Making exceptions to loan policy or allowing pricing discretion are not wrong. In fact, they may be necessary in some cases to get the deal done since no two applicants’ circumstances are the same. Exceptions and pricing discretion do; however, invite fair lending risk to the table and your lenders, management and Board need to be aware of this. The Federal Reserve has stated, One of the most common credit practices that elevates a bank's fair lending risk profile is the allowance of discretion with pricing (rate, term, fees/fees waived, etc.) or underwriting decisions for consumer loans. The more discretion a bank allows its lenders, the more fair lending risk is present as inconsistent treatment between borrowers may result. This means these must be monitored and controlled to mitigate this risk.
Jerod explains more in the video.
2026/01/05