Whether comparative files show second-review bias from underwriting exception

Situation

HMDA data-quality manager in a lender expanding into majority-minority census tracts has one working extract — underwriting exception log by branch — after a notice that cites 'other' as the principal reason 40% of the time. If underwriting exception log by branch cannot support comparative files show second-review, the honest Fair Lending output is hold.

Decision

HMDA data-quality manager 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 underwriting exception log by branch after a notice that cites 'other' as the principal reason 40% of the time.

Hypotheses to test

• HMDA data-quality manager can defend Remove access or reverse the item from underwriting exception log by branch after a notice that cites 'other' as the principal reason 40% of the time in a Fair Lending challenge.
• HMDA data-quality manager cannot defend Remove access or reverse the item from underwriting exception log by branch; Temporary compensating control is what the extract actually supports after a notice that cites 'other' as the principal reason 40% of the time.
• A notice that cites 'other' as the principal reason 40% of the time never reached the population in underwriting exception log by branch — reopen intake, do not close comparative files show second-review.
• Two facts in underwriting exception log by branch after a notice that cites 'other' as the principal reason 40% of the time conflict for HMDA data-quality manager; hold this Pricing and Credit Limits file.

Analysis required

• 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 underwriting exception log by branch.
• Check HMDA coding and underwriting policy against comparative files show second-review.
• For this Fair Lending Pricing and Credit Limits file, read underwriting exception log by branch against a notice that cites 'other' as the principal reason 40% of the time and write the one fact that would move comparative files show second-review for HMDA data-quality manager.

Recommendation

Choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold on this Fair Lending / Pricing and Credit Limits packet (underwriting exception log by branch after a notice that cites 'other' as the principal reason 40% of the time). The follow-on Pricing and Credit Limits action is what HMDA data-quality manager does next: implement the option, assign an owner, and log the missing fact.