Regulation — housing-specific
SR 11-7 + OCC Bulletin 2011-12 — Model Risk Management for AI underwriting
The joint Federal Reserve + OCC model-risk-management supervisory guidance is the load-bearing framework for bank supervisory review of AI. It predates modern AI but sets three obligations that map directly: development-implementation-use documentation, effective challenge, and ongoing monitoring.
What the regulation actually says
"Model risk management should include disciplined and knowledgeable development that is well documented; sound model implementation; effective challenge from parties independent of model development; and ongoing monitoring."
SR 11-7 / OCC Bulletin 2011-12 — Supervisory Guidance on Model Risk Management (Apr 2011)
"Ongoing monitoring is essential to evaluate whether changes in products, exposures, activities, clients, or market conditions necessitate adjustment, redevelopment, or replacement of the model, and to verify that any extension of the model beyond its original scope is valid."
SR 11-7 Section V.B — ongoing monitoring
What this means in plain English
- Documentation must be sufficient to reconstruct the model. Not vendor marketing. Version, inputs, assumptions, training-window rationale.
- Effective challenge must come from parties independent of development. Vendor QA does not qualify. Internal audit is a start; independent third party is the strong form.
- Ongoing monitoring must detect condition drift. Annual review is baseline. Real-time group-differential monitoring is where the exam expectation is moving.
What triggers the exposure in the sample
The mortgage-underwriting AI was not retrained across the 90-day audit period. Applicant-mix shift + presentation shift compounded silently. Under SR 11-7, ongoing monitoring should have caught the H3 divergence. Annual model-risk-management review alone is insufficient in an exam that lands mid-cycle.
What the $499 Snapshot shows against this rule
- Independent-verifier distributional-shape sensor operated across the audit period — the ongoing-monitoring record
- Distinct model family + distinct retention pipeline — the "effective challenge from independent party" record
- Model-version pinning + input snapshot — the "sufficient to reconstruct" record
- 3 fix-first items including adaptive drift-monitoring recommendation — the "condition drift detection" record
$499 Snapshot. 3 business days.
Independent-verifier determination + ongoing-monitoring record + 3 fix-first items.
Buy $499
Snapshot credit applies to Baseline ($2,500) or Enterprise Attestation ($35-55K) upgrade within 30 days.