Assess whether a model update needs a fair-lending revalidation (610d06)

Situation

A notice that cites 'other' as the principal reason 40% of the time put HMDA LAR validity and quality edits in front of second-review underwriter in a lender expanding into majority-minority census tracts. This Fair Lending / CRA and Special-Purpose Programs close is a model update needs from HMDA LAR validity and quality edits, and the live options are Remove access or reverse the item, Temporary compensating control, Approve a documented exception.

Decision

Second-review underwriter 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 HMDA LAR validity and quality edits after a notice that cites 'other' as the principal reason 40% of the time.

Hypotheses to test

• Authorize Remove access or reverse the item now; HMDA LAR validity and quality edits already has the discriminator after a notice that cites 'other' as the principal reason 40% of the time.
• Keep Temporary compensating control in force until HMDA LAR validity and quality edits is completed after a notice that cites 'other' as the principal reason 40% of the time for second-review underwriter.
• Treat HMDA LAR validity and quality edits as Approve a documented exception because both readings appear after a notice that cites 'other' as the principal reason 40% of the time.
• Refuse a Fair Lending close: second-review underwriter does not have the page a model update needs turns on in HMDA LAR validity and quality edits.

Analysis required

• Flag any disparate-impact table second-review underwriter cannot explain from HMDA LAR validity and quality edits.
• 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 HMDA LAR validity and quality edits.
• For this Fair Lending CRA and Special-Purpose Programs file, read HMDA LAR validity and quality edits against a notice that cites 'other' as the principal reason 40% of the time 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 / CRA and Special-Purpose Programs packet (HMDA LAR validity and quality edits after a notice that cites 'other' as the principal reason 40% of the time). If HMDA LAR validity and quality edits cannot force a Fair Lending label under CRA and Special-Purpose Programs, stop. If HMDA LAR validity and quality edits after a notice that cites 'other' as the principal reason 40% of the time cannot support Remove access or reverse the item versus Temporary compensating control on this Fair Lending CRA and Special-Purpose Programs close, second-review underwriter must do not infer a control or scheme beyond the transaction and entitlement evidence.