Assess whether a model update needs a fair-lending revalidation (b8789c)

Situation

An exception rate twice as high for one group after credit controls put CRA assessment-area versus lending footprint in front of model-risk partner for credit scoring in a lender expanding into majority-minority census tracts. This Fair Lending / Examination and Notices close is a model update needs from CRA assessment-area versus lending footprint, and the live options are Remove access or reverse the item, Temporary compensating control, Approve a documented exception.

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 CRA assessment-area versus lending footprint after an exception rate twice as high for one group after credit controls.

Hypotheses to test

• An exception rate twice as high for one group after credit controls is noise around an already-controlled Examination and Notices process in a lender expanding into majority-minority census tracts, given CRA assessment-area versus lending footprint.
• An exception rate twice as high for one group after credit controls is the event in CRA assessment-area versus lending footprint that forces Remove access or reverse the item for model-risk partner for credit scoring under Fair Lending.
• CRA assessment-area versus lending footprint shows a one-file miss after an exception rate twice as high for one group after credit controls, not a Examination and Notices program failure.
• CRA assessment-area versus lending footprint cannot decide a model update needs yet after an exception rate twice as high for one group after credit controls; hold is the only Fair Lending close a lender expanding into majority-minority census tracts can defend.

Analysis required

• Flag any disparate-impact table model-risk partner for credit scoring cannot explain from CRA assessment-area versus lending footprint.
• Test a documented exception versus a pattern a lender expanding into majority-minority census tracts must defend.
• Match the adverse-action language to the facts in CRA assessment-area versus lending footprint.
• For this Fair Lending Examination and Notices file, read CRA assessment-area versus lending footprint against an exception rate twice as high for one group after credit controls and write the one fact that would move a model update needs for model-risk partner for credit scoring.