Defending Against Fair Lending & Disparate Impact

Experts in The Field Share Their Knowledge on What to Do and How to be Prepared.

June 17, 2013 3:00-4:30pm

Moderator: Tammy Butler, Master CMB, Director of Fair lending and Compliance, Optimal Blue

Panelists:

Steven Bakst, COO, GFI Mortgage Bankers

Mitch Kider, Managing Member, Weiner, Brodsky, Kider PC

David Skanderson, Principal, Charles River Associates

Defending Against Fair Lending & Disparate Impact

Disparate Impact and Fair Lending from a secondary standpoint

What is Disparate Impact and Disparate Pricing?

GFI’s story

Real life scenarios

What can you do?

What Optimal Blue can do to help you

Disparate Impact and Disparate Pricing

Disparate Impact - Occurs when a policy or practice applied equally to all applicants has a disproportionate adverse impact on applicants in a protected class.

Disparate pricing – Occurs when a pricing policy or practice applied equally to all applicants has a disproportionate adverse impact on applicants in a protected class.

GFI’s Story with DOJ

US vs. GFI

Lender’s Policy: No mortgage loans permitted for less than $100,000.

This policy may disproportionally exclude potential minority applicants:

Due to income levels

Due to housing values by area

Scenario #1

This can result in Loan Officer A offering borrowers a higher rate than Loan Officer B

This will result in a disparity, as the protected class receives the higher rate.

Loan Officer A (Connecticut) Loan Officer B (Ohio)

100 Basis Points per Loan 50 Basis Points per Loan

Protected Class Non-Protected Class

Scenario #2

Rates drop due to an uptake in the market, and borrowers seek to renegotiate their loan rates.

Disparate Pricing: data analyzation shows that only non-protected class borrowers had their rates renegotiated.

Scenario #3

WHAT CAN WE DO?

What do regulators expect from us?

My Original Solution

Look-Back Monitoring System

Track which borrowers had higher rates or higher APR in a given month

Able to document each rate with clear reasoning, or lower the rate before closing

Loan Type Race Sex Age

Compliance Checklist

Rate Compare

Fair Lending

How Optimal Blue can help

Compliance Checklist

Historical Pricing

Fair Lending

Summary

Review your pricing policies and practices

Use the tools that Optimal Blue has available or create your own

Don’t become a statistic, trust me it is not worth it!

Defending Against Fair Lending & Disparate Impact

Steven Bakst

Chief Operating Officer

GFI Mortgage Bankers, Inc.

212-837-4537

sbakst@gfimortgage.com