In Fair Lending compliance, redlining risk exists when a financial institution’s lending patterns result in disparate outcomes of marketing, underwriting, or pricing decisions between geographic areas with high and low concentrations of minorities. Identifying this risk is the first step toward determining how best to address it.
ADI's Redlining Sweep℠ uncovers the Market Areas in which your institution faces the highest redlining risk, using publicly available HMDA LAR data or your institution's latest HMDA files to produce a timely diagnostic analysis.
To conduct the Redlining Sweep℠, ADI compares your institution’s lending activity with peer lenders in each active metropolitan area or county. This customizable report quickly identifies the majority-minority (MM) or low-to moderate-income (LMI) communities that require the most attention for evaluating redlining risk. ADI’s sophisticated mapping capabilities allow us to present conclusions in clear pictures that illustrate lending opportunities. We then calculate an
Opportunity Index for each MM or LMI tract, by comparing the difference between the lender’s actual and expected tract-level application volume with aggregate demand in the Market Area.
The results of each Redlining Sweep℠ provide context for your institution's performance and guide ADI’s recommendations to address the drivers of risk. Based on the findings, we may further recommend additional quantitative analyses to confirm the presence of redlining risk, or we may propose an evaluation of marketing activities, branching, and other factors that may be identified as the causes of lending disparities.
Report Contents
The Redlining Sweep℠ is designed as a low-cost first step in identifying and reducing your redlining risk. Each report contains:
1. Introduction
2. Analysis
3. Summary of Results
4. Methodology and Table Results
5. Redlining Sweep Results
6. Map 1: Geographic Distribution of Applications
7. Map 2: Geographic Distribution Close-Up
Download Sample Report
ADI's consultants have extensive experience in analyzing data and proposing effective measures to meet strategic business and regulatory objectives. To learn more about how ADI can meet your organization's objectives, contact us today.