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Turning a Headache on its Head: Transforming the HMDA/CRA Process Into a Winning Marketing Strategy
Nov 22, 2010

Each year, lenders are required to dedicate valuable time and resources to compiling and submitting Home Mortgage Disclosure Act (HMDA) and Community Reinvestment Act (CRA) data. While typically viewed as a burdensome process necessary for maintaining regulatory compliance, there is a significant benefit to be derived if done properly—one that can positively impact your marketing strategy. Once institutions submit HMDA/CRA data at the beginning of each year, the Federal Financial Institutions Examination Council (FFIEC) then releases that data to the public. This presents useful information that lenders can use to effectively compare their marketing efforts to those of their competitors and determine where opportunities for improvement lie. 2009 HMDA/CRA data indicate significant market changes On Sept. 20, HMDA data from mortgage lending transactions was released. HMDA data was collected from 8,124 U.S. financial institutions including banks, savings associations, credit unions and mortgage companies, covering 2009 lending activity, such as applications, originations, purchases of loans, denials and other actions, such as incomplete or withdrawn applications. According to the FFIEC, the total number of originated loans of all types increased by nearly 1.8 million, up 25 percent from 2008. This is largely due to a 67 percent increase in refinancings. Additionally, FHA loans were up 37 percent in 2009 and VA loans were up by 6.7 percent. CRA data was released in August for small business, small farm and community development lending reported by certain commercial banks and savings institutions. A total of 941 lenders reported data about originations and purchases of small business and small farm loans, a two percent decrease from the 965 lenders reporting data in 2008. And of the 941 institutions reporting 2009 data in 2010, more than 40 percent were not “large” institutions under the applicable regulation and, therefore, reported either voluntarily or because they elected to be evaluated as “large.” CRA lending, however, is down. The total number of small business loans reported in 2009 decreased by 42 percent from 2008, and the number of community development loans originated decreased 29 percent, from 22,287 in 2008 to 15,882 in 2009. Institutions need to not only make note of these national trends, but also focus on community trends that directly impact their own businesses. Much is revealed by analyzing relevant HMDA/CRA data, and doing so can enable institutions to better strategize their marketing and sales approach. Using 2009 HMDA/CRA data for strategic marketing Evaluating HMDA/CRA data can help institutions make significant and highly strategic changes to their marketing efforts. An institution can evaluate its lending activity alone to look for weak areas, such as identifying communities with little lending activity. Any weak areas may need a different marketing strategy or different loan products to generate activity. Since HMDA/CRA data is public information, it provides a detailed view of what other lenders are doing in specific markets. Institutions can compare their lending patterns to any number of other institutions to see how others are doing in any given area. By comparing one’s own lending activity to a competitor’s activity, institutions will have better information to guide strategic changes where necessary, offer new loan products, increase marketing efforts in more competitive areas, reduce marketing efforts in less competitive areas, etc. This should lead to more focused marketing and cross-selling. Analyzing peer data There were more than 19 million applications in the 2009 HMDA data. While this information is public and readily available at no cost, analyzing the data can be costly and time-consuming for lenders in need of evaluating hundreds of institutions. There can be a significant amount of information to consider, and lending institutions need a viable solution to evaluate this data effectively and efficiently for marketing purposes. Using a Web-based tool built on modern, .NET technology, institutions can more easily gauge how they compare and rank with their peers. Ideally, a system should enable an institution to perform evaluations by selecting a specific geographic area. Once you determine your criteria, you can filter the Loan Application Register (LAR) data, a register that lists all loan applications taken by a savings association, select institutions you consider to be your peers based on criteria such as volume or geographic vicinity, and then run analysis reports. Once the information is analyzed, different types of reports can be generated, such as table reports, top peer reports, ranking reports, market share reports, pricing reports or spatial assessment reports. HMDA/CRA data provides some of the best, most cost-effective market research available. Institutions that take advantage of this information are better positioned to improve their marketing efforts and move themselves into a more competitive position. John A. Woloshen is executive vice president and chief operating officer of RATA Associates, a provider of HMDA/CRA data compliance software and services for financial institutions. For more information, call (407) 831-7282 or visit
Nov 22, 2010
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