In the previous weeks we talked about pricing basics, the known adjustments and borrower decisions, and in Part Three how widely pricing adjustments can affect rate.
My question to all of you in Part Three was “Did the lender discriminate because there is pricing disparity? “
As Chris pointed out it in the comments, it doesn’t look like discrimination to him, and I would have to agree that pricing disparity does not equal discrimination in pricing. After all, I made it clear in my example why certain interest rates were given to each client.
BUT, what if you don’t have all of those details that you can drill back into quickly? Unfortunately, this is where many mortgage bankers fall apart in an inquiry or exam. If you don’t have the exact reasons then your company may be accused of pricing discrimination due to pricing disparity. It doesn’t matter if you did or didn’t, if you cannot prove why your company did not discriminate, when the “data” shows higher interest rates to minority clients, you will have issues.
The CFPB has taken review of pricing disparity up a notch, by expecting far more details than regulators in the past. So, if that is the case the lenders need to kick up their monitoring a notch.
I want you to honestly answer these questions (privately please):
- If the CFPB were to send you a letter that they had questions on several hundred or thousands of your files, could you get back to them in a timely fashion?
2.Can you do this without pulling every file?
- Have you secured all of the data points on each file to defend your position?
I can assure you that if your head is buried in a spreadsheet, which gives you numerical averages to plot whether you have an issue or not, then you are probably behind the times in defending your company position.
Today’s Fair Lending Analyst needs to be involved from the first phone to the closing. This means that all data proving you do not discriminate is archived and organized in such a way, that you can pull it up in seconds on any file.
The next thing I usually hear after that is “it’s impossible to collate and quantify all of that data on each file”. To which I respond “and they all thought Columbus was going to fall off the edge of the world”, or “no one believed you needed a personal computer in your home”, or “men cannot land on the moon”. Be willing to toss what you used to do, and stay tuned for a new Patent Pending process, which will take the guess work out of pricing disparity by removing all the noise and allow you to focus. It is math at its finest and easiest!
Or, you can keep typing away your responses to the regulators on your IBM Selectric Typewriter!