during the loan application process that may be documented
in the credit file, but may not get updated into the system of
record. Consider how, for example, the DTI (debt-to-income)
ratio might change as the credit officer receives new information during the underwriting process. What is the data that
was relied upon by credit in making the credit decision? Have
you engaged key stakeholders to discuss the importance of
accurate data within the system of record that will pull the
Key questions to consider:
• Does the business have a process to ensure that all changes or
updates made through closing, and thereafter, are promptly
entered into the system of record?
• Is there a timely, qualified quality control process embedded within the business that provides oversight over all final
data points at or about the time the loan closes and cures
are finalized, extended to the system of record that will pull
the HMDA data?
• Have the second and third lines of defense included time in
their schedules to provide monitoring or audit on this data to
allow time for the business to institute action plans, training
and process improvements on any findings to correct data
quality prior to January 1, 2018?
What Story Does Your Data Tell?
Fast forward to 2019, and congratulations! You have filed your
LAR on March 1, 2019, getting the new fields right! If you haven’t
had time to do this before, now is the time to review your data
from a fair lending and UDAAP (Unfair, Deceptive or Abusive
Acts or Practices) perspective.
What story does your data tell? You want to start this analysis
as soon as you can to understand your data, then compare your
data to your peers when the aggregate data comes out in the fall
of 2019. What do you need to do to prepare if the regulators come
knocking at your door in 2020?
Initially, do your best to stay current on any changes in fair
lending and UDAAP. You are diligently doing all the other work
suggested already. However, regulatory investigative techniques
and other concepts surrounding fair lending and UDAAP are
changing rapidly. Following are some evolving concepts to consider
as you evaluate your data and monitor trends:
■ ■ ■ “Minority”—We are already seeing a regulatory focus on
evaluating only African-American and Hispanic data in
some recent cases. Consider the various categories of race
and ethnicity in the new HMDA data, and the opportunity
to further define populations that are potentially treated differently on a prohibited basis, when that prohibited basis is
further defined with additional data, such as a FICO score.
The new data fields provide an opportunity for the regulators
to slice and dice data in unexpected ways—are you familiar
with what your data looks like? Are you evaluating your data
to support a reasonable business justification for any perceived
■ ■ ■ New Unique Identifiers—We are also seeing a regulatory
investigative approach that focuses on the REMA—
Reasonably Expected Marketing Area—that may differ from your
assessment areas. This means that how your institution attracts
applicants, and where, becomes more relevant. With identifying
data that can be evaluated down to the branch level, the new
data fields could be used to identify underperforming branches
within the assessment area or REMA. The identifiers may also
expose branches with significant variances in pricing or other
signals to suggest inconsistent or broader areas of discretion
applied at certain locations.
Next, update reporting to keep key stakeholders well informed.
As the type of data increases, the data analytics flowing out of the
new fields will result in a need for more robust reporting–and
to a broader audience. Consider, for example, if the initial data
analysis suggests patterns of pricing or fees that are of concern.
Remediation that might be required could have a bottom-line impact on core business strategies, ROI and, ultimately, in
the extreme, safety and soundness. Those of us responsible for
implementing the overdraft changes some years ago can attest to
the pain some institutions had to go through, with abrupt changes
in the flow of income from fees. The impact could potentially be
larger for smaller, niche institutions that don’t have the nimbleness
to adjust to significant changes in strategy.
The sooner you can engage key stakeholders, and keep them
aware of trends and key risk indicators, the better prepared the entire
institution will be for any required remediation or action plans.
Key questions to consider:
• Have you engaged key stakeholders to help them understand
the impact of the new rules—and to discuss the importance
of accurate data within the system of record that flows into
• Do you know what story your data are telling?
• Are you prepared for remediation steps that may impact
core business strategies?
Updates for Your
Compliance Management System (CMS)
With all your hard work and strained resources these past couple
of years, do you arrive back in 2020 with your CMS fully updated?
Here are a few key considerations to consider along the way:
■ ■ ■ Complaint Management System—The definition of “
complaint,” and the tracking and/or routing of complaints with
As the types of data increase, the data
analytics flowing out of the new fields will
result in a need for more robust reporting–
and to a broader audience.