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#2267124 - 03/02/22 08:04 PM Loan Exception Tracking
Mel in WA Offline
Diamond Poster
Joined: Mar 2013
Posts: 1,193
We have been collecting loan exception data and are now developing a process for evaluating it quarterly. I have a few questions for my BOL friends:

- Do you establish benchmarks (over a certain percentage) as to when further review would be warranted? For example, if the exception percentage exceeds 15% then a file review will take place?

- The exception percentage for commercial loans seems to be much higher than mortgage and consumer. Do you find this to be true at your institution as well?

- Do you consider waiving documentation (i.e. not obtaining a tax return for a guarantor) an "exception"?

Thanks in advance for you input.

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Fair Lending
#2267164 - 03/03/22 08:16 PM Re: Loan Exception Tracking Mel in WA
Inherent_Risk Offline
Gold Star
Joined: Jan 2017
Posts: 395
Originally Posted by Mel in WA
Do you establish benchmarks (over a certain percentage) as to when further review would be warranted? For example, if the exception percentage exceeds 15% then a file review will take place?
There are a lot of factors that would determine if and how much further analysis is necessary. Overall rate would certainly be one. Higher rate = higher risk. For consumer, we review the exception rates for prohibited classes, and a statistically significant disparity in exception rate v. control would trigger further review. File review and/or further data analysis.

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- The exception percentage for commercial loans seems to be much higher than mortgage and consumer. Do you find this to be true at your institution as well?
Not really. I find the definition of "exception" can be a bit murky in Commercial lending departments though. This might become an issue more people care about when 1071 is implemented.

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- Do you consider waiving documentation (i.e. not obtaining a tax return for a guarantor) an "exception"?
Yes. If it's your policy to require it, and you are denying applications that don't have it.

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