<img src="https://ws.zoominfo.com/pixel/pIUYSip8PKsGpxhxzC1V" width="1" height="1" style="display: none;">

7 Fair Lending Risks You Need to Know Right Now

author Michael Berman
2 min read
Jul 25, 2022

Fair Lending compliance is a hot button issue, making it critically important that your institution has a clear sense of its fair lending risk exposure.

From the Office of the Comptroller of the Currency’s (OCC) supervisory priorities and speeches from officials at the National Credit Union Administration (NCUA) to the Consumer Financial Protection Bureau’s (CFPB) advisory on the Equal Credit Opportunity Act (ECOA) and the Justice Department’s fair lending initiative, all eyes are on fair lending.

While Fair Lending compliance can be complex, having a clearer sense of your risk exposure can make it simpler.

Uncovering fair lending risk to build a stronger fair lending program 
Download Your Free Whitepaper: Fair Lending Risk 

The first thing to remember is that Fair Lending covers every stage of the crediting process — from marketing all the way to servicing.

Second, Fair Lending applies to all loans — not just HMDA loans.

And third, regardless of whether staff is officially responsible for compliance efforts, they are still responsible for supporting Fair Lending efforts and complying with Fair Lending laws and regulations.

Here are the seven primary Fair Lending risks.  

  1. Compliance Management Program Risk

    Is your Fair Lending Compliance Management Program (CMP) able to effectively manage and mitigate your Fair Lending risk? The strength of your CMP needs to be commensurate with the inherent risk profile of your institution.


  2. Redlining Risk
    Redlining continues to be a major regulatory hot topic. But do you know your Redlining risk? In today's regulatory environment, you need to.

  3. Marketing Risk

    Fair Lending extends to marketing. Financial institutions need to ensure they are marketing their services equally to similarly situated individuals. One question to consider as you assess your marketing risk is: Are we receiving applications consistent with our market demographics?


  4. Steering Risk

    As you assess steering risk, you will be looking to determine if similarly situated individuals are treated similarly. Any evaluation of steering risk will benefit from the insight provided by Fair Lending data analysis. One question to consider: Are we directing certain applicants to particular products? By analyzing your data, you'll be able to identify any disparities.


  5. Underwriting Risk

    Underwriting risk is key area of Fair Lending risk. When analyzing your data, pay attention to the number and rate of originations and denials. As you assess your risk, look for any vague or subjective underwriting criteria or other potential for discretion in the process.


  6. Pricing Risk

    Are all similarly situated applicants receiving similar pricing? If not, you may have pricing risk exposure. As you analyze your data, you'll be looking for incidence of rate spread, and disparities in the pricing charged. 


  7. Servicing Risk

    Consumer complaints are common during servicing, and consumer complaints can trigger regulatory attention. In analyzing your servicing risk, ensure that similarly situated individuals are being treated consistently. You'll also want to pay attention to any disparities in loss mitigation servicing options, decision processing times, and collections processes. And be advised — even if your bank outsources servicing, you are still responsible for that third party vendor's Fair Lending compliance.

Compliance Management Program Risk 



 

Redlining continues to be a major regulatory hot topic. But do you know your Redlining risk? In today's regulatory environment, you need to.  

Fair Lending is a top priority for regulators and regulatory scrutiny of Fair Lending will heighten. 

Are you aware of the Fair Lending risk in your financial institution?

 

Proactive fair lending risk management 
Use data-driven insights to identify, analyze, and better understand
your consumer fair lending risk. 
Fair Lending Software | Ncontracts 

Subscribe to the Nsight Blog

All Topics Risk & Compliance Product Insight Banks Lending Compliance Credit Unions Risk Management Fair Lending Nfairlending Cluster: Risk Management Compliance Lending Compliance Management Integrated Risk Blog Nrisk Regulatory Compliance Management News & Updates HMDA Risk Mortgage Lenders Ncomply Vendor Management Business Resiliency CRA Lending Compliance Blog Vendor CFPB Ncontinuity Third-Party Vendor Management Business Continuity Cybersecurity Fintech NVendor Strategic Planning Ncyber Ntransmittal Audits & Findings Company Culture OCC Regulatory Updates Audit Nverify Regulatory Compliance Exams FDIC Compliance Management Findings Nfindings NCUA Contract Management Employee Intranet Contract FRB Business Continuity Management FFIEC Findings Management Ncontracts manager Third-Party Vendors Vendor Risk Enterprise Risk Management ABA Bank Access Control Audit Findings Board Portal Call Report Due Diligence Efficiency Employee Engagement Exam findings FIEC Inc. 5000 Internal Audit Management Nboardportal Verify Wealth Management
Fair Lending Risk Assessments: Absolutely Everything You Need to Know
HMDA

Fair Lending Risk Assessments: Absolutely Everything You Need to Know

Apr 10, 2019 10 min read
8 Red Flags Indicating Potential Fair Lending Risk
Fair Lending

8 Red Flags Indicating Potential Fair Lending Risk

Sep 9, 2020 4 min read
7 Fair Lending Risks You Need to Know Today
HMDA

7 Fair Lending Risks You Need to Know Today

Apr 26, 2017 3 min read