What We Can Learn From Recent HMDA Enforcement Actions
Over the last couple of years, CFPB enforcement actions have focused on consumer related issues including debt collection, mortgage loan servicing, and student lending.
Although the cases involved different lenders and different violations, there are lessons to be learned.
Data Examined from Multiple Years
It is important to note that in each enforcement action, HMDA data errors were identified over multiple years. Regardless of whether you submit data during a regulatory roll-back or uptick period, the accuracy and completeness of your current and historic data matters. What you submit today can be flagged years later, and you will be held accountable.
Overriding Internal Controls
Despite having controls in place for detecting invalid or missing data, employees can still find ways around these controls. In this most recent settlement, the lender had business rules in place to stop applications from processing if data was missing. To override these rules, some employees were instructed to select non-Hispanic white for ethnicity and race when the applicant did not provide GMI information. Whether or not the supervisor giving these instructions knew the ramifications of this decision is unclear, but all employees should be educated on the severity of submitting incorrect data.
Regulators can now instantly analyze your HMDA submissions for statistical anomalies and errors. So, you need to know your data better than the regulators. The benefit of standardized reporting is that you have the same ability to see what regulators see. Running statistical analysis and even comparing it to previous years should uncover patterns in your lending. Any abnormalities should be investigated and brought up to management. Performing comparative analysis of your performance to all or selected peer lenders in the geographies you serve provides an additional indicator of risk.
Hopefully, by analyzing the two most recent HMDA enforcement actions, you can see that data integrity matters. If you're looking for a solution to reduce the amount of time you spend on processing and submitting your HMDA data, check out HMDA RELIEF. We've helped thousands of lenders submit their data to the CFPB.