Whether a model update needs a fair-lending revalidation from small-business

Situation

After a SPCP that originated almost no loans to the intended class, small-business decline comparative file set is what second-review underwriter can touch in a small-business desk using a new vendor score. Fair Lending will live with Remove access or reverse the item versus Temporary compensating control on this Redlining and HMDA Data file.

Decision

Second-review underwriter in a small-business desk using a new vendor score must choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold using small-business decline comparative file set after a SPCP that originated almost no loans to the intended class.

Hypotheses to test

• The population in small-business decline comparative file set is the one a SPCP that originated almost no loans to the intended class named, so Remove access or reverse the item follows for this Redlining and HMDA Data file.
• The population in small-business decline comparative file set is adjacent only to a SPCP that originated almost no loans to the intended class; Temporary compensating control is the honest Fair Lending call.
• A small-business desk using a new vendor score already contained a SPCP that originated almost no loans to the intended class before small-business decline comparative file set arrived; no new Redlining and HMDA Data path.
• Provenance on small-business decline comparative file set after a SPCP that originated almost no loans to the intended class is broken; do not pick Remove access or reverse the item or Temporary compensating control yet.

Analysis required

• Test a documented exception versus a pattern a small-business desk using a new vendor score must defend.
• Match the adverse-action language to the facts in small-business decline comparative file set.
• Check HMDA coding and underwriting policy against a model update needs.
• For this Fair Lending Redlining and HMDA Data file, read small-business decline comparative file set against a SPCP that originated almost no loans to the intended class and write the one fact that would move a model update needs for second-review underwriter.

Recommendation

Choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold on this Fair Lending / Redlining and HMDA Data packet (small-business decline comparative file set after a SPCP that originated almost no loans to the intended class). Lead with the Fair Lending option small-business decline comparative file set can support after a SPCP that originated almost no loans to the intended class, then the two facts that force it, then the Monday action for second-review underwriter in a small-business desk using a new vendor score.