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If you read the article – Fair Lending Landscape 2021 – The Top 5 Potholes, this is Pothole #2 – Misunderstanding the Impact of the New HMDA Data

2018 marked the official change of expanded HMDA data requirements for Mortgage lenders.  During this year, the required data more than doubled, and the CFPB began automating the intake of this information.  We are now approaching year three of that data, and as most numbers people will tell you, this is where the regulators can better perform trending analysis on mortgage lenders based on the new data requirements.  Couple that with the CFPB’s usage of Artificial Intelligence, which has been learning patterns and practices about mortgage lenders, the new administration, and the likely new priorities of the CFPB, and this trifecta will give any mortgage lender cause to be concerned about their monitoring practices.

Here’s the problem!  The entire game changed for fair lending data, and lender monitoring practices did not sufficiently evolve to defend their practices.  Instead of a “Bird’s Eye” view of your company, regulators now have highly granular details about your practices! If you are using the same types of tools, software, analysis with the only change being more data to monitor, it is not even close to being enough!

Consider This:

Before 2018 HMDA data could only be used to see how a lender was performing as a whole versus today’s granular level. Now regulators can look at deeper levels within your company and your peers.

For the last three years, they have collected data that reveals granular level performance. For instance, we can now use this data to see:

  • How the practices of originators in one branch may vary, AND compare them to peer originators with another company in that area.
  • How pricing and fees vary by LO, Branch, State.
  • Individual originator denial/withdrawal rates [i.e., discouragement practices]
  • Deeper dives into your data and practices. When using this data to scope for pricing disparity, pricing exceptions, or redlining, the regulators will also get more granular in their requests. This may be problematic if you do not have the correct reports and the information you need to satisfy the request collated in the fair lending department.

Evolved Monitoring:

Evolving your monitoring practices goes way beyond collecting more data on a spreadsheet or in your software program.  As I discussed in my last article, Fair Lending Software vs. Fair Lending Monitoring, software is a scoping tool and not a monitoring tool.

Monitoring requires lenders to:

  • Scope their own data for issues, which is WAY MORE data than HMDA!
  • Collect disparate data/reports from various departments to collate into one central source in the fair lending department.
  • Discover the “why” behind the pattern of practice that seems problematic.
  • Distill the “why” into summary items to be discussed with the Executive team
  • Work with each division to come up with strategies and solutions that will:
    • Solve the “why.”
    • Maintain profitability
    • Keep the sales force from jumping ship.
  • Compare their data to their peers at the LO, branch, and state levels

It is time to take off the “we have always done it this way hat” and consider the contemporary methods for monitoring your fair lending practices. Take the old school methods, evaluate their worthiness in today’s world and add the new school methods.  When you do this, you are properly preparing for a fair lending inquiry or exam.

Fair Lending Diversity specializes in uncovering and fixing the highest risk issues to the lender. Our clients range from small banks to top mortgage lenders.  Our mission for all our clients is simple – “Maintain Profitability & Reduce Risk.” If you would like to discuss our services, please contact me at

Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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