I've read the earlier posts on 2nd reviews. I'm wondering if any one has a specific checklist or worksheet they utilize. There is a Fair Lending worksheet on Bankers Tools but it's specifically for GA and I think more in line with HOEPA. If anyone has anything you're willing to share,please email me at tressaj@cfbanc.com. I'm trying to standardize this process at 4 separately chartered banks and appreciate any help. Thanks TJ

In this fast BOL world, you know something is up when you haven't received an answer to a question within a few nanoseconds. I think that something, in your case, may be that 2nd reviews aren't typically done via a checklist.

The point of a second review is to look at rejected loans, preferably from a higher perch in the organization than the initial loan decision, for consistency purposes. For example, a loan officer declines a loan. Someone or some committee with knowledge of the lending policy and recent loan approvals and in a position above that loan officer should review the denials of that loan officer and others. What they should look for are denied applicants that are similar to other loan approvals. Different loan officers can and do interpret and implement the same loan policy differently. Worse yet are the individual loan officers that interpret and implement a loan policy differently from customer to customer. That's a particularly sticky fair lending issue. So in one case, the loan officer may approve a loan that marginally meets the lending policy. In another case, that same loan officer may decline a similar loan to a similarly marginally qualified applicant. That similar applicant is often female, black or something other than the white male that was approved. To correct this seeming inconsistency, some denials get turned into approvals via the 2nd review process.

The trick with 2nd reviews is to look at all denials, not just those of women, minorities or some other prohibited basis. Otherwise, the 2nd review itself can lead to fair lending problems.

Given the subjective nature of the 2nd reviews, I think it would be difficult to approach it with a checklist, which is why I also think you didn't get another response to this. Perhaps my response will jar something in somebody out there. AR.

Thanks for your input. I happen to agree with everything you've said,however,my boss has been clear that he wants either a checklist or questionnaire. Thanks Again - TJ

This dovetails with a question I have been pursuing relating to regression analysis.

The appropriate tool to detect and monitor patterns would seem to be a spreadsheet. The process uses statistical regression (such as the infamous chi-square technique).

It seems that this approach has fallen out of favor. Many of the books on Amazon which cover this subject are long out of print.

What, if anything, replaced this approach?

Carl, I'm afraid you've left me way behind. Although, I'm vaguely familiar with some of the terms you mentioned, thank goodness I'm not in pursuit of any such animals. (That I know of anyway!)

I believe regulators are still using regression analysis, but in limited circumstances and by only a few people. I've not used it myself but understand it can be difficult to do it right.

Check your e-mail

I just did, nothing much there except usual stuff. Can I expect something wonderful from you?

From a Fair Lending Wiz press release, April 30, 2002:

Fair Lending Wiz is PCi’s powerful statistical tool combining risk assessment, comparative file, and regression-based analysis on loan portfolios that enable financial institutions to identify inconsistent lending decisions and pricing disparities. Fair Lending Wiz can also be pushed to the front-line second review process to detect potential discrimination prior to the denial of a loan.

Sounds like the perfect tool for the job.

Is no one using it for this specific purpose?

OCC statisticians (that can't be spelled right) and economists in the Washington office do it; they run the reports for the field examiners. I would love to have a contact in that office who could explain to us how it is done.

On that note, does anyone have a program developed that I could use in my Fair Lending Analysis? I would appreciate your assistance. tsweet@goldcountrynb.com

There are several professional services firms that will build a regression model for you and analyze your data. For example, KPMG offers this service. I am sure the other large accounting/consulting forms (PWC, E&Y, D&T) or their former consulting firms will di it also.

However, the process is expensive. IMHO, it provides nothing more than an indicator of potential problems. You still have to identify whether actual discrimination has taken place.

Some banks do use the FL Wiz product for regression and also to perform their comparative file review. But ost of the agenceis do not run it, even if they know what it is. I know the OCC does not use that specific program, but they have in-house economists to run regression for larger institutions. Also any reader beware about the second review feature in the Wiz. You pay extra for it and the software is expensive enough as it is. My predecessor priced it out. You better have a big budget.

I just sent you my Fair Lending Worksheet. This is what I use when reviewing files for comparative analysis. Your control file should be in the first column and the test files in the remaining columns. I received a message from the "system administrator" that it didn't recognize your e-mail address. I clicked on the address in your post.

I understand that the PCi Fair Lending Wiz costs about $50,000 plus you darn near have to have an MBA in Statistics to use it.

Willie Sutton was asked why he robs banks. "Because that is where the money is."

Louvera,

May I have a copy of the worksheet? Thanks in advance.

Tina

If you could e-mail a copy as well I'd appreciate it...