Calvin Bradford has been a fair lending, fair housing and community reinvestment consultant for over 25 years. His firm engages in research, training, program development and evaluation, and expert witness work for government, private industry, public interest and community-based clients.
Representatives from each of these organizations received a request to comment on the following statement:
A variety of research studies, emanating from the Federal Reserve System, other regulatory and government institutions, and private research organizations, have suggested unexplained variances in mortgage acceptance rates and pricing between majority and minority mortgage applicants. Though not uniformly the focus of these studies, credit scoring is now a commonly used tool in the mortgage underwriting process. Credit scoring advocates maintain that as an underwriting tool, credit scoring has allowed the underwriting function to be streamlined for highly creditworthy applicants, allowing human underwriters to allot more time to applications where credit issues are present, and has reduced overall costs of underwriting. Detractors claim that factors considered within statistical credit scoring models, even if not intended, favor majority applicants and create a new barrier to home-ownership for minority mortgage applicants. Please describe, from your perspective, fair lending issues that might arise as a result of the use of credit scoring technology in the mortgage underwriting process and what your organization does to address these issues.
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