Assess whether comparative files show second-review bias (a83710)

Situation

After a branch that stopped taking applications in one ZIP, HMDA LAR validity and quality edits is what model-risk partner for credit scoring can touch in a lender expanding into majority-minority census tracts. Fair Lending will live with Remove access or reverse the item versus Temporary compensating control on this Examination and Notices file.

Decision

Model-risk partner for credit scoring in a lender expanding into majority-minority census tracts must choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold using HMDA LAR validity and quality edits after a branch that stopped taking applications in one ZIP.

Hypotheses to test

• A branch that stopped taking applications in one ZIP is noise around an already-controlled Examination and Notices process in a lender expanding into majority-minority census tracts, given HMDA LAR validity and quality edits.
• A branch that stopped taking applications in one ZIP is the event in HMDA LAR validity and quality edits that forces Remove access or reverse the item for model-risk partner for credit scoring under Fair Lending.
• HMDA LAR validity and quality edits shows a one-file miss after a branch that stopped taking applications in one ZIP, not a Examination and Notices program failure.
• HMDA LAR validity and quality edits cannot decide comparative files show second-review yet after a branch that stopped taking applications in one ZIP; hold is the only Fair Lending close a lender expanding into majority-minority census tracts can defend.

Analysis required

• Check HMDA coding and underwriting policy against comparative files show second-review.
• Compare HMDA LAR validity and quality edits to similarly situated files, second-review notes, and reason codes after a branch that stopped taking applications in one ZIP.
• Flag any disparate-impact table model-risk partner for credit scoring cannot explain from HMDA LAR validity and quality edits.
• For this Fair Lending Examination and Notices file, read HMDA LAR validity and quality edits against a branch that stopped taking applications in one ZIP and write the one fact that would move comparative files show second-review for model-risk partner for credit scoring.

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