One of the great features of LendingPatterns™ is that any lender’s diverse lending performance can be analyzed in the context of other lenders in the same market. This is the only way a given lender’s performance can be said to be above or below expectations. Sometimes this is referred to as comparing a lender against their peers in the market.
So, what are peers? Peers are your competitors in each market. Does it make a difference how the competitors are regulated, e.g. by Fed, FDIC, OCC or CFPB? The answer is No! Who the regulator is does not really matter. Credit unions, mortgage companies, national banks, and bank holding company affiliates may all compete against each other in a given market.
Does size matter? Of course. It is probably illogical for a small community bank to compare itself to the largest banks in America even though the big bank might be a formidable competitor in the community bank’s market. The business model also matters. If the subject lender is a mortgage company specializing in refinancing’s they should not be compared to lenders specializing in home purchase.
What is the role of peer analysis in fair lending? Peer analysis plays two essential roles in fair lending analysis:
1) Informs the analyst whether the subject lender’s racial/ethnic and gender disparities are out of line with expected disparities.
2) Used in redlining analysis to determine whether the subject lender’s market share in majority-minority versus majority-non-Hispanic white census tracts is statistically different than the market’s.