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Late last year it was reported that the CFPB pumped up the number of enforcement attorneys on staff by double digits, ten percent. As typically happens with a new presidential administration, there’s been a new attitude in Washington toward the housing market. And there’s been no shortage of their presence since the change of guard.
Last week, the CFPB implored lenders to broaden their support of non-English speaking borrowers in the home-buying process. Overall servicer communications, appraisal bias, and the effectiveness of the Community Reinvestment Act were also under recent scrutiny. And, just last month, the watchdog agency cautioned lenders about AI-led decisioning and its impact on fair lending.
All of this, in addition to it already being midway through the year and application volume slowing giving lenders additional time, makes a good reason for lenders to start tightening their 2022 HMDA reporting controls.
The CFPB wants accurate reporting. How can this be achieved? Organizations have a few options.
The first is to perform regular data sanitizing/scrubbing maintenance before a LAR is submitted by the March 1st annual deadline. This typically means an internal manual review of applicable source documents against the data used in reporting. Does it match and cover all application types (withdrawn, incomplete etc)? Is geocode confirmed? Has data been omitted? Is it dated correctly? Depending on the size and risk tolerance of your organization, some may perform this cleanse quarterly or monthly and not wait until the last minute. Knowing this process can be a burden to busy mortgage compliance professionals, particularly at years’ end, some firms outsource this task.
With automated systems, like LoanLogics HMDA Complete, a 360-degree view and comparison of data to docs and systems are incorporated into the HMDA review itself, ensuring accurate reporting. The process is facilitated by IDEA Services delivering 99% data accuracy. Geocoding and rate spread are also calculated natively within the application. Discrepancy reports are available to use to update the LOS with whatever incomplete or inaccurate information surfaces. This automation is a preferred solution for lenders who are not routine in their regular data cleansing maintenance and do not trust the accuracy of their LOS data.
For lenders that do trust the quality of their data and prioritize data cleansing, LoanLogics offers another solution LoanHD® HMDA DirectCheck which uses source data to perform the HMDA review. Because no one can ever be certain about everything, we offer our clients a hybrid model where they can run a subset of their loans through our more robust offering to check the accuracy of a subset of their loans. This “testing” gives users a stronger comfort level that the accuracy on the remainder of their loans should be about the same, statistically speaking.
Back in the Fall, we saw one bank fined a hefty penalty for lending discrimination. While deliberate, we know that the CFPB itself does not discriminate and will find and fine lenders who provide inaccurate reporting. Ensure your reporting with confidence. Request a product introduction to LoanLogics HMDA Audit Tools today.
