The Influence of Bureau Scores,
Customized Scores and Judgmental Review on the Bank Underwriting
Decision-Making Process
Authors: M.
Cary Collins, Keith D. Harvey and Peter J. Nigro
Start Page:
129
End Page: 152
Volume: 24
Issue Number: 02
Year: 2002
Publication: Journal of Real Estate Research
Abstract: In recent years
commercial banks have moved toward automated forms of underwriting. This
study employs unique bank loan-level data from a scoring lender to
determine whether automated underwriting exhibits a potential ??disparate
impact?? across income strata. The findings indicate that strict
application of this custom scoring model leads to higher denial rates for
low- to moderate-income borrowers when compared with both a na?e
judgmental system and a bureau scoring approach. These results suggest
that financial regulators should focus more resources on the evaluation
and study of customized scoring models.
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