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3 Reasons to Use a Third-Party Geocoder for Loans

Jul 9, 2019 by Brian Arnesen

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.


Geocoding a loan on a map

When it comes to selecting a geocoder, there are options. Currently, the FFIEC provides a free single use geocoder. QuestSoft however, provides a batch geocoding tool called Instant Geocoder that has been the gold standard in geocoding for more than 20 years. Back in 2017, the CFPB announced that it would be releasing a new open-source geocoding tool to replace the FFIEC geocoder – but as of this writing, that tool is stalled in development and no ETA has been provided. Geocoding it seems, is not quite as easy as it appears on the surface.



Let's explore some of the reasons why lenders may want to use a third-party geocoder.


Accuracy

It's important to remember that there is no such thing as 100% accuracy in geocoding. Anyone who claims it, is lying. There are changes all of the time. QuestSoft updates our geocoding database quarterly to ensure you have the most accurate results available. In the last two quarters, there were 1.8 million changes to the Instant Geocoder data alone. Audits we have conducted in the past on our geocoding results, show 99.4-99.5% accuracy rates. Similar audits we have done on FFIEC geocoded data have shown accuracy rates of 99.2-99.3%. Both are well within the tolerance of reporting errors, but geocoding is not an exact science. We take accuracy very seriously. If you ever notice a discrepancy between what Instant Geocoder returns and what another reliable geocoder returns, simply request an audit. If we’re right, we’ll prove it. If we’re wrong, chances are it will be addressed (pun intended) in an upcoming quarterly release.   


Speed

The FFIEC geocoder requires you to input single addresses manually. This can be time-consuming, especially if Compliance Officers are trying to geocode multiple loans for HMDA/CRA submissions. Batch geocoding can save you valuable time. Our geocoder can process thousands of records in minutes, and you already know it’s accurate (see above)! If you’re geocoding more than 100 loans a year, a program like Instant Geocoder pays for itself, with time saved geocoding loans manually. Plus, you’re purchasing peace of mind!


Integrations

Instant Geocoder can be accessed from within many of our products, including Compliance RELIEF, Compliance EAGLE and Instant HMDA. It can also be integrated directly into your Loan Origination System (LOS). This gives you the ability to geocode loans at any time. There is no need to copy information from one screen to another or manually re-key the geocoding results. Instant Geocoder is also integrated into Google and Bing Maps to provide an additional level of verification. This can be especially helpful for new addresses and rural geographies.


While the FFIEC free geocoder is an excellent solution for geocoding single loan records, Instant Geocoder can help you process loans faster, saving you time on every loan file. While we wait to see what the new CFPB geocoding tool will offer, we can be sure that third-party geocoders like Instant Geocoder will continue to provide accuracy and flexibility that is crucial for compliance. Still not convinced? Contact us today to learn more about our geocoding solution!


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