An MLO discovers that their company's loan processing system automatically generates higher rate quotes for borrowers in certain ZIP codes, even when those borrowers have identical credit profiles to borrowers in other areas. The MLO is concerned about fair lending implications but is told by management that the system uses 'proprietary risk algorithms.' What is the MLO's best course of action under UDAAP principles?
Correct Answer
C) Report the concern through appropriate channels as this may constitute unfair or discriminatory practices
Under UDAAP, practices that cause substantial injury without reasonable avoidance or offsetting benefits may be unfair. Geographic pricing that cannot be justified by legitimate risk factors may constitute unfair practices and potentially discriminatory lending, requiring the MLO to report concerns through proper channels.
Why This Is the Correct Answer
Under UDAAP, practices that cause substantial injury without reasonable avoidance or offsetting benefits may be unfair. Geographic pricing that cannot be justified by legitimate risk factors may constitute unfair practices and potentially discriminatory lending, requiring the MLO to report concerns through proper channels.
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