Second line fair lending monitoring is crucial to any institution’s ability to understand, measure, and mitigate their applicable risks. Developing a monitoring program that uniformly reports on performance relative to fair lending across different product types and institutional business lines allows institutions to proactively mitigate risks and allocate resources appropriately.

The bank sought Asurity’s fair lending experience and expertise for developing KRIs and KPIs to serve as the backbone of the fair lending monitoring program. Asurity reviewed the bank’s HMDA Loan Application Register (LAR) and identified certain trends that would inform the development of KRIs and KPIs for HMDA-reportable loans. Asurity also reviewed similar information about each lending product offered by the bank and the different channels through which they were offered.

Asurity developed recommendations surrounding existing KRIs, including standardizing numerical results across different products. For example, in determining KPIs for underwriting results across different products, Asurity assisted the client in developing a uniform scoring system using outputs from regression and non-regression statistical analyses that would benchmark performance. Upon completion of the engagement, Asurity and the bank had collaboratively developed KRIs and KPIs for the following fair lending performance metrics, all of which were segmented by product type and line of business:

● Underwriting denial disparities
● Pricing
● Comparisons of HELOC line amounts
● Redlining
● Steering
● Adverse action reason concentration