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Automation provides a wealth of benefit to any manual process, inlcuding speed (file reviews in under 5 minutes), accuracy (99% for data validation) and traceability (audit trail of defects), to name a few.
But, in the case of HMDA, lenders are often surprised to find that it brings three unique value-adds to their reporting process.
Automation can eliminate “check the checker.” They say old habits die hard, and we have certainly seen our fair share while implementing our technology. Lenders that go from reviewing 100% of their loan files, using manual processes, are often reluctant to relinquish all their trust into a new automated workflow right out of the gate. Instead, they want to retain some existing manual reviews to ‘cross-check’ the automated output.
To help make believers out of the non-believers, automated HMDA technology should provide transparency to report on the data that passed the examination, so compliance managers can peruse tests and avoid creating off-line spreadsheets and manual processes to double check the work. After review, this level of transparency can reveal the accuracy of the technology and give managers the confidence to focus only on the single-digit error rate for defects that exist in most lenders loans.
Automation can structure your internal compliance training. Even those with the best of intentions can find themselves veering off course from their intended strategy. In the case of HMDA reporting and its goal of ensuring fair access to credit, regulators want to see lenders taking action, adjusting lending practices, and monitoring compliance.
In addition to flagging the data defects found in a lender’s loan files, automation can quickly cleanse and output data at a very granular level (i.e., by region, branch, loan originator) and bring patterns and trends to the surface. Equipped with this verified and validated level of detail, lenders can structure compliance training for their staff by either developing and tracking action plans right through their loan quality management system to minimize defects or use advanced BI tools to further identify lending opportunity adjustments. Oftentimes, standard reporting features of the loan quality management systems can provide enough detail to begin to identify trends without the need for a separate BI system. Each of these proactive steps help lenders show regulators they’re working towards continuous process improvement and fair lending standards.
Automation can include multiple databases in your HMDA analysis. The mortgage industry is no stranger to mergers and acquisitions. Behind the trail of shining synergies, IT and compliance teams are always left holding a mixed bag of disparate technology with a regulatory reporting clock ticking behind them. HMDA automation not only compares loan documents (the source of truth) with the system of record, often the loan origination system, for an effective audit but it can also incorporate analysis of data residing in other databases, such as those acquired through a merger. Automation makes it possible to grab the data from these additional record archives and pull them into the audit at the onset resulting in a more complete and accurate report.
As 2019 HMDA reporting deadlines approach, consider the benefits of introducing automation. Whether you need help juggling multiple systems of record, structuring compliance training programs, or eliminating existing manual processes, there’s still time to reap the additional benefits technology can enable for this calendar year of reporting.
