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.

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.

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.

Yes. If it's your policy to require it, and you are denying applications that don't have it.