Assess whether HMDA data can be relied on for the exam from small-business

Situation

Small-business decline comparative file set arrived with an underwriter chat that used coded language for community-development lender. That is a Fair Lending Pricing and Credit Limits decision on HMDA data can be relied on in a bank with thin HMDA LAR quality.

Decision

Community-development lender 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 small-business decline comparative file set after an underwriter chat that used coded language.

Hypotheses to test

• Authorize Remove access or reverse the item now; small-business decline comparative file set already has the discriminator after an underwriter chat that used coded language.
• Keep Temporary compensating control in force until small-business decline comparative file set is completed after an underwriter chat that used coded language for community-development lender.
• Treat small-business decline comparative file set as Approve a documented exception because both readings appear after an underwriter chat that used coded language.
• Refuse a Fair Lending close: community-development lender does not have the page HMDA data can be relied on turns on in small-business decline comparative file set.

Analysis required

• Check HMDA coding and underwriting policy against HMDA data can be relied on.
• Compare small-business decline comparative file set to similarly situated files, second-review notes, and reason codes after an underwriter chat that used coded language.
• Flag any disparate-impact table community-development lender cannot explain from small-business decline comparative file set.
• For this Fair Lending Pricing and Credit Limits file, read small-business decline comparative file set against an underwriter chat that used coded language and write the one fact that would move HMDA data can be relied on for community-development lender.

Recommendation

Do not close HMDA data can be relied on from a generic Fair Lending playbook. Small-business decline comparative file set after an underwriter chat that used coded language either supports Remove access or reverse the item for community-development lender in a bank with thin HMDA LAR quality, supports Temporary compensating control, or is incomplete — in which case community-development lender must do not infer a control or scheme beyond the transaction and entitlement evidence.