Assess whether HMDA data can be relied on for the exam (bd1b9a)

Situation

HMDA LAR validity and quality edits arrived with a SPCP that originated almost no loans to the intended class for adverse-action notice operations lead. That is a Fair Lending Examination and Notices decision on HMDA data can be relied on in a credit-card issuer changing line-assignment logic.

Decision

Adverse-action notice operations lead in a credit-card issuer changing line-assignment logic 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 SPCP that originated almost no loans to the intended class.

Hypotheses to test

• A SPCP that originated almost no loans to the intended class is noise around an already-controlled Examination and Notices process in a credit-card issuer changing line-assignment logic, given HMDA LAR validity and quality edits.
• A SPCP that originated almost no loans to the intended class is the event in HMDA LAR validity and quality edits that forces Remove access or reverse the item for adverse-action notice operations lead under Fair Lending.
• HMDA LAR validity and quality edits shows a one-file miss after a SPCP that originated almost no loans to the intended class, not a Examination and Notices program failure.
• HMDA LAR validity and quality edits cannot decide HMDA data can be relied on yet after a SPCP that originated almost no loans to the intended class; hold is the only Fair Lending close a credit-card issuer changing line-assignment logic can defend.

Analysis required

• Compare HMDA LAR validity and quality edits to similarly situated files, second-review notes, and reason codes after a SPCP that originated almost no loans to the intended class.
• Flag any disparate-impact table adverse-action notice operations lead cannot explain from HMDA LAR validity and quality edits.
• Test a documented exception versus a pattern a credit-card issuer changing line-assignment logic must defend.
• For this Fair Lending Examination and Notices file, read HMDA LAR validity and quality edits against a SPCP that originated almost no loans to the intended class and write the one fact that would move HMDA data can be relied on for adverse-action notice operations lead.

Recommendation