Regulatory Solutions – HMDA 2020 and HMDA 2021

The filing of the 2020 HMDA LAR is in the books and I think everyone is thankful to have that behind them.  The past year brought on new challenges for all of us, especially the mortgage industry with the sheer volume of new purchases and refinances – all while working remotely.  This increase of mortgage file volume of course increased the amount of HMDA data to be reported for the year.  Financial Institutions, as defined under Regulation C, that meet certain loan-volume thresholds for closed-end mortgage loans and for certain open-end lines of credit are required to submit their HMDA data annually and are required to submit that data correctly.

Last year, Regulatory Solutions reviewed over 21,000 HMDA files for financial institutions to ensure the data reported on their HMDA LAR was supported in their file and was recorded correctly.  That is over 2.2 million actual data points reviewed and the results required over 50,000 data points to be corrected prior to submission.  An analysis of the corrections needed in 2020 yielded the following top ten findings:

    • Rate Spread
    • Loan Amount (notably on non-originated files)
    • Data points for certain loans subject to Regulation Z (i.e., origination fees, lender credits)
    • Debt-to-income ratio
    • Type of purchaser
    • Visual Observation of applicants
    • Income
    • Submission of application
    • Action Taken Date (notably on non-originated files)
    • Automatic Underwriting System

Why is it important to scrub your HMDA data and make corrections prior to submission?  The data on the HMDA LAR is used to help determine if the financial institution is serving its community housing need; to assist public officials in distributing public investment to attract private investment; and to assist in identifying any potential discriminatory lender patterns in order to enforce antidiscrimination statues and for this to be relevant data it must be correct.  The Consumer Financial Protection Bureau, as well as the other regulatory agencies, will conduct transaction testing prior to starting a HMDA review to ensure the data is correct.  If 10 percent or more of the HMDA LAR sample entries contain errors for a reporter with fewer than 100,000 entries the financial institution may be required to correct and resubmit the HMDA data; for reporters with greater than 100,000 entries correction and resubmission may be required with four percent or more of the sample entries containing errors.

To avoid having to resubmit, make sure you have the HMDA LAR correct at time of submission and the best time to start that HMDA scrub is now for the 2021 HMDA data.  Regulatory Solutions can assist you with this by scrubbing your data on a monthly or quarterly basis and providing you with an exception report detailing each data point needing correction.  Contact us today at 205-736-7717 to discuss how we can help you Get it Right.

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