At $55mm, I'm guessing you only have two lenders and less than 15 FTEs. If that is the case, segregation of duties and independence is extremely difficult - not to mention that the President (your boss) is where the inconsistencies are coming from.
Personally, I would consider doing several things. First, I would approach the President pro-actively and explain that you have heard that fair lending is a hot topic (it always is) and that inconsistencies have been known to cause concern with examiners and even referrals to the Department of Justice (DOJ). I would then attempt three things.
First, I would work to create both a more formalized 1) exception review program and 2) adverse action review program. I strongly believe this is one of the best ways to reduce fair lending risk, regardless of the bank size. I have seen banks your size do this through tracking logs and regular meetings to compare denied loans to exceptions. In a small bank like yours, it can actually be fairly easy to manage because you could have every lender aware of all denials and all exceptions so that each lender is aware of any possible inconsistency from exception to denial before an exception is granted. Ideally, you would have all exceptions discussed as a group (again, there are probably only two or three of you) before the exception is granted. Regardless of your actual implementation, getting as formal as possible with both your exception program and your adverse action review program will give you a story when examiners start to discuss this. I know of a few banks your size that discuss all potential exceptions as a group (to verbally compare to denials) and this process does help give examiners a greater comfort level than if lenders are just arbitrarily making exceptions. The bottom line is that you don't want overlap between your best denials and worst approvals, and having a pro-active discussion comparing denials to a possible exception is one way to reduce your risk.
The next thing I would consider is evaluating what is being reported to the Board. If you have never reported exceptions to your board (which may be the case for a $55mm bank), it might be time to consider this. Escalation to the board of high risk areas (like fair lending) is an important component of compliance management. You may not like certain decisions made by upper management or the Board, but if the Board - who is ultimately responsible - has signed off on it, you should be able to wash your hands of it.
Finally, I would consider conducting a fair lending comparative analysis where you formally compare your most qualified denials with your worst qualified approvals of a similar loan type. As your bank is small, you probably have a limited number of marginal protected class denials, meaning that you could probably review them all. I would start by going through all of your denials and identify two things: 1) the most qualified denied applications and 2) all denials to a protected class. Of course, your primary concern is the denials to the protected class applicants, but reviewing the most marginal denials that are not to a protected class will also identify potential fair lending risk if the pattern continues. Once identified, you will want to conduct an analysis of each denial and compare them to your marginal approvals. Once your review is complete, I would formally document my findings and report them to the Board. The key will be to make sure you pro-actively take steps to correct any deficiencies noted in your review. Now, this review could be outsources so that it is clearly an independent audit, but if you can't get those resources, your review will still be considered a valuable monitoring activity. The bottom line in this is to self-identify any risk and then take any needed corrective action.
Adam Witmer, CRCM
All statements are my opinion, not those of my employer, and should not be taken as legal advice.www.compliancecohort.com