Fair Lending, the Sequel
Last month Accume addressed the Fair Lending – HMDA conundrum regarding data collection. As a follow up, we thought it would be a great idea to focus on the overall fair lending program itself. In light of recent examination findings at financial institutions, it is obvious that fair lending will remain a hot topic into 2021 and beyond…
What are the Elements of a Fair Lending Program?
According to regulatory guidance, a strong fair lending program is comprised of the following elements:
- Fair Lending Risk Assessment. The Fair Lending Risk Assessment identifies specific areas of risk to the financial institution, the adequacy of controls to mitigate that risk, and resultant residual risk. Based on the results of the Fair Lending Risk Assessment, the financial institution can implement a plan to address high risk areas and further mitigate moderate risk. At the very least, the fair lending risk assessment should speak to:
- The CRA Assessment area and the Institution’s market area;
- Branch and Loan Production offices and strategies;
- Patterns of HMDA mortgage applications and originations in the CRA assessment area and/or credit market area for at least a 3-year period; and,
- Strategies for marketing and outreach.