Imagine sitting at your desk in the year 2020, head in hands,
staring at your computer screen. Your gaze shifts to some movement
outside the bank. You turn to look out your window, and there is Doc, sitting in a
DeLorean time machine, door opened high…your “Back to the Future” moment! If you could travel
back in time, what advice would you give your past self to help better prepare for HMDA in the year 2020?
HMDA Changes in 2018
To review, the number of data fields to collect roughly doubles
in the year 2018, and points of data may total over 100 on any
given file. In general, the changes will relate to four categories of
new or modified data points:
■ ■ ■ Information about applicants, borrowers and the underwriting process, such as age, credit score, debt-to-income ratio,
reasons for denial if the application was denied, the application
channel, and automated underwriting system results, as well
as expanded categories for ethnicity, race and gender.
■ ■ ■ Information about the property securing the loan, such as
construction method, property value, lien priority, the number
of individual dwelling units in the property, and additional
information about manufactured and multi-family housing.
■ ■ ■ Information about the features of the loan, such as additional
pricing information, loan term, interest rate, introductory rate
period, non-amortizing features, and the loan type.
■ ■ ■ Certain unique identifiers, such as a universal loan identifier,
property address, loan originator identifier, and a legal entity
identifier for the financial institution.
Initial Focus: System Implementation
Very likely, your 2017 counterpart has spent a lot of time with
the IT department to focus on system changes needed to collect
the new fields of data in 2018. There will need to be two sets of
data aggregation rules in place: the current rules to maintain
getting it right for the 2016 and 2017 data flow, and the new
rules in anticipation of the 2018 data fields. Don’t take your eye
(or resources) off of monitoring the quality and integrity of 2016
or 2017 data–you don’t want to be correcting or resubmitting
that data in 2018. A recent enforcement action resulting in the
largest Consumer Financial Protection Bureau (Bureau) HMDA
enforcement fine ever ($1.75 million) reinforces the importance
of data integrity.
Additionally, be prepared to capture the necessary 2018 data
for any applications that are started in 2017, but for which the
final action is taken in 2018. Typically, all new fields apply, with
the possible exception of the expanded categories. A transition
provision generally allows for the ethnicity, race and gender information to be collected, based on the requirements in effect on
the date of collection–not the date of final action.
Additional Focus: Submission Changes
Also in 2017, your counterpart will be preparing for the changes
in the submission process on the Bureau’s new HMDA Platform.
In addition to the new process, platform and recipient for submitting the 2017 HMDA data to the Bureau on March 1, 2018,
there are also changes in the way data edits are verified (prior
to submission), how the signing officer acknowledges the accuracy and completeness of the data submitted, and a new Bureau
geocoding process (optional).
The following is a summary of changes you need to prepare for:
■ ■ ■ 2016 data collected under current rules, submitted annually
■ ■ ■ 2017 data collected under current rules, submitted annually
to the Bureau;
■ ■ ■ 2018 data collected under new rules, submitted annually to
the Bureau; and
■ ■ ■ 2020 data collected under new rules, submitted quarterly to
the Bureau (threshold for quarterly reporting: 60,000 covered
loans in the preceding year).
As if this weren’t enough, what else should you be considering?
Quality of Data for New HMDA Fields
What is the quality of the data you are collecting as of January
1, 2018? Let’s take a look at those new fields and consider where
that data flows through.
■ ■ ■ The TRID Effect: Yikes! Did you consider to what extent
your institution’s state of readiness with the implementation
of the TILA-RESPA Integrated Disclosure rules may have on
your HMDA data in 2018? Many institutions have manual
workarounds to meet thresholds and to effect timely cures for
loan features such as pricing and interest rate. There are times
that refunds are made to cure tolerance violations, and focused
concern about getting this information documented within the
customer’s disclosures. However, is the line of business equally
concerned about ensuring that all those last-minute changes
are accurately documented in the system of record? What if
the cure is done and falls into the next quarter/year after the
loan closed—is there a plan to update any HMDA data that
may have already been pulled?
■ ■ ■ Underwriting Data: Similarly, there are times when there are
a lot of changes in the applicant and co-applicant information