Mortgage Loan Quality

If You Don’t Get HMDA Right, You Don’t Know Jack

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dont-know-jack-nicholson-hmda-cfpb“It’s amazing, we can’t do HMDA right,” so said my good friend and colleague Jack Konyk, Executive Director of Government affairs with Weiner Brodsky Kider, during an exchange at a recent industry forum. Jack was talking about the requirements for reporting a borrower’s ethnicity, race, and sex for loan applications.

HMDA has been around since the 70’s, like Jack, and he says if lenders can’t get it right now, with limited options, what are they going to do when these options for ethnicity and race are expanded?

Under the new rules, a lender must obtain and report the information exactly as provided by the applicant(s), regardless of what the lender may think.

Per Jack, “It doesn’t matter what you think; report what they say about themselves.”   An applicant will have up to 20 different combinations for reporting this information under the new rules.

If a borrower does not provide the information, a lender is required to enter it based on a visual observation or surname.

Recently, it was reported that mortgage giant Nationstar is in negotiations with the CFPB regarding payment of civil monetary penalties for alleged HMDA reporting violations. This is under existing HMDA rules, which have been greatly expanded to include the collection and reporting of much more loan and consumer data beginning in 2018.

Konyk warned against sloppy HMDA reporting; saying that CFPB will take this to indicate incompetent management and inadequate lender controls. Not how any lender wants to be categorized.

Bad HMDA data can lead to big problems and several audits by a host of regulators. You need to get HMDA data collection and reporting right; the first time.

According to HMDA, a lender must compile and report data regarding applications for, and originations and purchases of, home purchase loans, home improvement loans, and refinancing’s for each calendar year.

An institution is also required to collect data regarding requests under a preapproval program,  as defined in the rule, when the preapproval request is denied or results in the origination of a home purchase loan.

A preapproval is different than a pre-qualification where a specific property and/or loan program is  not defined.

A preapproval, requiring reporting is defined under the law as being when the request is reviewed under a program in which the financial institution, after a comprehensive analysis of the creditworthiness of the applicant, issues a written commitment to the applicant valid for a designated period of time to extend a home purchase loan up to a specified amount.

First, a lender needs to know and understand what transactions need to be reported, and then ensure it collects and accurately reports all the required information.

If you’re still a little confused and need more information and guidance you’re in luck. Jack and a panel of legal experts will be discussing HMDA, TRID updates and other regulatory challenges to lenders at the upcoming Regional Conference of MBA’s in Atlantic City.

This panel alone is well worth the price of admission. Not to mention all the additional presentations and excellent networking opportunities. Take a look at the MBA Conference, to get all the details. Don’t miss it.

Michael Vitali

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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Michael Vitali

About Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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