fair lending software

A fair lending regression tests whether a gap in a lending outcome, such as denial or the rate paid, between a prohibited basis group and a control group survives once the credit factors your policy actually uses are held constant. What survives is the part you will be asked to explain, and the model shows which applications drive it. This article covers the working side of that: what goes into the model, how to read what comes out, and how examiners use the result. It is the companion to what regression can and cannot prove in fair lending, which deals with the method's limits in detail, quoting the OCC's handbook. If you have not read that one, the short version is that a model can only account for the factors you give it. What is a fair lending regression actually testing? Two…

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Every fair lending and CRA software evaluation starts the same way: a shortlist of vendors, a run of demos that all look competent, and a decision that has to be defended internally on something firmer than which interface felt nicer. The difficulty is that the differences between these products are mostly invisible in a demo. They show up eighteen months later, in an examination, when someone asks how a number was produced and the honest answer turns out to be that nobody knows. This is a guide to testing for that in advance. It is written from our side of the table — we sell one of these products — so treat the last section as the interested party it is. The first six are the questions we would ask any vendor in this category, including ourselves. What does fair lending…

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