Earlier HMDA Public Data Release & Fair Lending Analysis

Be Prepared

-- Download Earlier HMDA Public Data Release & Fair Lending Analysis as PDF --

Calculator, pen and business document

HMDA data is a key focus of fair lending analysis.

While many institutions analyze HMDA for fair lending performance throughout the year, there are others who wait until year end or even until after submission of annual data by March 1st. The delay in analysis until after March 1 worked to some extent because data was not released publicly until September of each year. Of course, any ability to address shortcomings mid-year is lost by waiting until year end.

This will all change with the new fully automated HMDA submission process beginning with the 2017 submission in early 2018.  The current plan is for the CFPB to publish the public HMDA data quickly, possibly as early as 30 days after submission. This will be possible because all edits will be managed online and there is only one submission method, a fully automated paperless process.

HMDA data will be in the hands not only of institutions and examiners within 30 days of submission, but also will be available to community groups and software vendors who download that data into programs that provide instant fair lending analysis.

What does this mean to HMDA reporting institutions? It means that it is more important than ever to be always on top of your HMDA data and the fair lending story it tells.  If you analyze data at year end, give serious consideration to analyzing throughout the year, uncovering any shortcomings and making needed changes to improve results or at least understand reasons for performance.

Don’t wait and undertake a last minute mad scramble to review the data submitted to prepare explanations of potential disparities such as different outcomes of similar applicants, pricing differences, and geographic penetration shortcomings. All data, other than any held back from the public files, will be published for the world to see in early second quarter.

This new publication schedule will likely begin with the 2017 data submitted in early 2018, the first year under the new automated process.  We do not know at this point if there will be any grace period for 2017 data, given it will be the first year with the new process.

The 2018 data submitted in early 2019 will, of course, contain greatly expanded HMDA data, making early analysis even more important.

Contact us if you have any questions on this or other HMDA issues.

Have you checked out The HMDA Academy?  The resources go far beyond webinars and conferences. Learn about it and find out how we can help!

HMDA Project Management

Ideas to Develop a More Efficient Cost Effective HMDA Process

-- Download HMDA Project Management as PDF --

Improve the HMDA Process Now using Project Management Methods

As another HMDA season draws to a close, take some time to consider the HMDA process and how to make it better.

The HMDA LAR is an important document that is very labor intensive, with monetary penalties attached for inaccuracies. Take a project management approach and create a strong process to get it right.

I personally see financial institutions scrubbing LARs at year end, making changes to applications and loans that should have been made earlier in the year.  Other than purchaser codes or reconsidered applications that change later in the year, the LAR is expected to be correct within 30 days of each quarter end.  Waiting until year end to review and correct means that:

  • The LAR was not correct with 30 days of each quarter end;
  • The work to review and correct is all combined into one frenzied time period at a high cost in real money.

HMDA should be treated as a core financial institution process, with project management methods used to develop an efficient, cost effective way to report the data. A great deal of time, effort (and therefore money) is expended on HMDA.  It should not be an orphan process relegated to one person or department to clean up after everyone to get it right.

New HMDA LAR Will Be Almost 3x Larger!

The time spent scrubbing HMDA logs will grow exponentially once the new HMDA rules are in place.  The new HMDA LAR will have 110 fields compared to 39 fields today.  (This includes Respondent ID, Record ID and Agency codes on the current LAR.)

Waiting until year end to review files will take immensely longer and create much higher stress levels. HMDA data should be reviewed as it is created and not left until quarter or year end for one person or department to clean up. Reviews and audits should identify inadvertent errors, not be the process to get the data right.

HMDA and Dual Controls

Dual controls have a place in HMDA management. Make HMDA data reviews part of the process as applications are handled and files go through booking and quality control. Scrubs and revisions are time consuming and costly. HMDA should not be handled more loosely than other processes that rely on accurate data.

HMDA has fair lending implications that cry out for accurate data. The new HMDA requirements require so much more data that will flag potential fair lending concerns.  Don’t let inaccurate data cause unnecessary problems. Get your current process under control so that chaos will not ensue when the new rules come into play in less than 24 months.

Many Sets of Hands Touch a Loan File

As an application moves through the processing, underwriting, and booking processes, data should be reviewed for accuracy.  The first accuracy review should not be Compliance conducting a periodic test or, worse yet, an audit or year end review.

What a lost opportunity to have so many employees touching a file and passing on incorrect data. Divide up specific sections of data responsibility to specific jobs that handle the applications as they move along. If a loan officer enters original data such as application date, amount, property address, purpose, and demographic data (race, ethnicity and gender), the next area to handle the file should check that information. Why process bad information and further pollute the HMDA pipeline? As more data is added (preapproval codes, geocoding, occupancy, etc.) it should be double checked by areas responsible for that information and reviewed by the next area handling the file.

When an application that does not result in an originated loan is closed out, the business unit should review the data at the time when an adverse action or other notice is issued or final status is assigned.  Check the data, has it all been entered an and is it correct? Don’t put that file away until it has been reviewed and corrected.

Surprise Applications

Build in checks to ensure that all applications have been identified.  Surprise applications should not be surfacing at year end.  Those surprises are not just a problem for HMDA but also create Regulation B/ECOA risk.  If the application process has not been automated, think about ways to recognize that an application is in house. Was a credit report ordered? Periodic reviews of the credit report billing can identify possible applications. Are there similar activities that can be used to identify these orphan applications? Consider the flow of data, where are the touch points that can flag applications? If there is an origination system, learn how to use it to review for open applications for HMDA and Regulation B and Z timeline issues.

Focus on Cost in Management Discussions

Discuss the process with management.  Don’t focus on how it makes the life of the Compliance Officer or other staff member doing final checks difficult. Emphasize the hard dollar cost to the financial institution to pull people away from other work, work that also needs to be completed, to carry out an intensive rush to review files and scrub data at year end when that data has been handled by many employees throughout the year.  Why process, file, scan, and protect files with bad data? 

Spend the financial institution’s money wisely on sound processes that are efficient and effective. The new fields for the HMDA LAR as of 1/1/2018 can be found here at the FFIEC site.  Review that document with management to get support for fixing the HMDA process now. HMDA is complex and is becoming more so; give it the respect it deserves.

Need Help?

If you need help understanding HMDA rules, or ways to improve your process, or if you need to get up to speed on the new HMDA rules which are going to take a lot of time to implement, consider The HMDA Academy.

New MSA and Other Changes Affecting CRA and HMDA

Geographical Changes to Pay Attention To

-- Download New MSA and Other Changes Affecting CRA and HMDA as PDF --

Map with Markers

The FFIEC announced geographical changes including a brand new MSA that could impact CRA and HMDA reporting and analysis!  The announcement made on December 15, 2015 concerns changes to MSAs and counties that will be incorporated into the FFIEC data for 2016 when it is released.

These updates reflect changes to the actual statistical areas by the Federal Office of Management and Budget announced in July 2015.  For CRA and HMDA purposes, the changes are effective 1/1/2016. Any income changes won’t be available until that information is released by the FFIEC.

The new MSA in Oklahoma could affect HMDA reporting for institutions that now have an office in an MSA for the first time. Also, the Micropolitan Statistical Area and Combined Statistical Area changes present some opportunities for assessment area creation.

Overview of Changes

New MSA – The Garfield County, Oklahoma Micropolitan Statistical Area has been changed to a newly created Metropolitan Statistical Area,  MSA 21420, Enid, OK.

New Combined Statistical Areas have been created.  For example, The Lake Charles Louisiana MSA and the Jennings Louisiana Micropolitan Statistical Area are now in the newly created Lake Charles-Jennings LA Combined Statistical Area Number 324.

Additionally, new Micropolitan Statistical Areas have been created and some counties have been renamed.

References to Micropolitan Statistical Areas and Combined Statistical Areas might be new to some. Micropolitan Statistical Areas are non-MSA areas of a certain size but smaller than an MSA.  It is not a category used separately for CRA analysis, but can come into play when determining assessment areas.  While Micropolitan Statistical Areas are non-MSA counties for CRA purposes, if they are in the same CSA as an adjacent MSA, they can be incorporated into one assessment area with the MSA. Also, MSAs within the same CSA can be included in one assessment area, rather than multiple assessment areas.

Complete List

The full list of changes and all MSAs and micropolitan statistical and combined statistical areas is available here.

Be advised the full document is 158 pages!

In need of training on CRA and HMDA?

Consider the CRA and HMDA training opportunities offered by Key Compliance Services, LLC. You will receive in depth training and get your questions answered! For the month of January, the HMDA Academy offer includes the CRA courses! You can also signup for updates here.

NY State AG Fair Lending Law Suit


-- Download NY State AG Fair Lending Law Suit as PDF --

NY State Attorney General has announced a redlining lawsuit alleging that Evans Bank refused to make mortgages available in Buffalo’s predominantly African-American neighborhoods. The lending area map (which the bank apparently calls its “trade area”) includes most of Buffalo metro area. This will be an important case to watch.