Facilitating Fair Lending and Community Reinvestment

While the financial services industry has been addressing several regulations, such as Sarbanes-Oxley and the USA PATRIOT Act, the lending industry has been facing its own challenge of collecting and filing information as required by the Home Mortgage Disclosure (HMDA) and Community Reinvestment Acts (CRA).

These acts require lending institutions to report mortgage loan data, community development loans, investments and services to their primary regulators, as well as the public.

But SAS has a new solution that will help financial institutions meet these requirements: SAS Fair Banking. With this new technology, lending institutions will be able to:

• Quickly access and organize disparate data.
• Analyze and report lending activities.
• Measure investment and service performance.
• Identify possible lending disparities.

The new requirements
HMDA was enacted by Congress in 1975. Recent revisions have increased its regulatory requirements. Beginning in August 2005, federal agencies will make public how lenders price loans to their customers, including protected classes. HMDA and CRA data can be used internally by banks and externally by regulators and community groups to proactively gauge how effectively the lending needs of low- and moderate-income groups, protected racial classes and genders are being met.

The regulations apply to certain financial institutions, including banks, savings associations, credit unions and other mortgage lending institutions. It states that public loan data can be used for:

• Determining whether financial institutions are serving the housing needs of their communities.
• Helping public officials distribute public-sector investments to attract private investment to areas where it is needed.
• Identifying possible discriminatory lending and servicing patterns.

Meeting the new requirements with SAS
SAS Fair Banking enables organizations to effectively and efficiently manage loan data, control and correct errors, prepare submissions, create a wide variety of reports and conduct in-depth analysis. With SAS Fair Banking, financial institutions can readily create submissions, metrics and reports for regulatory compliance, as well as use the same information to examine their fair banking practices prior to filing. As a result, financial institutions have the capability to gain a comprehensive understanding of lending practices in a timely manner, helping minimize surprises on regulatory exams with respect to data quality or fair lending performance.

SAS Fair Banking helps mitigate the risk of fines, business restrictions and damaged reputations associated with noncompliance, unfair pricing, underwriting, loan marketing or inequitable customer service. The key is to locate and remedy violations as early, and as close to the problem source, as possible, minimizing negative customer impact and cost.

Built by bankers for bankers
National City Corporation (NYSE: NCC), headquartered in Cleveland, is one of the nation’s largest financial holding companies. A SAS customer for 22 years, National City was familiar with the strength and accuracy of SAS solutions and worked with SAS during the development of SAS Fair Banking.

Built by bankers for bankers, the software features complete data access, integrated data management, cleansing and geocoding capabilities. Leveraging this consistent data store, SAS’ business and analytic intelligence engine further extends processes and investigations beyond wading through static reports.

With the changes to HMDA in 2004, National City decided it wanted a more efficient process to meet increasing data demands while at the same time ensuring a high level of data accuracy. With the SAS solution on board, National City was able to evolve from simply compiling 1 million customer records to completely automating its data collection and analysis processes.

Tangible gains
"The strength of SAS Fair Banking is its strict and rigorous data management capabilities," says Madeleine Thomey, a vice president of regulatory compliance at National City."With the discipline and consistency of the data management process, errors are hard to introduce. Since everything is automated, there is no possibility of a forgotten step or of unintentionally affecting records."

National City has already realized tangible gains from the solution’s implementation. "The most immediate benefit for us has come from the software’s custom edits feature," says Thomey. "It has permitted us to consolidate dozens of reports into a single edit report for each line of business. We have used the time gains to really analyze our data and implement rules for each line of business to ensure their data integrity."

SAS has transformed National City’s data management process. "We have been able to centralize and automate the data management function, which was previously handled by each individual business unit," says Thomey. "Between the online error correction and the ability to export error reports in an electronic format for users without Web access, we have been able to go paperless."

SAS has helped Thomey’s group deliver value to other areas of the company as well. "Some of the business lines have noticed how quickly and easily we can respond to requests, and they have begun leveraging our data sets and our ability to create custom edits to monitor areas of compliance other than HMDA and CRA."

Instant access
With SAS Fair Banking, senior managers at National City now have instant access to reports that show income and minority distribution in the areas that interest them. Having access to such reporting capabilities can help the bank identify opportunities to grow with mergers and acquisitions, since the company can now overlay its own demographic data with that of its peer institutions.

"The SAS solution has increased our analytical ability many times over, while reducing our response time," explains Thomey. "In many cases, we are able to provide data within minutes."

"SAS Fair Banking is superior in its data management and analysis capabilities, providing organizations with a software solution to manage and proactively monitor fair banking risk at the enterprise level," said Clark Abrahams, strategist of fair banking compliance at SAS. "By having National City as a strategic partner through the development process, SAS Fair Banking has become a valuable solution that can assist financial institutions in HMDA/CRA and fair lending compliance coupled with their business intelligence needs."

Managing risk with SAS
SAS Fair Banking is part of the SAS risk management offering, which supports all aspects of enterprise risk management. SAS Risk Dimensions provides an integrated platform of comprehensive solutions focused on creating enterprise transparency and managing risk to grow revenue, control capital and lower the total cost of ownership for credit, market and operational risk and for compliance. The SAS risk management solution offers a consolidated view of all risk and compliance information, enabling more timely, accurate and effective risk management.

Tapping almost three decades of experience in financial services, SAS works closely with more than 2,200 financial institutions worldwide to provide timely solutions that address their critical business needs. Customers include 61 of the 62 banks listed in the FORTUNE Global 500® and such leading companies as AXA Financial, Barclays Bank, Dreyfus, Hang Seng Bank, ING Bank, Royal Bank of Scotland and U.S. Bancorp.