With heightened regulatory and media focus on Home Mortgage Disclosure Act (HMDA) data, more lenders will find themselves the subject of fair lending exams, according to Mortgage TrueView, a provider of data-driven business intelligence services.
In a new independent study, the company found that many lenders are leaving themselves vulnerable to fair lending exams and significant penalties by not properly monitoring and managing HMDA reporting. Mortgage companies and banks are not taking full advantage of the insights offered in HMDA data, said Mortgage TrueView President and CEO David Moffat. Additionally, Moffat said the company’s 2013 HMDA survey showed that many lenders are submitting their data with formatting errors, which could lead to non-compliance issues with regulators.
HMDA Survey and Case Study, Volume II: 2013 HMDA Data Insights details Mortgage TrueView’s findings based on 2013 HMDA date collected from nearly 400 of the country’s lenders, including seven of the top 10 lenders and 15 of the top 20 lenders.
Among the key findings:
►2013 regulatory risk indicators show a 13 percent year-over-year increase in loan denial rates
►Denial rates for white applicants increased from 17 percent to 21 percent, while denial rates for non-white applicants increased from 23 percent to 28 percent
►Denial rates for Hispanics increased from 25 percent to 30 percent. Denial rates for non-Hispanics increased from 18 percent to 21 percent
►Denial rates for female applicants increased from 21 percent to 26 percent. Denial rates for males increased from 17 percent to 21 percent
For its survey, Mortgage TrueView requested the 2013 public loan application register (LAR) filings from the top 1,160 mortgage originators in the country. Notably, Mortgage TrueView found that a sizable number of the 388 respondents had critical errors in their filings, including missing data fields, incomplete data fields, incomplete records and incorrect data formats.
“Regulators have made it clear that lenders face significant fines and penalties for non-compliance with HMDA reporting requirements,” Moffat said. “Our survey shows that problems with the way the data is reported could raise that risk. We strongly recommend that lenders’ senior management get more involved in monitoring and managing HMDA reporting, as well as other regulatory reporting requirements.”
Mortgage TrueView’s flagship product HMDA Analytics helps lenders identify trends in loan application data, compare their data to other lenders, and calls attention to risks that increase the likelihood of a fair lending examination. It also helps lenders find new business opportunities, according to noted industry expert Becky Walzak, executive vice president, director of regulatory compliance with Mortgage TrueView. The company’s advanced analytics offer an in depth and meaningful view of lending activities that can help reduce potential risk and financial exposure, and can ultimately lead to increased revenues, she said.
“The purpose of HMDA isn’t to point fingers,” Walzak said. “The intent is to show lenders where they may not be fulfilling minority needs. A good analysis of the data also tells lenders where there may be missing opportunities.”
By integrating other public data elements, such as Census data, into its HMDA analyses, Mortgage TrueView is able to offer additional insights into lending practices, both by company and for the industry as a whole.
“Lenders need to be more aware of how HMDA data is being used,” Moffat said. “A lender should know more about their own data than the regulators know, and right now, that’s clearly not the case.”
