review notes, and reason codes after a vendor score change with no disparate-impact test.
• For this Fair Lending CRA and Special-Purpose Programs file, read appraisal-gap outcomes in majority-minority tracts against a vendor score change with no disparate-impact test and write the one fact that would move a model update needs for exam-response coordinator.

Recommendation