Assess whether a redlining pattern exists after controls (c509f3)

Situation

An institution preparing for a redlining exam cannot treat a SPCP that originated almost no loans to the intended class as color commentary on adverse-action notice principal-reason sample. Community-development lender must close a redlining pattern exists from that extract under Fair Lending / CRA and Special-Purpose Programs.

Decision

Community-development lender in an institution preparing for a redlining exam must choose Remove access or reverse the item / Temporary compensating control / Approve a documented exception / Hold using adverse-action notice principal-reason sample after a SPCP that originated almost no loans to the intended class.

Hypotheses to test

• Community-development lender can defend Remove access or reverse the item from adverse-action notice principal-reason sample after a SPCP that originated almost no loans to the intended class in a Fair Lending challenge.
• Community-development lender cannot defend Remove access or reverse the item from adverse-action notice principal-reason sample; Temporary compensating control is what the extract actually supports after a SPCP that originated almost no loans to the intended class.
• A SPCP that originated almost no loans to the intended class never reached the population in adverse-action notice principal-reason sample — reopen intake, do not close a redlining pattern exists.
• Two facts in adverse-action notice principal-reason sample after a SPCP that originated almost no loans to the intended class conflict for community-development lender; hold this CRA and Special-Purpose Programs file.

Analysis required

• Match the adverse-action language to the facts in adverse-action notice principal-reason sample.
• Check HMDA coding and underwriting policy against a redlining pattern exists.
• Compare adverse-action notice principal-reason sample to similarly situated files, second-review notes, and reason codes after a SPCP that originated almost no loans to the intended class.
• For this Fair Lending CRA and Special-Purpose Programs file, read adverse-action notice principal-reason sample against a SPCP that originated almost no loans to the intended class and write the one fact that would move a redlining pattern exists for community-development lender.

Recommendation