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HMDA-The New Four-Letter Word

 

I’d like to welcome everyone to my new blog Fair Lending Diversity. It is my hope that you will continue to enjoy the content that you have been accustomed to over the years.  You can expect to see a lot of content generated over the next few months, which is designed to help you in your role as an industry professional.

 

To kick it off, let’s talk about the new Four-Letter word in our lives, HMDA.  That’s right, TRID has been replaced by its more daunting cousin HMDA and boy oh boy is it a doozy.
When most of us think of HMDA, we think of a nasty little report that must be filled out and sent to the government so that they have our “data”.  The problem is that lenders get their “data” wrong on a regular basis; which causes the lender to scrub and resubmit their data when examined.  The data that we are required to file is doubling, so I suspect that data integrity will continue to be an issue.  But wait, will it?  Or will it become a monster of a report to file, because the CFPB has now further automated the process?

 

Here are some of the essentials that you need to know before we can dive any deeper into this minefield.
  1. The CFPB will be unveiling its new data submission portal sometime this Summer.  Once that happens, developers will need to quickly figure out how data submission will change, in order to properly change your systems, to comply with data collection and submission.  Which means….
  2. Any system that collates your HMDA data or collects the required fields will need a revision. It’s a great time to put a Project Manager on who is doing what, and how it will change your workflow BEFORE you have to implement.
  3. When the data hits the new CFPB portal, it will search for obvious errors and kick it back to you repeatedly until you get it right. This is how the CFPB is trying to address Data Integrity outside of examination. This means that you do not want to wait until the last minute to attempt to submit your company data, because you may have to try it multiple times to get the system to accept it. Remember what it was like when automated underwriting started and how frustrating it was to try to figure out what the system wanted from you?
  4. The Senior Counsel for the CFPB Fair Lending & Equal Opportunity Division stated at the MBA Legal Issues conference the following:
“Many of the newly added data points will enhance screening to evaluate compliance with anti-discrimination laws, helping both institutions and regulators focus their attention on areas where fair lending problems are most likely to exist.”
I will be writing more about how these “new” data fields will be used by the CFPB and others, to shine a bigger light on industry practices, specifically as they relate to Fair Lending.  It’s not going to be pretty folks!
With these profound changes, each and every department within a financial institution will need to consider policy and workflow changes. I intend to break it all down for you and develop a HMDA readiness checklist to help you out.  These decisions will move to the forefront of each executive meeting as “business as usual” will no longer be our standard.  Stay tuned for the next posting where you will learn how the Race/Ethnicity section is changing on the loan application and in our HMDA data submission requirements.  I promise you that you will not believe it!

 

Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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