Assess whether HMDA data can be relied on for the exam after a HMDA

Situation

A credit union rolling out a special-purpose credit program cannot treat a HMDA resubmission that still fails quality edits as color commentary on appraisal-gap outcomes in majority-minority tracts. Model-risk partner for credit scoring must close HMDA data can be relied on from that extract under Fair Lending / Redlining and HMDA Data.

Decision

Model-risk partner for credit scoring in a credit union rolling out a special-purpose credit program must choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold using appraisal-gap outcomes in majority-minority tracts after a HMDA resubmission that still fails quality edits.

Hypotheses to test

• Model-risk partner for credit scoring can defend Remove access or reverse the item from appraisal-gap outcomes in majority-minority tracts after a HMDA resubmission that still fails quality edits in a Fair Lending challenge.
• Model-risk partner for credit scoring cannot defend Remove access or reverse the item from appraisal-gap outcomes in majority-minority tracts; Temporary compensating control is what the extract actually supports after a HMDA resubmission that still fails quality edits.
• A HMDA resubmission that still fails quality edits never reached the population in appraisal-gap outcomes in majority-minority tracts — reopen intake, do not close HMDA data can be relied on.
• Two facts in appraisal-gap outcomes in majority-minority tracts after a HMDA resubmission that still fails quality edits conflict for model-risk partner for credit scoring; hold this Redlining and HMDA Data file.

Analysis required

• Test a documented exception versus a pattern a credit union rolling out a special-purpose credit program must defend.
• Match the adverse-action language to the facts in appraisal-gap outcomes in majority-minority tracts.
• Check HMDA coding and underwriting policy against HMDA data can be relied on.
• For this Fair Lending Redlining and HMDA Data file, read appraisal-gap outcomes in majority-minority tracts against a HMDA resubmission that still fails quality edits and write the one fact that would move HMDA data can be relied on for model-risk partner for credit scoring.

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 (appraisal-gap outcomes in majority-minority tracts after a HMDA resubmission that still fails quality edits). The follow-on Redlining and HMDA Data action is what model-risk partner for credit scoring does next: implement the option, assign an owner, and log the missing fact.