Our external auditor wants our Bank to perform a Regression Analysis before they will perform a Fair Lending Audit. Does anyone out there have software that they use or recommendations for software? Thanks.

How large is your portfolio? If you have a very small portfolio, it is a waste of time. Most banks outsource this function.

We are now categorized as a large bank for CRA and have over 1100 loans reported for HMDA. I would love to outsource it, but our external auditors have decided that we are large enough to warrant the analysis and won't perform the Fair Lending Exam until WE perform the analysis.

the smaller the portfolio, the less insightful the results will be. What portfolios are they wanting you to do a RA on? Auto, Helocs, etc?

You can run an OLS regression analysis in excel if you have time to learn. It is definitely one of the higher functions and kind of a pain though. If not, outsource it. They cant require you do an RA internally. If they truly want an accurate RA which identifies outliers for review than they should be happy you're willing to shell out thousands of dollars to pay an expert to run the analysis. On another note, it can take weeks to get this done on a single portfolio (vendor management, gathering data, sending data, waiting on them to run report, reviewing the data, and THEN reviewing all of the outliers identified to identify any fair lending issues). By the time you write your final report it could be a couple of months!

Out of curiosity, how big are you? How many loans in each portfolio are you looking to run an RA on?

Costs can be somewhat prohibitive unless your systems can provide the information. The vendor will tailor the analytical portion to your underwriting guidelines, and normally gather 55-70 pieces of information per loan to run through the algorithms. Costs are in line with the work involved.

Two things to consider - if there is no loan officer/underwriter discretion and if the pricing is done off rate sheets (without pricing discretions) then there would be no findings.

Thanks everyone for your help. I personally don't believe our portfolio is large enough for a full blown analysis. I have spoken with a vendor that we already use and they are have an outsource program that should help that doesn't involve a full regression analysis but will give the auditors what they want. We are scheduled for a demo this week.

I also think that you need to revisit your engagement with this firm in the future. I think they forgot who is writing their paycheck. Requesting that a regression analysis be completed and insisting that the "bank" perform it, is absolutely unacceptable in my book. If they were experienced in fair lending auditing and they thought a regression analysis was necessary, "THEY" would either do it or have it outsourced as part of the audit. This is really a big "tell" that they have no idea what they are doing.