Magazine article Mortgage Banking

The March of Time toward HMDA 2018

Magazine article Mortgage Banking

The March of Time toward HMDA 2018

Article excerpt

JANUARY 2018 IS JUST AROUND THE CORNER--at least in terms of compliance with new reporting requirements for Regulation C, implementing the Home Mortgage Disclosure Act (HMDA). [paragraph] Last year, the Consumer Financial Protection Bureau (CFPB) finalized its call for more and better reporting from lenders amid dramatic changes in the mortgage market and under the statutory requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Operationally, that translates into 25 new and 14 modified data points.

Some lenders began the painstaking process of reworking this data soon after the CFPB issued its proposed regulation in 2014--and they are, in effect, demonstrating the way forward. Others should start soon, if they haven't already, to ensure a seamless and error-free HMDA data disclosure in 2018.

Public officials use HMDA data to raise and allocate housing and community development investments, respond to market failures and monitor financial institutions for discriminatory lending practices. Updating HMDA reporting will also require lenders to test, scrub and reformat data, as well as refine overall HMDA processes.

Some banks have had the opportunity to work directly with regulators to begin to define best practices. How does your institution compare with the forerunners in this space? Here are steps to consider.

Perform multiple data scrubs and checks

Institutions should perform several rounds of data scrubs and file-level testing exercises before submitting their Loan Application Register (LAR). The data should be reviewed by multiple groups, scrubbed by a dedicated team of HMDA subject-matter experts, error-tested internally and tested again by an independent team. This can reveal root causes of data anomalies early so data can be updated and corrected before it's too late. Understand which sample sizes are adequate for HMDA file-testing purposes and ensure testing results are used to correct root-cause issues. If multiple layers of file testing are not possible due to resource constraints, consider software solutions that automate some of the scrub process.

Revamp and update software

Many institutions are re-evaluating their current HMDA reporting and analysis software solutions to ensure that their functions align with new expectations. What has worked in the past may not be the best solution for the future, and it is important to have the best and most applicable HMDA reporting software available. Software that can assist in detailed fair lending analysis is preferred. If a change is warranted, now is the time to make it in order to train employees, work through mock submissions and fix root-cause issues.

Cross-calibrate

Certain new fee-related data points such as total loan costs will need to align with documents that are also required under the Truth in Lending Act (TILA)Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure rule (TRID). These fields require back-end calculations that introduce the risk of further data inconsistencies. Any post-closing regulatory cures such as those made pursuant to RESPA must be reflected in the data and be consistent across platforms as well. Before reporting, a targeted point and fee analysis for both RESPA fee tolerances and HMDA data will improve this consistency. …

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