Big Picture
The Equal Credit Opportunity Act (ECOA) prohibits discrimination in any aspect of a credit transaction and applies to any extension of credit, including extensions of credit to small businesses, corporations, partnerships, and trusts. The Fair Housing Act (FHA) also prohibits discrimination in all aspects of “residential real estate related transactions.” These fair lending laws create the basis for regulatory expectations that financial institutions treat consumers and customers fairly and equitably. Amongst other things, regulators expect financial institutions and mortgage lenders to regularly analyze their data to identify, measure, and mitigate fair lending risks.
Client Scenario
A multi-state non-bank mortgage lender engaged Asurity Advisors to perform underwriting, pricing, and steering analytics on their annual Home Mortgage Disclosure Act (HMDA) data to identify fair lending risks. The mortgage lender also requested Asurity Advisors propose markets for redlining analysis and perform the analysis on the selected markets. The lender, recognizing the importance of ensuring that personnel are knowledgeable in fair
lending principles and practices, wanted to equip key personnel with the necessary skills to utilize advanced data analytics tools. As part of the engagement, they requested Asurity Advisors conduct knowledge transfer training sessions.
Asurity Solutions
Asurity Advisors leveraged the RiskExec software platform to review and analyze the lender’s loan data at the portfolio, business unit, and underwriting center level. This review encompassed performing redlining/mapping, peer comparisons, and statistical regression analyses on the lender’s HMDA-reportable loans to identify any potential disparities in loan approvals and pricing on a prohibited basis. Following the statistical regression analyses,
Asurity Advisors reviewed the focal points and provided comparative matched pairs to the lender to conduct file reviews. Asurity Advisors also provided training to lender staff, recommended approaches to improve performance, and developed executive reporting to explain the analyses and the risks identified.