Hey, it’s Tory Haggerty from Tuscan Club University’s Fair Lending School and welcome to another Fair Lending Short.
In this fair lending short, we are going to talk service levels you provide to applicants.
If you are a HMDA reporter, you can easily find this by looking at your fallout applications.
What are fallout applications? Those are applications that did not result in a denial or origination. They are your approved but not accepted, withdrawn, or closed for incompleteness. For some reason, the applicant fell out of the process.
Why should we care about fallout rates? It can be indicators of reduced service levels if certain prohibited basis group individuals have much higher fallout rates than white borrowers or peer lenders.
How does this happen? It can have many causes, but here’s one example to help you understand the problem.
I once did an audit for a bank that had fallout rates to Hispanic applicants 3 times higher than any other class of applicants. When I asked if they had any Spanish speaking personnel, I watched the light bulb go off. Hispanic applicants were applying but falling out of the process because nobody at the bank spoke Spanish.
Know your fallout rates, and if you have higher rates, find the root cause so you can address it.
This shows up in your HMDA data, which means examiners will be able to see it. You need to identify it first and fix it, so it won’t be a problem at your next exam.
Thanks for reading!
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