Every year, lenders around the country compile, scrub and submit their HMDA data to the CFPB. While HMDA filing is not new; each year seems to bring its own changes, challenges and hopefully, success stories. This year was no different.

For those that are scrubbing their HMDA data, we wanted to share a few data integrity issues clients have identified or that have been the focus of recent regulatory examinations. Of course, we also want to offer some quick tips for addressing these key “red flags”.

On January 24th, the CFPB issued a policy statement to provide clarification on how it intends to apply the “abusiveness” standard in supervision and enforcement matters. Abusiveness is a component of the Dodd-Frank Act’s Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) rule. The CFPB has acknowledged there is still uncertainty as to the scope and meaning of abusiveness, which creates challenges for complying with the law.

In the past few months, the constitutionality of the Consumer Financial Protection Bureau (CFPB) has been hotly debated and has grabbed many industry headlines. While compliance professionals tend to be more realistic about the CFPB, there are always a minority of vocal individuals who cling to the hope that compliance requirements and reporting will cease to exist. The current concern revolves around the inability to remove the standing director unless just cause, described as “inefficiency, neglect of duty, or malfeasance in office,” is present. While some agree that this is a just and fair way of conducting this governmental entity, others feel that it neglects the current checks and balances of our executive branch.

The 2018 HMDA aggregate data was released in early September – much later than originally planned. It is interesting to note that the data has been published in two separate views – snapshot data and dynamic data. The snapshot data is as of August 31, 2019 while the dynamic data is updated every Monday to reflect the most currently submitted 2018 HMDA data. The underlying question is which dataset will examiners use when comparing lender performance to peers?

New data points and mid-year rule changes created significant challenges for lenders, their vendors, and regulators. Implementation and testing of systems and processes were continuous throughout 2018 and well into 2019. Many questions went unanswered, resulting in confusion that became more apparent with the data submissions. It is anticipated that most issues have been addressed and that 2019 data submitted in March 2020 will not repeat these issues and the aggregate data will be released much earlier next year.

Approximately 5,400 lenders reported HMDA data in 2018, but only 33 comments have been submitted to the ANPR which addresses HMDA data collection and only 372 comments have been submitted to the NPRM which changes the thresholds for reporting. It is definitely time to get your comments in and ensure the industry is heard when it comes to the regulatory burden imposed by HMDA data collection and reporting.

Geocoding loans has become a fairly routine process in mortgage lending. It’s easy to type a single address into a government website and obtain a state code, county code, MSA/MD code and census tract code. Geocoding information is critical to report for the Home Mortgage Disclosure Act (HMDA) and the Community Reinvestment Act (CRA). Geocoding also allows lenders to determine if a loan is located in a low- to moderate-income tract, which can enable originators to ask for higher premium pricing when selling their loans on the secondary market. In addition, geocoding can provide a host of other useful demographic information. However, there are limitations to some geocoding systems, many of which can slow your operations and cause accuracy issues.

Over the last couple of years, most enforcement actions by the Bureau have not focused on mortgage originators. However, on June 5th, the CFPB levied a $1.75 million fine against one of the largest mortgage lenders in the country for HMDA violations. This is the exact amount that the CFPB fined Nationstar in 2017 for its HMDA violations — which was the largest HMDA fine ever issued by the CFPB at the time.

The Office of the Comptroller of the Currency (OCC) recently published its Semiannual Risk Perspective for Spring 2019, which provides a detailed analysis of the federal banking system and key risks facing banks. Overall, the OCC reported that the banking system is stable. However, some banks have increased their risk from previous years.