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#2190687 - 08/27/18 05:08 PM FDIC Treatment of Joint Applicants
Compliance Nut Offline
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Has anyone heard that when doing a fair lending review, the FDIC treats a joint application as a Male, and whatever their surname is, that is what is used to determine ethnicity and race?

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#2190791 - 08/28/18 01:14 PM Re: FDIC Treatment of Joint Applicants Compliance Nut
JobSecurity Offline
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All of our loans that had a male borrower were treated as male even if a female was the primary applicant.

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#2190831 - 08/28/18 03:34 PM Re: FDIC Treatment of Joint Applicants Compliance Nut
Skyline Offline
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While I realize that this discussion is not directly related to mortgage leading, residential real estate is one of the top classifications of loan products used in Fair Lending analysis. The Uniform Residential Loan Application, URLA, provides space for up to two applicants. The mortgage company calls the first applicant the “borrower” and calls the second applicant the “co-borrower.” No single borrower is the “primary” or “secondary” borrower. If the lender uses the terms primary or secondary borrowers, they usually refer to the main source of income or credit.
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#2190906 - 08/28/18 06:54 PM Re: FDIC Treatment of Joint Applicants JobSecurity
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Originally Posted By JobSecurity
All of our loans that had a male borrower were treated as male even if a female was the primary applicant.


Was this for an actual FDIC fair lending exam? So applications for a female only (or a female/female co applicants) were the target group and males only (or any combination of male/female or female/male co applicants) were the control group?

Do all the other regulators do it this way? The FFIEC Exam Procedures do not specifically state that it should be done this way.

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#2210468 - 04/05/19 03:39 PM Re: FDIC Treatment of Joint Applicants Compliance Nut
KelliD Offline
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Joined: Jun 2015
Posts: 62
Can anyone answer the original question of whether or not joint applications use the borrower or co-borrower info for race and ethnicity?

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#2210486 - 04/05/19 05:17 PM Re: FDIC Treatment of Joint Applicants Compliance Nut
Inherent_Risk Offline
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Posts: 374
I'm guessing the original post is not talking about HMDA reportable applications (or it would pretty obviously be the Demographic info used for all of this). I don't know what FDIC does, but I can share what our examiner has told us.

As far as joint apps, I believe our examiners (FRB) say if any borrower falls into race or ethnicity minority, then they would be a part of the protected class. For gender, a joint application is excluded from analysis (just look individual male v. individual female). You'll need to check with your own regulator though. According to our fair lending vendor, none of this is very consistent.

As far a proxy, the Fed put this out a while ago (https://www.consumercomplianceoutlook.org/outlook-live/2013/indirect-auto-lending/). See the documents at the bottom including the step by step proxy methodology. It's about 6 years old, but our examiners pointed it out to us pretty recently as still being used though a new list of Hispanic names was recently released (I can't find the link). It's technically specific to indirect auto, but they suggested this is more broadly used for non-HMDA consumer loans. It is a very basic proxy, and I know that the CFPB at least uses much more sophisticated BISG proxy analysis. As far as race, geocoding the address and looking at those in minority majority census tracts is used as a proxy for racial minorities can be used.

Bottom line is to ask your examiner what to use. There is not a ton of consistency. Ours has been very responsive. They generally want you to do the correct analysis, and that might be different from examiner to examiner and bank to bank. You also might want to look at it from different angles. If a disparity shows up, then you've got risk.

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#2210505 - 04/05/19 07:11 PM Re: FDIC Treatment of Joint Applicants Compliance Nut
KelliD Offline
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Joined: Jun 2015
Posts: 62
Thank you for responding. I am asking specifically about HMDA reportable applications. I'm not sure I understand your statement about this obviously being the demographic info used for all of this though. I need to know which of the applicants information are to rely on for characterizing the loan as male/female, black/white, Hispanic/non-Hispanic when it’s a joint application. I think the answer is in the statement, "if any borrower falls into race or ethnicity minority, then they would be a part of the protected class". I will check with our examiner.

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#2210508 - 04/05/19 07:37 PM Re: FDIC Treatment of Joint Applicants Compliance Nut
Inherent_Risk Offline
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I was responding to the original post: "and whatever their surname is, that is what is used to determine ethnicity and race?" Surname for HMDA would only matter for a face-to-face application where the applicant didn't want to answer. At the point of fair lending analysis, it wouldn't matter at all. For HMDA, you would analyze based on what you reported (or will be reporting), not using a proxy based on surname, but that's all you have for most other consumer loans.

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