Assess whether HMDA data can be relied on for the exam (dce269)

Situation

After a marketing mailer that skipped majority-minority tracts, appraisal-gap outcomes in majority-minority tracts is what fair-lending officer can touch in a bank with thin HMDA LAR quality. Fair Lending will live with Remove access or reverse the item versus Temporary compensating control on this 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 appraisal-gap outcomes in majority-minority tracts after a marketing mailer that skipped majority-minority tracts.

Hypotheses to test

• A marketing mailer that skipped majority-minority tracts is noise around an already-controlled CRA and Special-Purpose Programs process in a bank with thin HMDA LAR quality, given appraisal-gap outcomes in majority-minority tracts.
• A marketing mailer that skipped majority-minority tracts is the event in appraisal-gap outcomes in majority-minority tracts that forces Remove access or reverse the item for fair-lending officer under Fair Lending.
• Appraisal-gap outcomes in majority-minority tracts shows a one-file miss after a marketing mailer that skipped majority-minority tracts, not a CRA and Special-Purpose Programs program failure.
• Appraisal-gap outcomes in majority-minority tracts cannot decide HMDA data can be relied on yet after a marketing mailer that skipped majority-minority tracts; hold is the only Fair Lending close a bank with thin HMDA LAR quality can defend.

Analysis required

• Check HMDA coding and underwriting policy against HMDA data can be relied on.
• Compare appraisal-gap outcomes in majority-minority tracts to similarly situated files, second-review notes, and reason codes after a marketing mailer that skipped majority-minority tracts.
• Flag any disparate-impact table fair-lending officer cannot explain from appraisal-gap outcomes in majority-minority tracts.
• For this Fair Lending CRA and Special-Purpose Programs file, read appraisal-gap outcomes in majority-minority tracts against a marketing mailer that skipped majority-minority tracts and write the one fact that would move HMDA data can be relied on for fair-lending officer.

Recommendation