When it comes to evaluating compliance with fair lending laws, you want a tool that will conduct widespread and effective evaluations based on the FFIEC risk factors. Although there are many tools on the market, be sure to consider these 6 elements before selecting a fair lending analytical tool.

1.   Administration and Credentials

As you’re examining your options, check that the provider doesn’t need an administrator within your organization controlling and monitoring your account. You, the user, can create your own credentials.

2.   Web-Based With Automatic Updates

Look for an analytical tool that doesn’t force software to be downloaded onto your computer—the program should be web-based so that you can enjoy real-time updates.

To save your company time, make sure updates automatically occur outside of business hours, with no action required from you.

3.   HMDA LAR Preparation Included

When evaluating a fair lending analytical tool, check if the application includes a tool to help prepare the Home Mortgage Disclosure Act (HMDA) Loan Application Register (LAR) for submission at no additional charge.

Do your own research to determine whether the regulatory community is familiar with the tool, and whether the vendor has experience working with state and federal regulators.

4.   Interactive Help & Knowledgeable Trainers

With the complexity involved with regression and other statistical modeling, you may need guidance navigating areas of the program or help with troubleshooting. Always look for a tool that provides assistance at every step and even includes interactive help and videos.  A company that offers one-on-one support is a must-have.

5.   Reports & Capabilities

You need a tool that will produce reports that get to the heart of underwriting, redlining, and pricing. Make sure that these reports are easy to produce, comprehensive, and simple to explain to senior management.

You should also check to see if it includes match pair testing, which is traditionally used to check for discrimination in mortgage and other types of lending. Also, take a look at  the statistical analysis capabilities.   If you are a depository institution, then you may need a tool that analyzes non-mortgage loans.  These systems should include race proxy and geocoding capabilities.

6. Mapping

Mapping has become a mandatory requirement for banks in the last number of years, and a crucial piece of compliance. It’s used to show lending activity by tract income or tract percent minority information, for Community Reinvestment Act (CRA) and fair lending analysis purposes. Finding the right risk assessment tool will also help your organization easily highlight areas of potential fair lending risk and allow you prioritize your resources.

Selecting the right fair lending analytical tool for your organization is one of the best ways you can grow your financial institution. Contact the team at ComplianceTech today by visiting us online and finding out how we can help you stay up-to-date on the issues that matter to you.