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#2196736 - 10/29/18 07:16 PM Pricing and UW Exception management for FL purpose
Kristin S Offline
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Joined: Aug 2018
Posts: 1
Hi All:
I was wondering if you had any opinions on a threshold for pricing and underwriting exceptions? I have heard a threshold of 10% exception rates but am not sure what others in the industry are doing. Also how often are your pricing and uw exceptions? monthly? quarterly?

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Fair Lending
#2196755 - 10/29/18 09:54 PM Re: Pricing and UW Exception management for FL purpose Kristin S
Rocky P Online
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Joined: Jun 2003
Posts: 7,650
Florida
Welcome to BOL Kristin.

A lot of what the bank does is dependant on their appetite risk, which would be dictated by ALCO, Risk Management, or Audit Committees. A bank that went from LO underwriting to automated underwriting had a 6 month trial, where they allowed 15% low side overrides and 10% high side overrides. At the end of the period, they analyzed the results and compared the portfolio to expectations and dropped to 10% and 5% respectively. That also gave the loan officers time to adjust. Your model should give you some guidance.

For any exception or override, remember to record, analyze, track and report. Based on results, you can adjust your tolerances.

From a Fair Lending side, be very careful about any exceptions to policy or pricing. An exception given to one applicant can be discriminating to the other applicant that it was not given (or offered) to.
_________________________
Integrity. With it, nothing else matters. Without it, nothing else matters.

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#2196942 - 10/31/18 04:19 PM Re: Pricing and UW Exception management for FL purpose Kristin S
P*Q Offline

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Joined: May 2001
Posts: 8,458
Somewhere
Having just completed an exam by the FRB and state last week, and the intense Fair Lending review we underwent, whenever you make any exceptions, remember to document, document, document the reasons.

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#2196955 - 10/31/18 06:12 PM Re: Pricing and UW Exception management for FL purpose Kristin S
Inherent_Risk Offline
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Joined: Jan 2017
Posts: 570
As far as monitoring, a recent webinar by the Richmond Fed said in general that more exceptions = more discretion = more monitoring required. It mentioned quarterly aggregate exception monitoring in passing, but the more discretion = more monitoring was what they hammered home.

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