Some lenders already had collected what was widely referred to
as “HMDA Plus” data, which included many of the expanded
data points required under the 2015 rule. Most, however, were
faced with developing new processes and procedures to gather
the additional information. And many have confronted some
common hurdles along the way, as the March 1, 2019 reporting
date looms ever closer.
For example, some covered institutions were unable to make
significant strides in implementing the 2018 changes until late in
2017 due to technology challenges. Several third-party providers
of loan origination systems (LOSs) lagged in making the necessary
updates to allow for collection of all data points, at least partially
due to evolving regulatory guidance. Although these providers’
desire to provide a single, comprehensive update to address all
requirements at once, the delays severely limited the ability of
institutions to implement and properly test the changes—not to
mention modifying processes to incorporate the changes. Many
lenders still are working with their LOS providers to make tweaks to
their systems to allow for more automated HMDA data collection.
In addition, some lacked the necessary organizational change
management structure to implement such a sweeping regulatory
change. Implementation of the new requirements required coordination between the compliance department and the various lending
areas, including consumer lending, residential mortgage, and commercial lending departments. Each affected lending area was required
to completely overhaul its HMDA data collection procedures—and
in many cases the revised collection procedures were not sufficiently
challenged to help ensure alignment to the new requirements.
Similarly, a lender might find some internal resistance as it shifts
from a culture reliant on manual processes to one more automated.
When the compliance department has long been counted on to
“scrub” inaccurate data provided by the front-line staff, those front-line employees can become complacent about achieving accuracy
themselves. The heavier reporting burden effectively necessitates
that the data collected by the lending areas is as accurate as possible instead of leaving accuracy in the hands of the compliance
department. There now are too many fields to scrub the LAR at
the second line efficiently. The second line should be sampling for
accuracy and working with the lending areas to improve procedures
around data collection as errors are identified.
Some Temporary Regulatory Relief
The changes brought about by the 2015 HMDA Final Rule have
proven burdensome, which regulators implicitly acknowledged
in December 2017. The CFPB issued the following compliance
statement at that time:
“The CFPB does not intend to require data resubmission for
HMDA data collected in 2018 and reported in 2019, unless data
errors are material. Furthermore, the bureau does not intend to
assess penalties with respect to errors in data collected in 2018 and
reported in 2019. Collection and submission of the 2018 HMDA
data will provide financial institutions an opportunity to identify
any gaps in their implementation of amended Regulation C and
make improvements in their HMDA compliance management
systems for future years. Any examinations of 2018 HMDA data
will be diagnostic to help institutions identify compliance weak-
nesses, and the bureau will credit good-faith compliance efforts.” 2
Similar statements also have been made by the other regulatory agencies. The federal regulators seem to be suggesting they
are giving covered institutions leniency for their 2018 reporting
as long as the institutions can demonstrate a good faith effort to
implement the new requirements and do not have material errors.
However, regulators have not made similar leniency statements
regarding the 2019 data reporting.
In July 2018, the bureau also noted that the Economic Growth,
Regulatory Relief, and Consumer Protection Act signed into law
on May 24, 2018, provides partial exemptions for some insured
depository institutions and insured credit unions from certain
Institutions generally are exempt from the collection, recording, and reporting requirements for some, but not all, of the data
points specified in current Regulation C if:
■ ■ ■ For closed-end mortgage loans, they originated fewer than
500 closed-end mortgage loans in each of the two preceding
calendar years; and
■ ■ ■ For open-end lines of credit, they originated fewer than 500 open-end lines of credit in each of the two preceding calendar years.
Partial exemptions are not available to institutions that received
a rating of “needs to improve record of meeting community credit
needs” during each of their two most recent CRA examinations
or a rating of “substantial noncompliance in meeting community
credit needs” on their most recent CRA examination.
Subsequent guidance clarifies that institutions that qualify for
a partial exemption can optionally report exempt data points as
long as they report all data fields that the data point includes. Some
lenders that had already done extensive work to ramp up their collection, recording, and reporting capabilities—especially those that
are close to the 500-loan threshold—might opt to report exempt
data points rather than pull back and start over for 2019 data.
Re-evaluating HMDA Processes
Fortunately, it’s not too late to enhance your HMDA processes to
improve 2018 reporting and launch into 2019 with a functioning HMDA compliance program. Covered institutions should
consider the following steps when looking to improve HMDA
data collection efforts:
1. Determine where automation is possible. Perhaps the most
critical step is to set up the LOS so that the requisite data points
are as close to the source as possible and the fields export the data
directly into the LAR. When an institution maximizes automation,
the testing process will almost always uncover fewer errors, thereby
reducing the burden of data correction. Lenders, therefore, should
work with their vendors to improve automation where possible.
Discussions with vendors and involvement in user groups can
help to identify quickly which fields can be automated and even
where semi-automated workarounds can be used.
2. Develop well-defined data sources for fields that cannot be
automated. For data points that require information to be manually entered, lenders should draft formal written procedures that
clearly describe the information source (such as another system
or a particular document). The procedures should include as
RE-EVALUATING YOUR 2018 HMDA IMPLEMENTATION