Publications:
Searching for an Optimal Strategy
for Identifying Files to Review for Fair Lending Exams
by Jason Dietrich
Abstract: A manual review of applications is an important
component of statistically modeled fair lending exams. How files to
review are identified affect both resource allocation and
reliability of conclusions. This study uses Monte Carlo simulation
to compare how six outlier identification strategies perform at
identifying disadvantaged applicants. The results show that the
optimal strategy for minimizing cost and maximizing reliability of
conclusions depends on the likelihood and severity of disadvantage.
Further, none of the strategies are highly successful at identifying
disadvantaged applicants or minimizing the number of
non-disadvantaged applicants reviewed.
Disclaimer
Any whole or partial reproduction of material in this paper should include the following citation: Jason Dietrich, "Searching for an Optimal Strategy for Identifying Files to Review for Fair Lending Exams," Office of the Comptroller of the Currency, Economics Working Paper 2005-3, September 2005.
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