United States

Regulation C: HMDA struggles and efficiencies


The first of the year brought many new regulatory changes. None was more important to the financial community than the Home Mortgage Disclosure Act (HMDA). The updates to reporting standards under HMDA represent a substantial expansion to data reporting requirements. The first quarter highlighted some of the struggles and efficiencies associated with the implementation of HMDA.

Under HMDA, mortgage lenders are now required to collect up to 110 reportable data fields. This includes an increase of 76 fields, which were not previously collected and 23 original data fields that have been modified. The new data fields now collect information that includes, but are not limited to, loan features, property information, applicant information and underwriting process and unique identifiers.

Over the past quarter, observations and client discussions have given insight into some of the struggles and difficulties faced by financial institutions.

  • Because there is so much more information that lenders are now obligated to collect there is a much greater risk of data entry error on the Loan Application Register.
  • There are a lot of updates coming out from software providers to correct system issues.
  • Vague definitions for specific data fields. Some clients have received validity errors and validation errors from their software, and they are not sure they agree with them.
  • An increase in staff training on new and modified data fields.
  • Internal institutional need for updating processes, policies and procedures.

Recent observations and client discussions after the implementation of HMDA included many efficiencies and benefits:

  • The increase of data collection helps deter potential discrimination.
  • Providing the Consumer Financial Protection Bureau with more information regarding the real estate market.
  • May provide a more in-depth picture of the mortgage markets.
  • Enhanced transparency to promote public and private investment in certain underserved markets.

While there are some challenges in implementing the changes to HMDA (LAR), financial institutions should, by now, have a clear set of plans and procedures in place. Many of the struggles they have experienced will be managed internally. And finally, as 2018 progresses, financial Institutions should keep the following questions in mind as they move forward transitioning into the new HMDA requirements.

  • Are you prepared to alleviate stress due to HMDA? 
  • Has your staff been trained? 
  • Is your financial institution adequately staffed to handle the extra HMDA requirements?
  • Has the individual(s) responsible for completing the LAR been appointed?  
  • Have you experienced system issues with your systems in pulling over data to record on the LAR?

Additionally, have you considered how the new requirements will affect fair lending compliance? Historically, fair lending compliance has included monitoring a financial institution’s HMDA data for patterns or practices of illegal discrimination and/or disparities in treatment of loan applicants. With the enforcement of the new requirements, you will see:

  • A broadened view of a financial institution’s fair lending risk by the examiner prior to being onsite or meeting with the institution’s management.
  • More robust analysis by regulators of HMDA data due to new requirements in reporting home equity lines of credit.