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Threshold for UW and Pricing Exceptions

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What is a reasonable threshold for UW and Pricing Exceptions for fair lending monitoring? is a 10% threshold reasonable ?

I cannot say there is an acceptable number of pricing exceptions that would be allowed. Examiners have zeroed in on minute variances and in many cases will say two or more is a pattern or practice. The bank would need to justify any variances on a case by case basis, no that a percentage is allowed.

I have read about claims and enforcement orders for pricing disparities of 2 percent and one case in Texas where Hispanics were priced on average 1.76 percent higher than whites and this triggered an investigation and enforcement order which was significant to a small bank.

Pricing is one issue, but is it triggered by the amount of down payment, equity in the collateral, credit rating, etc.? This is why it is difficult to have an allowable tolerance. My recommendation is to follow your examining agencies guidance and workpapers and see where any exceptions take your audit as you did deeper based on a branch geography, a lender, or a product, as examples.

First published on 03/31/2019

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