Assess whether pricing disparities are justified by legitimate factors

SITUATION A bank with thin HMDA LAR quality has CRA assessment-area versus lending footprint in hand following a notice that cites 'other' as the principal reason 40% of the time. Fair-lending officer must determine whether pricing disparities are justified by legitimate factors for this Fair Lending CRA and Special-Purpose Programs file.

DECISION Fair-lending officer in a bank with thin HMDA LAR quality 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 1. Fair-lending officer 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. 2. Fair-lending officer 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. 3. 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 pricing disparities are justified. 4. 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 fair-lending officer; hold this CRA and Special-Purpose Programs file.

ANALYSIS REQUIRED 1. 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. 2. Flag any disparate-impact table fair-lending officer cannot explain from CRA assessment-area versus lending footprint. 3. Test a documented exception versus a pattern a bank with thin HMDA LAR quality must defend. 4. For this Fair Lending CRA and Special-Purpose Programs 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 pricing disparities are justified for fair-lending officer.

RECOMMENDATION Choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold on this Fair Lending / CRA and Special-Purpose Programs packet (CRA assessment-area versus lending footprint after a notice that cites 'other' as the principal reason 40% of the time). Lead with the Fair Lending option CRA assessment-area versus lending footprint can support after a notice that cites 'other' as the principal reason 40% of the time, then the two facts that force it, then the Monday action for fair-lending officer in a bank with thin HMDA LAR quality.