By Clark R. Abrahams
reasonable Lending ComplianceIntelligence and Implications for credits hazard Management
"Brilliant and informative. An in-depth examine cutting edge ways to credits danger administration written through practitioners. This e-book will function an important reference textual content if you happen to desire to make credits available to underserved shoppers. it really is finished and obviously written."
--The Honorable Rodney E. Hood
"Abrahams and Zhang's well timed treatise is a must-read for all these attracted to the severe function of credits within the economic system. They ably discover the intersection of credits entry and credits chance, suggesting a hybrid technique of human judgment and machine types because the valuable route to balanced and reasonable lending. In an atmosphere of swiftly altering patron demographics, in addition to regulatory reform tasks, this publication indicates new analytical versions during which to supply credits to make sure compliance and to regulate firm risk."
--Frank A. Hirsch Jr., Nelson Mullins Riley & Scarborough LLP monetary prone legal professional and previous basic advice for Centura Banks, Inc.
"This publication tackles head out there mess ups that our present possibility administration platforms have to tackle. not just do Abrahams and Zhang adeptly articulate why we will be able to and may increase our platforms, they supply the analytic facts, and the stairs towards implementations. reasonable Lending Compliance fills a much-needed hole within the box. If carried out systematically, this idea management will bring about advancements in reasonable lending practices for all Americans."
--Alyssa Stewart Lee, Deputy Director, city Markets Initiative The Brookings Institution
"[Fair Lending Compliance]...provides a special combination of qualitative and quantitative assistance to 2 sorts of monetary associations: those who simply want a little assist in staying at the correct part of complicated reasonable housing rules; and people who aspire to management in profitably and responsibly serving the unmet credits wishes of numerous companies and shoppers in America's rising household markets."
--Michael A. Stegman, PhD, the loo D. and Catherine T. MacArthur starting place, Duncan MacRae '09 and Rebecca Kyle MacRae Professor of Public coverage Emeritus, collage of North Carolina at Chapel Hill
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Additional info for Fair lending compliance : intelligence and implications for credit risk management
Use of Alternative Credit Data Offers Promise, Raises Issues,” New England Community Developments—Emerging Issues in Community Development and Consumer Affairs, Federal Reserve Bank of Boston, Issue 1, Third Quarter 2005. 28. Studies have found that in case of “thin” or no credit history, minority applicants are more likely to be denied for a loan than nonminority applicants. For example, an analysis of the Boston Fed data (Han, Song, Learning and Statistical Discrimination in Lending, unpublished manuscript, 2002) found that, for the subsample with no credit history information, very large racial differences exist in underwriting outcomes, versus no racial differences for the subsample where information on credit history is available.
Minorities and the poor benefit more than expected from nontraditional data. Nontraditional data decrease credit risk and increase access. Nontraditional data has relatively little effect on the mainstream population. Scoring models can be improved with more comprehensive data. 27. “Lenders rely heavily on credit scores to make credit decisions. An estimated 32 million Americans, however, have credit files that do not have sufficient information to calculate standard credit scores. ” See Afshar, Anna.
Chapter 6 explores some new ways to develop models that can accommodate missing information and alternative data to help evaluate underserved and unbanked consumers for loans. The foregoing discussion has touched on the “opportunity side” of compliance and risk management. Fair lending is no longer just a compliance issue. It has a significant impact on various aspects of an institution’s business growth and operations. 32 These models and strategies will not only pertain to customers and the parameters of the financial transaction; they will span external factors in the macroeconomic, community-based, sociological, and cultural realms.