Fair Lending Laws and Regs (ECOA FHA) Flashcards

Question

True or false: A policy or practice that creates a disparity on a prohibited basis is proof of violation and disparate impact.

Answer 1

False: a policy/practice alone does not provide proof of violation. We must first determine if the practice can be justified based on business necessity.

Answer 2

Cost | Profitability.

Answer 3

Yes, a violation can still be identified if an alternative policy/practice could serve the same purpose with a less discriminatory effect.

Answer 4

- Develop an institutional overview to assess inherent fair lending risk. - If more than minimal FL risk, identify products/product groups to review and discrimination risk factors. Then evaluate the CMS for mitigating factors - If factors have not been fully mitigated, identify a focal point. Identify inherent risk-->identify discriminatory risk and mitigating factors for each product type-->if not fully mitigated identify focal point.

Answer 5

- structure and management - supervisory history - loan portfolio - credit and market operations

Answer 6

- loan products - loan markets - loan decision centers - loan time frames - prohibited basis - control groups

Answer 7

- risk factors - FL procedures/priorities - previous exam record - relevant guidance - overview of CMS

Answer 8

Yes, as long as the bank voluntarily discloses the "self-tests"

Answer 9

- Credit operations of the bank - risk that discriminatory conduct may occur in those operations - ability to develop a reliable record of bank performance and FL compliance in those operations.

Answer 10

- types and terms of credit products, product variations - presence of special purpose credit program - volume/growth in lending products - demographics - organization of credit decision making process (lending authorities, discretion/exceptions) - compensation program - quantity, quality and accessibility of relevant documentation for various loan products - burden of information requests on bank.

Answer 11

Yes for subsidiaries. For affiliates, no typically, unless the affiliate acted as the agent for the bank or the bank knew about the violation by the affiliate before becoming involved in the loan transaction or purchasing loans.

Answer 12

Indication that a bank purchased loans based on a prohibited factor, or caused a prohibited factor to influence the origination process.

Answer 13

Examiners should review if underwriting standards are applied consistently by each entity and the location of records if needed for comparison.

Answer 14

Applicants being steered from the bank to a subsidiary or other lending channel based on a prohibited factor.

Answer 15

Because an institution can be found in violation of FL laws if it participates in transactions where they knew or should have known other parties were discriminating.

Answer 16

Underwriting Terms and Conditions Redlining Steering

Answer 17

Examiners should narrow the review to focus on the MSA or underwriting centers that present the highest discrimination risk based on LAR data. This can be done by evaluating the denial rates between control and prohibited basis groups for each underwriting center/MSA.

Answer 18

No volume is to low to draw conclusions. However, this can still be reviewed if other risks are present that point to underwriting risk. ex: Pattern where almost all 19 male borrowers receive low rates, but almost all 4 female borrowers received high rates.

Answer 19

- Products/prohibited basis reviewed at prior exam - Prohibited Basis groups that make up a significant portion of the bank's market for different credit products - Any products/groups reviewed in a bank's self assessment.

Answer 20

- Develop an Overview - Identify Compliance Program Discrimination Risk Factors - Review Residential Loan products - Identify Residential lending Discrimination Risk Factors - Organize and focus Residential risk analysis - Identify Consumer Lending Discrimination risk factors - Identify Commercial Lending Discrimination Risk factors - Complete the scoping process

Answer 21

- Understanding the bank's credit operations | - Evaluating the potential for discriminatory conduct

Answer 22

- Underwriting guidelines, policies, and standards - Factors used in credit scoring systems and guidance on overrides/exceptions - Pricing policies, models, and guidance on discretion - Compensation system - relationships with finance companies - Loan applications - HMDA LAR data - Loan product databases - records of policy exceptions or overrides, and any reporting or monitoring processes - consumer complaints - CMS materials - Marketing materials

Answer 23

Overall compliance record is weak

Answer 24

Prohibited basis monitoring information required by applicable laws and regulations is nonexistent or incomplete.

Answer 25

Data and/or recordkeeping problems compromised reliability of previous exam reviews.

Answer 26

Fair lending problems were previously found in one or more institution products or subsidiaries.

Answer 27

The size, scope, and quality of the compliance management program, including management's involvement, designation of a compliance officer, and staffing is materially inferior to programs customarily found in institutions of similar size, market demographics, and credit complexity.

Answer 28

The bank has not updated compliance policies and procedures to reflect changes in law or agency guidance.

Answer 29

Fair lending training is nonexistent or weak.

Answer 30

- Government insured loans - mobile/manufactured home loans - wholesale, indirect, and brokered loans - Portfolio lending (Fannie mae/Freddie Mac rejections)

Answer 31

No they should be evaluated separately for comparative purposes.

Answer 32

For each residential loan product that represents a high volume or displays noticeable growth: - Lending policies - marketing plans - underwriting appraisal and pricing guidelines - broker/agent agreements - loan applications

Answer 33

Data regarding the distribution of the bank's loan originations with respect to race and national origin demographics within each census tract.

Answer 34

No, however consideration should be given in such cases where calculations could be made based on gender or racial-ethnic surrogates

Answer 35

Including explicit prohibited basis identifiers in the bank's written or oral policies and procedures.

Answer 36

Collecting information, conducting inquiries or imposing conditions contrary to express requirements of regulation B.

Answer 37

Including variables in a credit scoring system that constitute a basis or factor prohibited under ECOA, or for residential credit scoring systems, FHA.

Answer 38

Statements made by the bank's officers, employees, or agents which constitute an express or implicit indication that one or more such persons have engages or do engage in discrimination on a prohibited basis in any aspect of a credit transaction.

Answer 39

Employee or bank statements that evidence attitudes based on prohibited basis prejudices or stereotypes.

Answer 40

Substantial disparities among approval/denial rates for applicants by monitored prohibited basis characteristic (especially within income categories)

Answer 41

Substantial disparities among the application processing times for applicants by monitored prohibited basis characteristic (especially within denial reason groups)

Answer 42

Substantially higher proportion of withdrawn/incomplete applications from prohibited basis group applicants than from other applicants.

Answer 43

Vague or unduly subjective underwriting criteria

Answer 44

Lack of clear guidance on making exceptions to underwriting criteria, including credit scoring overrides.

Answer 45

Lack of clear loan file documentation regarding reasons for any exceptions to standard underwriting criteria, including credit scoring overrides.

Answer 46

Relatively high percentages of either exceptions to underwriting criteria or overrides of credit score cutoffs.

Answer 47

Loan officer or broker compensation based on loan volume (especially loans approved per period of time).

Answer 48

Consumer complaints alleging discrimination in loan processing or in approving/denying residential loans.

Answer 49

Financial incentives for loan officers or brokers to charge higher prices (including interest rate, fees, and points). Special attention should be given to situations where incentives are accompanied by broad pricing discretion (P2), such as through the use of overages or yield spread premiums.

Answer 50

Presence of broad discretion in loan pricing (including interest rate, fees and points), such as through overages, underages or yield spread premiums. Such discretion may be present even when bank's provide rate sheets and fee schedules, if loan officers or brokers are permitted to deviate from those rate and fees without clear and objective criteria.

Answer 51

Use of risk-based pricing that is not based on objective criteria or applied consistently.

Answer 52

Substantial disparities among prices being quoted or charged to applicants who differ as to their monitored prohibited basis characteristics.

Answer 53

consumer complaints alleging discrimination in residential loan pricing.

Answer 54

In mortgage pricing, disparities in the incidence or rate spreads of higher-priced lending by prohibited basis characteristics as reported in the HMDA Data.

Answer 55

A loan program that contains only borrowers from a prohibited basis group, or has significant differences in the percentages of prohibited basis groups, especially in the absence of a special purpose credit program under ECOA.

Answer 56

Lack of clear, objective and consistently implemented standards for (i) referring applicants to subsidiaries, affiliates, or lending channels within the institution (ii) classifying applicants as “prime” or “sub-prime” borrowers, or (iii) deciding what kinds of alternative loan products should be offered or recommended to applicants (product placement).

Answer 57

Financial incentives for loan officers or brokers to place applicants in nontraditional products or higher cost products.

Answer 58

For a bank that offers different products based on credit risk levels, any significant differences in percentages of prohibited basis groups in each of the alternative loan product categories.

Answer 59

Significant differences in the percentage of prohibited basis applicants in loan products or products with specific features relative to control group applicants. Special attention should be given to products and features that have potentially negative consequences for applicants.

Answer 60

For an institution that has one or more sub-prime mortgage subsidiaries or affiliates, any significant differences, by loan product, in the percentage of prohibited basis applicants of the institution compared to the percentage of prohibited basis applicants of the subsidiary(ies) or affiliate(s).

Answer 61

For an institution that has one or more lending channels that originate the same loan product, any significant differences in the percentage of prohibited basis applicants in one of the lending channels compared to the percentage of prohibited basis applicants of the other lending channel.

Answer 62

Consumer complaints alleging discrimination in residential loan pricing or products placement.

Answer 63

For an institution with sub-prime mortgage subsidiaries, a concentration of those subsidiaries’ branches in minority areas relative to its other branches.

Answer 64

*Significant differences, as revealed in HMDA data, in the number of applications received, withdrawn, approved not accepted, and closed for incompleteness or loans originated in those areas in the institution’s market that have relatively high concentrations of minority group residents compared with areas with relatively low concentrations of minority residents.

Answer 65

*Significant differences between approval/denial rates for all applicants (minority and non-minority) in areas with relatively high concentrations of minority group residents compared with areas with relatively low concentrations of minority residents.

Answer 66

*Significant differences between denial rates based on insufficient collateral for applicants from areas with relatively high concentrations of minority residents and those areas with relatively low concentrations of minority residents.

Answer 67

Significant differences in the number of originations of higher-priced loans or loans with potentially negative consequences for borrowers, (i.e., non-traditional mortgages, prepayment penalties, lack of escrow requirements) in areas with relatively high concentrations of minority residents compared with areas with relatively low concentrations of minority residents.

Answer 68

Other patterns of lending identified during the most recent CRA exam that differ by the concentration of minority residents.

Answer 69

Explicit demarcation of credit product markets that excludes MSAs, political subdivisions, census tracts, or other geographic areas within the institution’s lending market or CRA assessment areas and having relatively high concentrations of minority residents.

Answer 70

Difference in services available or hours of operation at branch offices located in areas with concentrations of minority residents when compared to branch offices located in areas with concentrations of non-minority residents.

Answer 71

Policies on receipt and processing of applications, pricing, conditions, or appraisals and valuation, or on any other aspect of providing residential credit that vary between areas with relatively high concentrations of minority residents and those areas with relatively low concentrations of minority residents.

Answer 72

The institution’s CRA assessment area appears to have been drawn to exclude areas with relatively high concentrations of minority residents.

Answer 73

Employee statements that reflect an aversion to doing business in areas with relatively high concentrations of minority residents.

Answer 74

Complaints or other allegations by consumers or community representatives that the institution excludes or restricts access to credit for areas with relatively high concentrations of minority residents.

Answer 75

An institution that has most of its branches in predominantly non-minority neighborhoods at the same time that the institution’s sub-prime mortgage subsidiary has branches which are located primarily in predominantly minority neighborhoods.

Answer 76

Advertising patterns or practices that a reasonable person would believe indicate prohibited basis customers are less desirable.

Answer 77

Advertising only in media serving non-minority areas of the market

Answer 78

Marketing through brokers or agents that the bank knows (or has reason to know) would serve only one racial or ethnic group in the market.

Answer 79

Use of marketing programs or procedures for residential loan products that exclude one or more regions or geographies within the institutions assessment or marketing area that have significantly higher percentages of minority group residents than does the remainder of the assessment or marketing area.

Answer 80

Using mailing or other distribution lists or other marketing techniques for pre-screened or other offering of residential loan products that: - Explicity exclude groups of prospective borrowers on a prohibited basis - Exclude geographies within the market area that have significantly higher percentages of minority group residents than does the remainder of the marketing area.

Answer 81

Proportion of prohibited basis applicants is significantly lower than that group's representation in the total population of the market area.

Answer 82

Consumer complaints alleging discrimination in advertising or marketing loans.

Answer 83

Any factor related to a loan applicant that potentially identifies that applicant's race, color, or other prohibited basis characteristics in instances where no direct evidence of that characteristic is available. (Ex: Surname)

Answer 84

Prioritize focal points for each product/prohibited factor on the basis of: - high number and/or severity of risk factors - high data quality and other factors affecting the likelihood of obtaining reliable examination results - high loan volume and the likelihood of widespread risk to applicants/borrowers - low quality of any compliance program

Answer 85

- the intensity of the current exam based on the evaluation of the compliance management measures used by the bank - reliability of the bank's practices and procedures for ensuring continued fair lending compliance.

Answer 86

- determine if the Policies/ procedures of the bank allow management to prevent, identify, and self correct, disparate treatment identified for further analysis in the first part of the review (focal points) - obtain an understanding of how management addresses its fair lending responsibilities with respect to lending practices and standards, training, guidance, and marketing.

Answer 87

- Precise language used and fair lending concerns raised - bank's stated purpose for adopting the policy and who issued the policy - how and when it was put into effect - how widely the policy was applied - if and to what extent applicants were adversely impacted by the policy

Answer 88

- nature of statement/practice and fair lending concerns raised - who is making the statement or applying the practice, why, and who authorized it - how and when it was put into effect - how widely it was applied - if and to what extend applicants were impacted.

Answer 89

- Set sample size - Determine sample composition - compare approved and denied applications - expand sample if evidence of violations but `not enough to establish pattern or practice - discuss findings with management and document appropriately.

Answer 90

for each focal point selected there are two samples: - prohibited basis group denials - control group approvals Size is determined based on the Fair lending Sample size tables in the appendix. using the number of target group denials and the number of control group approvals during a 12 month period.

Answer 91

to high-select a shorter period to sample from to low- no need to attempt transaction testing, Discuss with supervisor if there is more than one focal point

Answer 92

- request loan exceptions and include all exceptions applicable to the focal point - Select approved and denied applicants based on criteria that maximized the likelihood of finding marginal approved/denied applicants - if the two above are not feasible, select a random sample

Answer 93

- Create applicant profile spreadsheet - Complete applicant profiles - review and compare profiles

Answer 94

- Categories of data based on the bank's written or articulated credit standards for each loan product (ex: branch location, underwriter) - Always include (income, loan amount, debt, credit score, etc) - comments block

Answer 95

to identify cases where similarly qualified prohibited basis and control group applicants had different credit outcomes. BC, discrimination is more likely to occur with applicants who are not either clearly qualified or unqualified (marginal applicants)

Answer 96

-expand your review beyond the initial sample and review additional files of approved control group applicants. This will either increase number of marginal approvals, or confirm that marginal approvals are so infrequent that marginal denials are unlikely to involve disparate treatment.

Answer 97

in a back and forth manner to facilitate close matches and a more consistent definition of marginal between the two types of loan files.

Answer 98

- the extent of any assistance (affirmative aid, waivers, partial waivers) which enabled marginal control group applicants to overcome credit deficiencies - extent of marginal target group applicants with similar deficiencies were or were not provided similar aid, waivers or assistance.

Answer 99

- unexplained deviations from credit standards - inaccurate reasons for denial - incorrect disclosures

Answer 100

-Examiners should consider the 41% not the 46% in determining the benchmark. Examiners must adjust the facts compared between applicants so that assistance, waivers, or acts of discretion are treated consistently between applicants.

Answer 101

-for each reason for denial within the target group, rank the denied applicants beginning with the applicant whose qualification related to the reason for denial is least deficient. The top ranked denied applicant for each denial reason is the benchmark applicant.

Answer 102

if there are no approvals who are equally or less qualified than the benchmark applicant.

Answer 103

- Identify the approved loan on the worksheet as an overlap approval - compare the overlap approval with other prohibited basis denials in the benchmark ranking to determine if additional overlaps exist.

Answer 104

- determine sample selection - determine sample composition and create applicant profiles - review terms and conditions, compare with borrower outcomes

Answer 105

use sample sizes table to determine appropriate sample size based on the number of target group and control group originations for each focal point in the last 12 months.

Answer 106

- tailor sample to specific pricing factors/terms and conditions (underwriting factors should not be used) - group the target and control group borrowers based on a range of dates to ensure the bank's pricing practices were the same for both applicants. (loan origination date, loan application date) - identify data to be analyzed for each focal point and record for each borrower in the spreadsheet (ex: products with different pricing implications)

Answer 107

- Review all loan terms and conditions (rate, points, fees, maturity, LTV, collateral) with special attention to those that a subject to discretion. And for each term identify: - -target group borrowers in the sample who were treated unfavorably with respect to the term or condition - -control group applicants in the sample who were treated favorably with respect to the term or condition. -identify any control group borrowers with creditworthiness less than or equal to the target group, who were treated better than target group applicants - get explanations from the bank for any findings - expand the sample if there is not enough evidence of a pattern or practice - discuss differences between comparable loans with the bank and document findings.

Answer 108

Steering risk: This may present opportunities for loan officers or brokers to illegally steer applicants to higher risk products

Answer 109

Steering risk: may present opportunities for loan officers or brokers to illegally steer applicants to certain products or features.

Answer 110

Steering risk: may present opportunities for applicants to be illegally steered to the sub-prime channel.

Answer 111

- Clarify what options are available to applicants - Document policies, conditions, or criteria that have been adopted by the bank for determining how referrals are made and how choices are presented to applicants. - Determine how referral decisions are made and documented - Determine level of individual discretion exercised when deciding what loan products are made available to applicants - Determine if policies and procedures are followed. - If discretion is present, conduct a comparative file review - Consult with supervisors regarding contacting applicants to substantiate steering analysis.

Answer 112

Through interviews and reviewing bank documents, verify the following for each product or feature: - Underwriting criteria used by the bank, subsidiary, and affiliates for each product or feature and their alternatives. - Pricing or other costs applicable to the product and alternative products (interest rates, points, fees)

Answer 113

Products: stated income, negative amortization, option ARMs Feature: prepayment penalties, escrow requirements

Answer 114

- Determine volume of referrals made from or to the bank for each product during the relevant time period - Identify referral policies and procedures, especially for subsidiaries, and between products or lending channels. - Determine if there are financial incentives to make referrals, or for specific products or features.

Answer 115

- Identify policies and procedures for: - -Referring a person who does not meet criteria to another lending channel, subsidiary, or affiliate --offering one or more alternatives to applicants, who do not meet criteria for their original product choice --referring a person who applied to a subsidiary or affiliate, but appears to qualify for a loan from the bank. --referring a person who applied through one lending channel but appears to qualify for a loan through another lending channel.

Answer 116

- Enter data from the target group sample on spreadsheet and determine if the bank is applying criteria as stated. - If actual treatment of target group sample differs from the bank's stated criteria document and discuss with management. ex: announced criteria of DTI ratio of no more than 38% was required for receiving a "more favorable" prime mortgage, review spreadsheet to determine if that criteria was adhered to.

Answer 117

- Target group applicants who received "less favorable" treatment (referral to subsidiary or affiliate, or counteroffers with less favorable products) - Marginal applicants

Answer 118

-underwriting criteria and referral criteria used in reaching underwriting and deferral decisions between different products.

Answer 119

- review "less favorably" treated applicants from the target group and rank them from least qualified to most qualified. - identify the best qualified target group applicant, based on the criteria identified for the control group.

Answer 120

Identify applicants who were treated "more favorably" with respect to the same product-alternative product pair as the target group.

Answer 121

- compare qualifications of benchmark applicant with control group applicants, starting with least qualified control group applicant - identify and document overlap applicants (applicants from control group who appear less qualified than benchmark applicant) - compare overlap applicants with less qualified target group applicants to determine if other overlaps exist. - document overlaps as possible disparate treatment and discuss with management.

Answer 122

Small businesses with GAR of $1MM or less as they likely have fewer borrowing options, which makes them more vulnerable to discrimination.

Answer 123

- Understand commercial loan policies - Conduct Comparative file review - Conduct targeted Sampling

Answer 124

- review credit policy guidelines | - conduct a criteria interview to articulate standards used for underwriting commercial loan applications

Answer 125

- Max of ten denied applications during 3 month period prior to exam. - unless the bank has a significant volume of commercial loans then more than 10 should be selected.

Answer 126

Denied apps from businesses that are: - located in a minority/integrated geography - appear to be owned by minority group members, based on applicant names

Answer 127

Information about: - principal owners - purpose of the loan - type of business - financial information about the business that was used to evaluate the application

Answer 128

The maintenance and use of the data should be evaluated as a potential violation of ECOA.

Answer 129

10 Approved loans that appear to be similar to the denied loans regarding: - business type - loan purpose - loan amount - loan terms - type of collateral

Answer 130

Approved applications for lines of credit from retail businesses.

Answer 131

- obtain and record information from control group apps that is parallel to target group apps - Compare credit criteria considered for both samples with established underwriting standards, rather than comparing files directly. - Identify deviations from credit standards for both samples, and differences in loan terms granted to approved credit requests. - discuss and document deviations from credit standards with commercial underwriter.

Answer 132

- determine if deviations from credit or pricing standards, which are unexplained, are detrimental to any protected classes - consider using proxys to determine race and gender of commercial applicants. - if any target group applicants received less favorable terms, select additional samples for the same prohibited basis and and similarly situated control group applicant to determine if there is a pattern or practice. - if there are not enough similarly situated applicants expand the sample period.

Answer 133

- select a sample large enough to draw a reasonable conclusion - select applicants from the initial sample period, that were not included in the initial sample, expand period if needed - expanded sample should include both approved and denied prohibited basis and control group applicants, where similar credit was requested by similar businesses for similar purposes.

Answer 134

Illegal disparate treatment where a bank provides unequal access to credit, or unequal terms of credit because of the race, color, national origin, or other prohibited characteristic of the residents of the area in which the credit seeker resides or will reside.

Answer 135

practice of targeting certain borrowers or areas with less advantageous products or services based on prohibited characteristics.

Answer 136

Whether on a prohibited basis: -a bank fails or refuses to extend credit in certain areas - a bank targets certain borrowers or certain areas with less advantageous products - a bank makes loans in an such area but at a restricted level or with less favorable terms/conditions than contrasting areas - a bank omits or excludes an area from efforts to market residential loans or solicit customers for residential credit.

Answer 137

False: neither specifically uses the term redlining. However, interpretations for FHA include it as prohibiting banks from having different marketing or lending practices for certain geographies compared to others, where the purpose or effect is discrimination. ECOA would prohibit treating applicants for credit differently on the basis of differences in the racial or ethnic composition of the neighborhood.

Answer 138

Overt redlining risk on the basis of national origin.

Answer 139

- Identify and delineate areas in the bank's AA or REMA for residential products that have racial or national origin character - determine if the identified minority areas appear to be excluded, under-served, selectively excluded from marketing, or treated less favorably by the bank - Identify and delineate areas in the AA or REMA for resi products that are non-minority and appear to be treated more favorably - Idenify any minority areas located just outside the AA and market area for resi that the bank may be avoiding - get the bank to explain apparent differences in treatment between areas and determine if credible and reasonable - obtain and evaluate other info that may support or contradict interpreting disparities to be the result of unintentional illegal discrimination.

Answer 140

Where the scoping process has produced reliable factual record, the examiners should begin with Step 5, obtaining an explanation from the bank.

Answer 141

Focuses on the bank's decisions about how much access to credit to provide to different areas.

Answer 142

Areas where the bank marketed and provided credit, and where it could reasonably be expected to have marketed and provided credit. Those areas might be beyond or different from the AA.

Answer 143

- Describe in percentages why a specific area is identifiable as having the identified character - Describe how the area's character changes across the suspected redlining area's boundaries - Document or estimate the demand for credit, within the area. (percentage of homeowners, median housing value, income, etc. )

Answer 144

- Identify the demographics of an area - review the bank's non-originated applications from the suspected redlined areas. - Review aggregate bank data for loans originated or applications received from the area. - Discuss demand for credit with a community contact.

Answer 145

- review CRA lending test for underserved or excluded areas that match the potentially redlined area. - determine if bank policy treats any area differently within market or service area through (marketing, branch ops, appraisal practices) or any policy or practice related to access to credit. See if any identified areas match the potentially redlined area. - ask the bank for: - -reasons for policy differences - how differences are implemented - -any conditions that exist in an area for it to receive the different treatment.

Answer 146

- document % of control group and racial/ethnic groups living in the non-minority area. - document nature of housing stock in area - Describe how bank policies or procedures or rate of lending change from less to more favorable as one leaves the minority area. - Consider if the MMCT has enclaves of non-minorities, or if the edges of the CT are mostly non-minorities. And compare if credit access in non-minority areas changes from the larger minority areas.

Answer 147

Look at previous exam AAs and REMAs and see if it was influenced by prohibited basis factors. Determine if they ought to be included in the redlining analysis.

Answer 148

For each matter that requires explanation, provide the institution full information on what differences appear to exist in how it treats minority and non-minority areas. Also explain how examiners reached preliminary conclusions.

Answer 149

If there are minority areas for which those conditions existed, ask the institution to explain why the areas were treated differently despite the similar conditions.

Answer 150

If there are non-minority areas for which those conditions existed, ask the institution to explain why those areas were treated differently, despite the similar conditions.

Answer 151

Consider additional information from: - comparative file review for a different focal point - Interviews of third parties - Marketing - Peer Performance - Institution's Record

Answer 152

To compare denied applications from the suspected redlined area to approved apps from the contrasting area and learn: - If there were denials from qualified applicants from the suspected redlined area - If there are instances of disparate treatment against applicants of the same prohibited basis as the suspected redlined area. - if there are any denied non-minority residents from the area that were treated less favorably - if denied or incomplete application data reflects the bank discouraging applicants from that area from applying.

Answer 153

Interview third parties that may have extensive experience dealing with the applicants in the redlined area to learn if they have any experience with the following: - overt statements by the bank that applications from the area are discouraged - if the bank treated applicants from the area according to their procedures and/or treated them similarly to non-minority areas. - unusual delays or irregularities in loan processing in the area - differences in pricing, loan conditions, property valuation in the area compared to other areas.

Answer 154

-review materials that show how the bank has marketed in the suspected redlined area and in non-minority areas.

Answer 155

No these comparisons are insufficient by themselves to prove redlining. Similarly a bank cannot justify its own failure to market or lend in an area by citing other bank's failure to lend in the same area.

Answer 156

- Develop a list of the bank's competitors - learn the level of lending in the suspected redlining area by competitors A bank's inactivity in an area where competitors are active supports the idea that the bank avoids doing business there.

Answer 157

Examiners can request the bank for info about its overall record of serving the prohibited basis group with the same character as the redlined area. This will reveal the bank's intend to serve that group, which may contradict any findings of discrimination.

Answer 158

- identify the bank's marketing initiatives - determine if marketing efforts are significantly lower in minority areas. - Document any identified disparities in marketing and get bank responses.

Answer 159

- Pre approved solicitations - Media Usage - Self-produced promotional materials - realtors, brokers, contractors, or other intermediaries - telemarketers or predictive dialer programs.

Answer 160

-Determine if the bank sends them for Home purchase loans, home improvement loans, or refinances. - Determine how the bank selects recipients for solicitations: - -criteria for selections - -guidance and info provided to credit agencies that supply lists for such solicitations.

Answer 161

- Determine in which newspapers/media the bank advertises and if the media focuses on a specific prohibited basis or geographic area - Learn bank strategies for geographic and demographic distribution of media - review copies of the media - determine criteria/info provided to media about what is an attractive customer or attractive area for business. - determine if advertising is the same across non-minority areas as minority areas

Answer 162

- how the bank distributes the materials (method and areas) | - Learn what the bank thinks their target audience is.

Answer 163

- determine if the bank uses them to solicit business - learn how the bank decides which intermediaries it will solicit - identify solicited parties and determine distribution between minority and non-minority areas - review information distributed to intermediaries - how often the bank contacts intermediaries - what criteria bank communicates to intermediaries about the type of customer or geographic areas it seeks for business.

Answer 164

learn how the bank identifies which customers to contacts and if the bank sets any parameters on how the list of customers is created.

Answer 165

- Present findings to bank management if present - document ALL findings provided by the bank - evaluate if responses are consistent with previous statements, bank policy/ procedures, bank documents, and reasonable banking practices. - if you conclude the bank failed to justify findings on a legal or nondiscriminatory basis, prepare violations and report - Consult with supervisors if violation should be referred to another agency or an enforcement action should be undertaken.

Answer 166

- Overt evidence of disparate treatment - Instances of apparent disparate treatment in underwriting or pricing - apparent disparate treatment in steering, redlining, or marketing policies/practices. - instances where a denied prohibited basis applicant was not afforded the same level of assistance as an approved control group applicant who was not better qualified - instances where a prohibited basis group applicant received less favorable treatment than was customary by bank policy - statistically significant average differences in frequency or amount of pricing disparities between control and target group applicants - evidence of neutral policies/procedures, practices that appear to have a disparate impact on a prohibited basis.

Answer 167

- All responses, not just the "best" or "final" response. - Document each discussion with dates, names, titles, questions, responses. - Any information that supports or undercuts the bank's credibility or bears on the issues raised by the discussions.

Answer 168

- don't assume the bank had specific intentions or considerations in mind when they took the actions being evaluated. (ex: don't conclude that bc you noticed a legitimate reason for denial, that no discrimination occurred, unless its clear the bank actually based the denial on that reason at the time of denial.) - Perform follow-up file reviews as necessary to determine accuracy and credibility of explanations.

Answer 169

No: Creditors may evaluate a co-signer’s qualifications separately from the applicant. A co-signer is generally called upon to repay a loan when the primary borrower is not able to make the payments; therefore, creditors may consider their financial capacity independently from the applicant. For instance, a bank may calculate separate debt-to-income ratios. This is a different structure from a loan involving two or more co-applicants where all would have primary responsibility for repayment. HOWEVER, A bank that required unmarried co-applicants to qualify separately, while allowing married co-applicants to qualify jointly, would have a discriminatory policy based on marital status.

Answer 170

This could present a disparate impact concern

Answer 171

Yes A consultation is not required because credit report fee violations based on marital status are not considered a pattern or practice of discouraging applicants and do not require a referral to the DOJ, a 15 day letter is also not required Bank should cease the practice immediately, conduct a file review of loans originated since LX, reimburse effected customers, and make changes to policies procedures and provide training.

Answer 172

No A credit scoring system that does not meet this standard is considered a judgmental system. The use of a judgmental system for evaluating applicants is not considered a violation of Regulation B unless it directly considers a prohibited basis as a factor.

Answer 173

Yes a bank can inquire about permanent residency under ECOA. a denial of credit on the ground that an applicant is not a United States citizen is not per se discrimination based on national origin. However, a creditor must fairly and neutrally consider these factors without regard to any prohibited basis. For example, a bank would violate ECOA if it only asked for proof of citizenship or resident status if the applicant had a Hispanic surname.

Answer 174

Yes, Pre-application marketing is covered by the discouragement provision. Here are three examples or prohibited practices: - statement that the applicant should not bother to apply after stating the applicant is retired - the use of communication in advertising that implies or suggests discriminatory preference or policy of exclusion - use of interview scripts that discourage applicants on a prohibited basis No, Pre-screened solicitations are not covered by the rule. But FHA, with regard to residential credit, covers pre-application marketing more broadly including prescreened credit solicitations.

Answer 175

This is a violation of FHA and ECOA. - the bank cannot treat applicants requesting this type of loan differently than any other applicants - faith-based covenants are legally unenforceable and are unlikely to impact if the bank needed to sell - a broad ban on lending to members of a religious community would not be the least discriminatory alternative to the bank.

Answer 176

ECOA would not apply if the deposit account does not contain a credit feature. However the Civil rights act could apply to non credit transactions (Section 1981) and could cover such discrimination. A violation could be cited in the ROE and perhaps lead to an enforcement action, but would need careful legal analysis.

Answer 177

Yes. Under Regulation B (12 CFR 1002.4(a)), a creditor cannot treat borrowers differently based on age (provided that the applicant has the capacity to enter into a binding contract). One exception to this is that credit programs may treat borrowers age 62 or older more favorably than younger borrowers. (See Official Interpretation 12 CFR 1002.6(b)(2)). Therefore, a deposit account that allows a higher overdraft program limit for customers age 50 or above is overtly discriminatory, in that it allows preferential treatment to borrowers age 50-61, as compared to borrowers younger than 50.

Answer 178

No. A bank may not have a policy that applicants must be at least 21 years of age to qualify for credit. While Regulation Z (1026.51(b)) imposes requirements when opening a credit card account under an open-end (not home-secured) consumer credit plan for a consumer less than 21 years, lenders cannot avoid following those requirements by not offering credit to applicants under 21. A policy requiring applicants to be at least 21 would violate Regulation B’s prohibition against discriminating on the basis of age.

Answer 179

Yes. While there is no requirement that banks offer applicants the option of having co-borrowers, co-signers, or guarantors, having a policy against them could have a disparate impact on younger applicants. Younger applicants may be more likely to require such additional support due to lack of credit and job history.

Answer 180

Yes, overdrafts are considered credit under TILA.

Answer 181

Any federal, state, or local governmental assistance program that provides a continuing, periodic income supplement, whether premised on entitlement or need. The commentary goes on to list Temporary Aid to Needy Families, food stamps, rent and mortgage supplement or assistance programs, Social Security and Supplemental Security Income, and unemployment compensation as examples of public assistance, but indicates that the list is not meant to be exclusive. Medicare and Medicaid are considered public assistance for doctors and hospitals and others to whom the benefits are payable.

Answer 182

Yes. Just as a person would need to identify their race or age if a discrimination claim was made on the prohibited basis of race or age, a consumer who makes a claim of discrimination based on handicap must show how they meet the definition of handicap.

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Fair Lending Laws and Regs (ECOA FHA) Flashcards

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