Litigation Services Handbook, 2014 Cumulative Supplement: The Role of the Financial Expert, 5th Edition

CHAPTER 35A

FAIR LENDING LITIGATION

Shara M. ChangValerie L. HletkoLiana R. PrietoBenjamin P. Saul

CONTENTS

35A.1 Introduction

35A.2 Legal Background

(a) Fair Housing Act

(b) Equal Credit Opportunity Act

(c) Civil Rights Act of 1866, As Amended

(d) Community Reinvestment Act of 1977

(e) Home Mortgage Disclosure Act

35A.3 Categories of Discrimination: Disparate Treatment and Disparate Impact

35A.4 Statistical Background

(a) Statistical Analysis and Tests of Significance

(b) Hypothesis Tests

(c) Review of Statistical Methods

(d) Two-Sample Binomial Tests: Z-Scores

(e) T-Tests: Comparing Two Means

(f) Multiple Regression Analysis

(g) Comparative File Review

35A.5 Forms of Data Used in Fair Lending Litigation

(a) Omitted Variables

(b) Reliability and Completeness

(c) Sample Selection Bias

35A.6 Underwriting

(a) Selection of the Pool of Applicants

(b) Data Collection

(c) Statistical Analysis of Underwriting Discrimination

35A.7 Pricing

(a) Selection of the Pool of Applicants

(b) Data Collection

(c) Statistical Analysis of Pricing Discrimination

35A.8 Redlining

(a) Selection of the Relevant Market or Pool of Applicants

(b) Data Collection

(c) Statistical Analysis of Redlining

(d) Statistical Analysis of Reverse Redlining

35A.9 Default Servicing

(a) Selection of the Pool of Borrowers

(b) Data Collection

(c) Statistical Analysis of Loan Servicing

35A.10 Conclusion

NOTES

35A.1 INTRODUCTION

Fair lending has become an increasingly active area of litigation by government agencies and private ...