FAIR LENDING PROGRAM
[Bank] Corporation and its subsidiaries and affiliates, which includes [Bank], N. A.
(“Bank”), is committed to meeting the credit needs of the entire community in which it
does business. The Bank recognizes its responsibility for ensuring the members of the
communities it serves receive equal access to credit products and services and to respond
to all persons in the credit process without regard to any prohibited bases as listed in the
stated commitment to fair lending. (See Credit Policy §xxx)
In support of the Bank’s commitments, [Risk Management] - Compliance has established
a Fair Lending Program, described below, that is facilitated by a Fair Lending Manager
who monitors fair lending performance and efforts on a company wide basis.
[Bank] will not tolerate illegal discrimination by any of its officers, employees, or agents
against any current or potential credit customer / applicant. Discrimination is not only
overt mistreatment of applicants, but also extends to more subtle forms of unequal
treatment, including giving higher quality of assistance only to applicants who are not
members of a protected class. No one may discriminate against any applicant on any
The Bank is committed to assuring that policies and practices do not have an adverse
effect on applicants on a prohibited basis. Such a result is not only unfair to the
applicants involved, but deprives the Bank of valuable business it might otherwise obtain.
In order to assure that no standards and / or practices may have an unintentional
discriminatory effect, the Fair Lending Manager reviews proposed new and revised
lending-related policies and procedures. Any standards or practices questioned in such a
review are subject to scrutiny to assure they are needed, are reasonable and that there is
not an alternative with less adverse effect.
Prevention and Detection
The Bank strives to both prevent illegal discrimination from happening and attempts to
detect any possible occurrences. It utilizes a three-pronged strategy: training for all
applicable employees, a self-assessment mechanism and a second review program.
Annually, all applicable employees will be provided with training appropriate to
their job responsibilities in fair lending issues. This will include information
regarding both technical requirements, as well as more substantive and often
subtle issues relating to unintentional discrimination and quality of assistance.
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The fair lending self-assessment process includes traditional monitoring and audit
processes. A detailed description of the process is stated below.
3. Second Review
For all residential loans, a second review program exists to take a second look at
all applications that are slated for denial by the underwriter. The second review
will be conducted by the department’s underwriting manager who has no
involvement with the original application and underlying transaction. The
purpose of the second review will not be to conclude if a denial is justified, but to
determine if there is some way that the credit can be made.
For all other types of consumer loans as well as for small business credits, the
origination process is backroom (i.e., there is no face-to-face interaction with the
applicants), primarily automated and high volume. Thus, it was determined that a
second review would not add value to the process.
Board of Directors
The board of directors formally adopted a commitment to fair lending.
Additionally, the board remains informed of fair lending performance through
periodic evaluation of internal and agency examination reports. The board holds
all appropriate employees accountable for the Bank’s fair lending performance.
The Chief Compliance Officer and other senior managers assure that an
appropriate fair lending program is established to comply with stated
commitments. Senior management will also assure that a positive fair lending
culture exists in our organization, as set by their example and behavior. Senior
management holds all appropriate employees accountable for fair lending
Fair Lending Manager
The member of [Risk Management]–Compliance’s Bank Compliance Team
assigned responsibility for Regulation B, Fair Housing, and back up support for
HMDA and CRA is designated as the Fair Lending Manager. In addition to
maintaining expertise for those assigned regulations in accordance with [Risk
Management]-Compliance policies, the Fair Lending Manager is also responsible
for monitoring the Bank’s fair lending performance company wide. The Fair
Lending Manager regularly reports to the Chief Compliance Officer regarding fair
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lending performance, who in turn reports any irregularities in that performance to
The Fair Lending Manager will assure technical compliance requirements of the
fair lending laws and regulations are met, including:
Applications / Monitoring Information – Credit applications will
request only allowable information. In addition, required government
monitoring information will be collected for applicants seeking to
finance / refinance the purchase of a dwelling that is, or will be, the
applicant’s primary residence and is secured by the dwelling.
Proper Notification – Applicants for credit must be notified of the
action taken within 30 calendar days from receiving their completed
applications. Consumer and small business (under $1M in revenues)
applicants must be notified in writing, as must large businesses if they
Any written notice of adverse action (denial or counteroffer) must
include the required information as proscribed by Regulation B and the
FCRA. Any written notice of incompleteness must also include the
required statements specifying by Regulation B.
Lobby Notice – The current Equal Housing Lender poster will be
posted prominently in all offices as required.
The Fair Lending Manager is also responsible for assuring the appropriate level of
compliance management is met by:
Ensuring fair lending training is made available annually to all
applicable employees to assure compliance with the Bank’s
commitment and the underlying laws and regulations. This training
may be in the form of classroom and / or assigned reading material.
Analyzing new and modified products, underwriting standards,
marketing strategies, pricing guidelines, exception policies and other
credit procedures relating to creditworthiness for potential disparate
impact on a protected class and overall assurance of compliance with
fair lending. This may include participation on task forces as
necessary to provide upfront feedback, responding to employee
questions and reviewing policies and procedures.
Ensuring credit advertisements, lobby notices, brochures, signs and
other promotional material are reviewed by the compliance officer
assigned responsibility for marketing reviews to assure their
compliance with fair lending.
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Reviewing credit scoring reports to ensure exceptions remain at an
acceptable level and are in accordance with the Bank’s exception
Scrutinizing HMDA reports to determine whether denial rates for
minorities are at an acceptable level. If levels are found to be
unacceptable, the Fair Lending Manager will ask Compliance to
initiate a self-assessment of questionable areas.
Giving consideration to the need for [Risk Management]-Compliance
to conduct fair lending self-assessment measures within integrated
evaluations and / or initiate self-assessment measures in high risk
areas, as well as participate in / oversee the integrated evaluations, as
needed. (See Self-Assessment / Comparative File Review, below).
Regularly reviewing complaints received for any indication of
problems that could lead to examiner criticism of, or civil liability for,
the Bank’s fair lending performance. Recommendations are made to
management for actions to address any significant complaints.
All employees are expected to cooperate with and support fair lending compliance
efforts. Staff will be held accountable for any lack of cooperation that weakens
fair lending performance, as reflected in internal evaluations, agency examinations
and / or consumer complaints.
Self-Assessment Process/Comparative File Review
When the Fair Lending Manager determines the need for conducting comparative file
review analyses, the procedure will follow the OCC guidelines. In summary, the
following steps will be taken:
1. Initial scoping is considered by determining:
a. Products Offered: By business unit / type of underwriting involved
b. Decision Making: Centralized or not?
2. Determination of which of the following risk factors are legitimate possibilities to
assist determination of appropriate focal points. For example, because Corporate
Compliance reviews all applicable policies and marketing to ensure no overt
discrimination is present, those factors can be eliminated.
O1: Including explicit prohibited basis identifiers in underwriting criteria or
O2: Collecting information, conducting inquiries, or imposing conditions
contrary to express requirements of Regulation B.
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O3: Including variables in a credit scoring system that constitute a basis or factor
prohibited by Regulation B or, FHA.
O4: Statements made by the institution’s officers, employees, or agents which
constitute an express or implicit indication that one of more such persons have
engaged or do engage in discrimination on a prohibited basis in any aspect of a
O5: Employee or institutional statements that evidence attitudes based on
prohibited basis prejudices or stereotypes.
U1: Substantial disparities among the approval/denial rates for applicants by
monitored prohibited basis characteristic (especially within income categories).
U2: Substantial disparities among the application processing times for applicants
by monitored prohibited basis characteristic (especially within denial reason
U3: Substantially higher proportion of withdrawn / incomplete applications from
prohibited basis group applicants than from other applicants.
U4: Vague or unduly subjective underwriting criteria.
U5: Lack of clear guidance on making exceptions to underwriting criteria,
including credit scoring overrides.
U6: Lack of clear loan file documentation regarding reasons for any exceptions to
normal underwriting standards, including credit scoring overrides.
U7: Relatively high percentages of either exceptions to underwriting criteria or
overrides of credit score cutoffs.
U8: Loan officer or broker compensation based on loan volume (especially loans
approved per period of time).
U9: Consumer complaints alleging discrimination in loan processing or in
approving / denying residential loans.
P1: Relationship between loan pricing and compensation of loan officers or
P2: Presence of broad discretion in pricing or other transaction costs.
P3: Use of a system of risk-based pricing that is not empirically based and
P4: Substantial disparities among prices being quoted or charged to applicants
who differ as to their monitored prohibited basis characteristics.
P5: Consumer complaints alleging discrimination in residential loan pricing.
R1: Significant differences, as revealed by HMDA data, in the number of loans
originated in those areas in the lender’s market that have relatively high
concentrations of minority group residents compared with areas with relatively
low concentrations of minority residents.
R2: Significant differences between approval / denial rates for all applicants
(minority and nonminority) in areas with relatively high concentrations of
minority group residents compared with areas with relatively low concentrations
of minority residents.
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R3: Significant differences between denial rates based on insufficient collateral
for applicants from areas with relatively high concentrations of minority residents
and those areas with relatively low concentrations of minority residents.
R4: Other patterns of lending identified during the most recent CRA examination
that differ by the concentration of minority residents
R5: Explicit demarcation of credit product markets that excludes MSAs, political
subdivisions, census tracts, or other geographic areas within the institution’s
lending market and having relatively high concentrations of minority residents
R6: Policies on receipt and processing of applications, pricing, conditions or
appraisals and valuation, or on any other aspect of providing small business credit
that vary between areas with relatively high concentrations of minority residents
and those areas with relatively low concentrations of minority residents
R7: Employee statements that reflect an aversion to doing business in areas with
relatively high concentrations of minority residents.
R8: Complaints or other allegations by consumers or community representatives
that the lender excludes or restricts access to credit for areas with relatively high
concentrations of minority residents.
M1: Advertising patterns or practices that a reasonable person would believe
indicate prohibited basis customers are less desirable.
M2: Advertising only in media serving nonminority areas of the market.
M3: Marketing through brokers or other agents that the lender knows (or has
reason to know) would serve only one racial or ethnic group in the market.
M4: Use of marketing programs or procedures for residential loan products that
exclude one or more regions or geographies within the lender’s assessment or
marketing area that have significantly higher percentages of minority group
residents than does the remainder of the assessment or marketing area.
M5: Using mailing or other distribution lists or other marketing techniques for
pre-screened or other offerings of residential loan products that exclude groups of
borrowers or geographies.
M6: Proportion of monitored prohibited basis applicants is significantly lower
than that group’s representation in the total population of the market area.
M7: Consumer complaints alleging discrimination in advertising or marketing
3. Select loan program(s) to be evaluated based on existence of highest discrimination
possibility as well as the sections within the portfolio containing similar underwriting
criteria, similarity of collateral, etc.
4. Select sample focal minority group(s). Considerations include size of group (is it
statistically significant?) and the plausibility of determining ethnicity and / or gender
of the applicants. Once selected, develop a report that segregates white male
approvals and denials for the focal minority group(s) selected. This selection may
need to be honed by eliminating high approvals and low denials to make it more
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5. Create applicant profile spreadsheet. Determine primary credit criteria based on input
from Credit Exam, the business unit underwriting manager and others familiar with
the process. Prepare evaluation sheets for each sample applicant to ultimately create a
database for review.
6. Review spreadsheet to determine potential matches. Once the information has been
gathered for each selected applicant, establish a Comparative File Review Council to
review the spreadsheet information for determination of possible comparative
matches. Past groups have included the Fair Lending Manager, other Corporate
Compliance employees with knowledge of the business unit’s underwriting standards
and Credit Exam employees. In preparation for the review, create spreadsheets to sort
the data through various criteria (e.g., credit score, debt service ratio, LTV,
bankruptcy, collections, charge offs). Eliminate those applicants with glaring
problems (e.g., debt service ratios exceeding anything seen in the approvals,
unverifiable information, counteroffers that were not accepted). Compare the
remaining denials against the approvals to determine if any compared equally or more
favorably to the benchmarks.
For each potential comparables found, consult the business unit underwriting manager
to determine if an explanation exists. If no comparables exist or if the underwriting
manager can sufficiently explain potential issues, then no fair lending issues exist.
For unexplained comparables, appropriate corrective action must be taken
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Policy Title: Fair Lending Program
Policy Last Revised: (MM/YYYY): December 2002
Institution Asset Size (in Millions): $36 Billion
Primary Federal Regulator: OCC
Geographic Market Scope:
Majority Non-MSA (Primarily rural business footprint),
Majority Single MSA,
Majority Single State,
Multi-MSA (urban concentration),
Web Site Used to Advertise Deposit or Loan Products (but cannot conduct banking transactions
Web Site Used to Conduct Payments or Transactions (but cannot open accounts or make loan
Web Site Used to Conduct banking transactions and Open Accounts or Make Loan
None of the above.
Exam Endorsement: (MM/YYYY of Last Compliance Exam: _________)
Policy not reviewed at last exam,
Policy reviewed at last exam (and no adverse mention made),
Policy received favorable oral or written mention at last exam.
Please note year if policy received favorable mention at exam prior to last exam and has not been criticized
by examiners since then (MM/YYYY of favorable mention: _________)
Submitter’s Suggestions: (ID Caveats or Helpful Hints)1
This document is intended as a program outline rather than specific policy, which is imbedded in
business unit policy rather than carved out to stand alone.
1 Please correct or carry forward relevant suggestions when you submit your adapted policy benchmark.
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