Could It Happen to You? It Doesn’t Have to!
Written by: Bill Dolan, CMB, AMP
For several months now, SCA has been out in front, writing numerous articles surrounding CRA, Fair Lending, and Redlining. We advised you of the numerous penalties being incurred by financial institutions throughout the region and the rest of the country. No institution (small, mid-size or large) is exempt when it comes to having their house in order as Redlining/CRA and Fair Lending compliance remains a top priority for the DOJ, regulators, and examiners today. At the same time, compliance risk management must remain a fundamental responsibility for you, and for all financial institutions both locally and nationwide.
Let’s get real here. NO institution deliberately engages in redlining. Many times, it is an unanticipated aftermath of underwriting standards or marketing practices. Therefore, it is critical that every institution analyzes its data for potential risk and exposure. There are several critical data points that should guide your institution’s self-evaluation of redlining risk.
SCA has worked with several clients in this area and, over a period of several months, has developed a CRA/Fair Lending data mining analytics tool that will provide an easy solution using your HMDA data.
By working with our Senior Compliance consultants, within 48 hours after providing us with your HMDA data, SCA can provide you with an overall analysis of potential fair lending exposure and pinpoint for you, what SCA can do to resolve these areas of lending risk, especially prior to your next CRA/Fair Lending examination. Our subject matter experts and former examiners will advise you and your management team of specific risk areas based on demographic data included in the public files that can stratify geographies (city/town) with respect to minority compositions. We can examine at the census tract level just what the penetration looks like with your HMDA reportable LAR, and with respect to both majority-minority demographic and geographic landscapes.
While you may think that this has not been an issue for community banks and credit unions, expansion into new markets, rapid change within a market, mergers and acquisitions, staff turnover, etc. can cause serious disruptions with respect to the communities you lend in.
Examiners typically assess redlining risk right at the start of their CRA/Fair Lending examinations. They do so by evaluating both your HMDA and Census Tract data and your performance will be compared and evaluated to your peers within your market.
Redlining compliance is more important today than ever, and effective compliance management weighs ultimately on comprehensive data analysis so your organization can identify, manage, understand and mitigate any potential risk exposure.
Contact Bill Dolan, Director at (617) 694-2617 or email Bill at: WDolan@scapartnering.com to arrange a free HMDA data analysis of your prior HMDA LAR submission(s) using SCA’s analytics tool and methodology to help you identify potential redlining risk exposure and see just what your examiners will see at exam time.
