Charity loan approvel system
Abstract : Current banking data management on loan approval processes has great room for improvements of information quality and prevention of data problems in general, but especially with regards to fair lending and fair pricing practices. We first review briefly typical data collection protocols deployed at many financial institutions for loan approval and loan pricing. Portions of these data protocols are mandated by federal regulation. In discussing the data capture and analysis for fair lending, we illustrate some initial key steps currently needed in improving information quality for all parties involved.
? Identification and assessment of the applicant’s repayment willingness and capacity, including consideration of credit history and performance on past and existing obligations.
? Some banks may be inclined to relax lending terms and conditions beyond prudent bounds in attempts to obtain new customers or retain existing customers.
? Some banks have granted additional accounts to borrowers who were already experiencing payment problems on their existing accounts.
? To facilitate comparison, management often uses exception coding and retains it even if the condition triggering the coding no longer exists.
? The other lending channels have problems similar to mortgages but with further quality complications.
? These situations aids in preventing problems when the internal banking data quality and the model are periodically refined and deployed.
? In recreating the lending decisions, the compliance officer is testing for two types of fair lending violations: disparate impact and disparate treatment.
? Disparate impact in lending is revealed when two similar populations are treated differently as a result of characteristics of a particular loan program.
• The possibilities of optimization are proposed, and the potential effect on the quality of the loan approval process.
• The loan approval process is one of the more sensitive areas of banking and the Finance sector.
• Due to the pursuit to create efficient processes and achieve an optimized resource consumption regardless of a domain, the search for a qualitative product application is becoming vital.
• As a proposal for optimization, using advanced IT support can optimize the credit approval process to some extent.
• However, traditional systems like banks are less prone to change, and use few of the available possibilities.
? A great deal of performance information is now available on the new loan and its applicant.
? The principal benefit of retaining these data elements for all credit applications lies in the risk manager’s ability to efficiently ascertain compliance and to proactively prevent non compliance with fair lending laws.
? We have presented the typical data capture process at lending institutions, demonstrating the deficiencies of such an approach from a data quality and efficiency perspective.
? At this individual credit level, the officer will review the physical file against the electronic record used in testing and note any differences.
|