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Fair Lending

Making Lending Fair for Everyone

August 21, 2020 | Posted by Guy Weismantel
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3 Minute Read

This article caught my eye instantly yesterday with the headline that “Lenders deny mortgages for Black homeowners at a rate 80 percent higher than whites.” While the article goes on to clarify that number is for refinancing a mortgage vs. a purchase, and there’s ample hard data out there that debunks this statistical rate, that’s hardly any comfort. Even if that number is inflated by half, it’s still higher than for other applicants.

So there’s a problem out there—and while we can’t directly change how people act towards one another, we can help banks and credit unions ensure they’re adhering to HMDA (Home Mortgage Disclosure Act) policies and that their lending practices are fair and ethical to everyone. Here are three practical steps that any financial institution should take today:

  1. Dig into and understand their fair lending risk. Having this information at their fingertips and having the insight to identify and mitigate risk for HMDA and non-HMDA loans saves the company a huge amount of time and effort—and helps them see where and if they have a problem they need to fix.
  1. Identify their risk in key areas of fair lending compliance—places like marketing, underwriting, pricing, steering, redlining, matched pairs, and more. They can do this by comparing their organization’s performance to that of their peers, and then analyzing any disparities so that they know the story of their own data in preparation for their next regulatory exam.
  1. Perform regression analysis to find out how their past performance may incur future risk—which is an essential step for high-volume lenders. They can then examine the factors of their credit and pricing decisions, predict applicant models, compare the model outcome with actual approvals and denials, and then investigate disparities in model predictions and their results.

There are great tools that allow banks, credit unions, and mortgage lenders to do interactive mapping and geocoding to see if they have an area where they’re not adhering to the policies; peer and benchmark analysis to compare themselves to other lenders in their area, and even guided reviews with an analyst to help them see the blind spots and high-risk areas and policies they need to shore up and even change.

These solutions help ensure that everyone has a fair chance when applying for a loan. And with banks, credit unions, and mortgage lenders in fierce competition for new loans today, these companies can set themselves apart and do their part to ensure everyone who qualifies—no matter who they are, can get their business.

Fair lending is a big and important topic these days, for good reason. My colleague Kimberly Boatright recently wrote about the fair lending issue and the Paycheck Protection Program—known to us all by now as PPP—check out those insightful blogs here and here.


Guy Weismantel

Guy Weismantel

As the Executive Vice President of Marketing, Guy has responsibility for the company’s marketing organization, including all brand, communications, digital, demand generation, and product marketing functions. With over 20 years of marketing leadership in companies such as Expedia, Microsoft, and Baxter Healthcare, as well as at fast-growth start-ups such as Marchex, Pushpay, and Zenoti, Guy’s career has focused on bringing differentiated products to market and providing the compelling reason to purchase for customers and prospects alike. Prior to joining Ncontracts, he served as SVP Marketing at Zenoti, the leading provider of SaaS solutions for the beauty and wellness industry. He is a regular blogger, spokesperson, and contributor for publications and thought leadership topics in marketing and technology across the industry. Guy has a Bachelors Degree in Accounting from the University of Notre Dame and a Masters Degree in Business Administration from the Kellogg School of Management at Northwestern University. He is a Certified Public Accountant in the state of Illinois.