CFPB – HMDA Getting it Right

By: Tammy Butler, Master CMB

The HMDA Data “Getting it Right” is the thought, hope, and prayer of all lenders and regulators.  The reality is that less than 50% of the HMDA data collected is correct now, and this is before the regulators doubled the fields that need to be collected.  So 2018 data collection should be great fun for all!

Rule Synopsis:

HMDA went through a massive change when the CFPB updated the data fields that were to be collected starting January 1, 2018.  The fields more than doubled and many of the new fields added will pinpoint down to the loan originator, pricing disparity issues and exceptions.  This will open up more risk for lenders and originators as the Bureau evaluates this data. Getting the data right and reviewing what the data says about your company gives your company a chance to make strategy changes and address problematic trends before they become a large issue.

Interpretive Comments:

 The CFPB has told us that they have gone to great efforts to ensure that transmitting data required by HMDA will be easier, more efficient and will result in a higher degree of accuracy.  For lenders, I hope that this is true because the AI (Artificial Intelligence) that is going to evaluate this data will look at this data as gospel.  If you do not know your company “data story” that the expanded set of data will tell about your company, I strongly recommend that you test this out by running analytics on your 2016 data with the expanded set.  Surprises next year are never in your best interests.  It is much smarter to search for any patterns of practice that may be problematic now, and then put strategies in place to fix it this year, versus waiting for a regulator to find them and be blindsided by your data story.

The bottom line is this.  Someone in your company needs to be exclusively focused on HMDA this year and parse through this document over and over again to actually “get it right” so that come 2019 you are not dealing with the tragedy of having a year’s worth of data that is incorrect.  Now is the time to evaluate, test and work through any systemic issues, and this booklet along with the plethora of tools on the CFPB site should help you pin that down.  For the compliance folks, make sure that you document the due diligence your company has taken to implement the new HMDA data requirements.  In an exam, if an examiner has an issue with your data or methods, you can demonstrate the levels of detail that you went through to actually get it right.  You will likely still have to fix it, but you will also likely have more leniency for the things you did not do well.

Loan Officer/Processor/Closer/Underwriter Interpretation

Keep your file data clean in your LOS system.  The new HMDA data will be evaluated and can be traced directly back to your NMLS number, so you want it to be correct to avoid any false positive issues.

Compliance/Manager/Owner Interpretation

Compliance was tough before, and it is about to get tougher.  Whether you do your reporting or you have a third party handle it, spend extra time in QC to ensure that the LOS has correct data when a loan is applied for and going to closing.  The new system to upload HMDA data is not as tolerant as the old system.  Therefore, mistakes picked up by the new system will cause you a lot of frustration to fix, not to mention a timeline crunch if you wait until the last minute.

Supporting Resources:

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