HMDA: Report with Purpose, Not for Purpose

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HMDA was back in the news this month with the CFPB’s latest ruling announced and with the year swiftly coming to a close, it is a good time to remind lenders about the rich repository of information their HMDA data contains.

The fundamental principles of the Home Mortgage Disclosure Act were designed to create fair access to credit. By understanding the results of your lending strategies, you may uncover inadvertent disparate impact or the appearance of discriminatory practices, but you may also discover new areas of opportunity to expand your lending programs.

None of this is possible, however, without a complete and accurate HMDA report.

Lenders who have not deployed an automated workflow for this reporting process do not have the time for a complete data quality analysis.  Many find themselves relying solely on their LOS data hoping it contains the accurate HMDA data they need.  Crunched for time it is quickly formatted on spreadsheets, briefly reviewed for any missing fields or obvious mistakes and is submitted blind without much confidence in what the data is saying.

With automation, a more comprehensive and accurate review is possible.  Data can be incorporated from every source, verified and validated against a set of sophisticated rules, then fed into a simple worksheet for auditors to work through.  Data inconsistencies are flagged to manage by exception, GEO code and rate spread are calculated automatically, and an audit trail of rebuttals can be tracked for regulator inquiries.  This automated process instills trust in the data whereby a detailed analysis can be performed.

From there, business intelligence tools can drill-down into the data and provide great insight to help track trends from month to month and profile your borrower engagement across branches, regions, underwriters and processor.  You can leverage reporting analytics to analyze denial patterns by neighborhood, race or gender, approval rate trends over prior years, product mix, and investigate new pricing strategies.

The goal is to feed this information back into your business processes on a routine basis, so you can support the markets you serve better and avoid regulatory scrutiny, or worse penalty.

Producing a complete and accurate HMDA report is for more than just the purpose of producing a quality report to submit to regulators.  It gives lenders a clearer picture of their lending patterns.  Rest assured, the CFPB will paint a picture of your lending practices, so you should know what your data communicates before they do.  A complete and accurate HMDA report also has the purpose of providing you the visibility you need to create the opportunity for homeownership for more borrowers.

To learn more about HMDA automation, watch this video on LoanLogics LoanHD® HMDA Audit Tool.

About the Author

Don Smith

Don Smith is currently serving as Director of Product Solutions for LoanLogics®. In this role he is responsible for driving the implementation of features and improvement of the company’s flagship SaaS based platform for loan quality management, LoanHD®. He also leads a team of business analysts. Don has been adding market driven capabilities to LoanHD since 2010. Prior to that, Don learned the mortgage industry during the boom and bust period from 2003 to 2007. He is also a law school graduate and “recovering attorney”, which helps him understand the regulatory landscape while designing solutions for the mortgage industry.