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.
- 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.
- 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.