I am new to compliance and have been assigned to conduct a fair lending audit. Can anyone give me some direction or a resource that would give some guidance in how to start the audit, select files, and conduct the audit?? All input is appreciated!!!

Thanks!!

The best thing you can do is to start here and read Side By Side: A Guide to Fair Lending. Also, doing a search on BOL will be good too.

Have you seen the interagency fair lending exam procedures? Here's a link to an OTS regulatory bulletin that contains them. http://www.ots.treas.gov/docs/7/74829.pdf It is an 87 page document.

I would caution anyone that is going to do a fair lending audit that it be approached in a very well planned manner. The Audit Committee should be actively involved up front with full knowledge of the process and scope and a plan for corrective actions. The last thing you want is to do a review and find something and not have the Board of Directors on board. Legal counsel involvement is also not a bad idea.

Then, I would highly recommend that you stick with the FFEIC examination guidelines:

http://www.ffiec.gov/PDF/fairlend.pdf

http://www.ffiec.gov/pdf/fairappx.pdf

You need to perform the risk assessment process and document in good detail. You need to use the risk assessment in order to select your actual focal points.

You don't what to just say - hmmmm - let's see - let's test for this.

The one benefit of using the FFIEC process, is that unless the regulators think that the process you used was flawed, they basically have to accept your audit and you qualify for the "streamlined examination" process.

As another note, examiners are not allowed to come into a bank and just pick something to examine without going through the risk assessment process. If they try and do that - you need to kick it up the chain.

I would agree with Randy 110%. You need to have full management and board awareness before going into the audit, and a plan in the event that you identify fair lending violations. At prior banks, they have been done by engaging outside counsel and performing the work under (limited) attorney client priviledge - (you're not shielded from regulatory review.)

I am going to make a comment and PLEASE do not take it the wrong way, Klopferc. It is my belief that someone who is 'new' to compliance should not be performing the Fair Lending Audit. I am not doubting your abilities one iota, but my thoughts are that a seasoned compliance professional would be better suited and your institution would not be getting the full benefit from the review.

That makes sense. Thanks for the resources and the advice and info. I appreciate it!!!

What is the "streamlined examination" process that you referred to? I am not familiar with this and would like to know more about it and what it might mean for our bank. Our bank is OCC regulated.

Rlcarey - is fair lending the only examination procedures that you can get off of the FFIEC website? I can't seem to locate any more examination procedures but would be very interested in figuring out what programs/procedures that they have available.

The streamlined examination is dicussed in the Appendix - last topic.

As far as more examination procedures from the FFIEC go - it would depend on whether the interagencies have agreed on a standard approach or if each specific regulator has developed their own. For example, the BSA/AML Examination Manual. There are not too many that have been standardized.