Jim Lochbihler is a senior consultant with global
information-services company Wolters Kluwer. He has more
than 20 years of banking experience and more than 15 years
of fair-lending compliance experience. Reach Lochbihler at
A New HMDA Show Is
Debuting at a Lender Near You
Home Mortgage Disclosure Act changes are expected to alter
the course of fair-lending and CRA analytics
By James Lochbihler
Nearly four years ago, the Consumer Financial Protection Bureau(CFPB)issueda rulerequiringlenderstogatheragreatly expanded range of data under the
decades-old Home Mortgage Disclosure Act (HMDA).
That was followed by another “clean-up” rule issued
in 2017 that updated and clarified the prior rule.
Under the final CFPB rule, lenders were required to
begin collecting the additional HMDA data in 2018
but were not required to begin reporting that data
to the CFPB until this year. Although it may seem that
the HMDA regulatory reform is a significant enough
regulatory burden all on its own, let’s remember that
the HMDA data is the fuel used for fair-lending and
Community Reinvestment Act (CRA) analytics.
Clearly the regulators, community groups, and the
HMDA-savvy public will have a greater level of detail
relating to mortgage-lending applications and originations than ever before. History shows that changes
to HMDA-reportable data are soon followed by increased regulatory and civil activity against lenders
for possible fair-lending and CRA violations. For that
reason alone, mortgage originators should be aware
of the new HMDA-reporting requirements because it
may affect lenders’ financing decisions and, consequently, the originators working with those institutions.
To some in the industry, fair-lending analytics might
seem like the work of an illusionist. It’s especially
intimidating if the mystery is left to the regulators to
solve. Those familiar with working with data, numbers
and statistics usually know all of the tricks behind the
smoke and mirrors. Even the most seasoned statistician, however, will need to re-evaluate the fair-lending
implications of all of the new HMDA data fields.
Set the table
Initially, the most important precursor to performing a
fair-lending analysis is to be sure that the data is accurate. No amount of magic can turn bad data good.
Therefore, it is critical to ensure that all HMDA data
is timely and accurately collected. Additionally, it
would be a mistake to think the new analysis will be
the same as the previous HMDA data analysis. There
are a lot of nuances around the new HMDA reporting,
even though the data is familiar.
So, what is the best way to approach the HMDA
changes? Perhaps the biggest influence on the overall
analysis is the influx of newly reportable records into
the HMDA-reportable definition. For consumer transactions, reportable transactions are determined based
on the securitization of a “dwelling,” and are no longer
This new standard has the potential to increase the
HMDA-reportable population for many institutions.
These changes are important because fair-lending
analytics are based on numbers and ratios. Even small
changes to this overall population of data can unmask
These types of changes also will likely impact the
overall risk profile, as well as how an institution will
perform a trend analysis, as year-over-year will no longer involve an apples-to-apples type of comparison.
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