Last week, on August 30, the FFIEC released the 2018 HMDA data, aggregated into one file. This HMDA data is a powerful and essential resource for the industry. Here are 7 fast facts your financial institution need to know.
Unless you’ve been living under a rock, you’ve probably heard that the aggregated loan-level Home Mortgage Disclosure Act (HMDA) data has been released publicly. As always, this sets off a flurry of activity in the industry as financial institutions and the companies that serve them work to incorporate this new data.
Released on August 30 by the FFIEC, this aggregated loan-level public HMDA data (sometimes referred to as the HMDA peer data) brings important industry insights.
Here are 7 fast facts about the public HMDA peer data, and what it might mean for your institution.
Keep these items in mind as you begin using this data in your HMDA monitoring and analysis:
1. The release includes data from more than 5,000 covered financial institutions.
According to the FFIEC’s press release, the HMDA data set includes lending data on 5,683 financial institutions that are covered by HMDA. HMDA requires that covered financial institutions report specific lending data to the federal government. The government reviews the data and then releases it publicly.
It includes data on banks, savings associations, credit unions, and mortgage companies, so it’s one of the most comprehensive data sets available on the state of mortgage lending in the US.
Even though some public HMDA data was released early this year, this data set is powerful because it’s aggregated. The release earlier this year required users to find individual institutions, and users could only look at one institution’s data at a time. (Or, they’d have to download multiple institutions’ data and create their own data set.)
This aggregated loan-level data set puts all the HMDA data in one easy-to-read and easy-to-navigate place.
“...The data help the public assess how financial institutions are serving the housing needs of their local communities and facilitate federal financial regulator's fair lending, consumer compliance, and Community Reinvestment Act examinations. For example, when these regulators evaluate an institution's fair lending risk, they analyze HMDA data in conjunction with other information and risk factors, in accordance with the Interagency Fair Lending Examination Procedures...”
- FFIEC Press Release, "FFIEC Announces Availability of 2018 Data on Mortgage Lending"
Because of its scope and scale, the data is used by regulators to prioritize institutions for exams, financial institutions to monitor and improve their Fair Lending performance, journalists to research mortgage lending and the financial industry, community groups to identify potential discrimination, and consumers to learn more about financial institutions they’re considering working with.
It’s not an overstatement to say that this is one of the most important data sets in the financial industry.
2. 2019 is the very first year that some of the expanded HMDA data is making it into the public HMDA data release.
After all of the HMDA changes in the recent years, you’d be forgiven for not knowing precisely what data points and fields are included in this release.
All of the HMDA data that was required prior to the implementation of the new HMDA rule is in the data set, but are also new data points as outlined in the 2015 HMDA Final Rule. We sometimes refer to those additional data fields as HMDA Plus data, or expanded HMDA data. Remember, some smaller institutions are exempted from reporting those HMDA Plus data points and fields, but no one is exempted from reporting the historical HMDA data.
This loan-level HMDA dataset includes 48 data points; many of those data points are available publicly for the first time in this 2018 HMDA data release.
Broadly speaking, the data points cover many aspects of lending. There are data points related to the applicants, the property securing the loan, the transaction itself, and more.
If you need a refresher on some of the HMDA changes that have happened in the past two years, here are a few resources and blog posts for you:
- Answers to 7 Basic Questions about the HMDA Final Rule
- Mythbusting 5 Rumors About the Dodd-Frank Rollback
- Do You Qualify for the HMDA Small Filer Exemption?
- A Step-by-Step Guide to Implementing the New HMDA Rule
- 4 Key Stages of Your HMDA Data’s Yearly Lifecycle
- Your Quick Guide to the Recent HMDA Data Disclosure Changes
- How the HMDA Plus Data Is Changing Fair Lending Analysis
- Why Do I Need a HMDA and CRA Transmittal Tool?
- How to Prepare for the 2018 Public HMDA Data Release
- How to Prepare for Fair Lending Exams in a HMDA Plus World
- Free Guide to the 2018 HMDA Changes
(And these are just a few of the compliance resources we've published to help you with HMDA compliance! We are here to help.)
3. This data is particularly useful for peer analysis.
Because this data collects loan-level HMDA data from all of the covered institutions, it is really important for peer analysis. This data is also used for creating local and national benchmarks. You can learn more about benchmarks here.
There are a few important reasons why it’s important to understand how your HMDA data compares to peer institutions:
- It’s a necessary step for your internal risk monitoring.
- Regulators will look at how institutions compare to peer benchmarks to identify elevated risk and prioritize those institutions for exams.
- There is no absolute definition for good or bad Fair Lending performance, so community activists will also look at national and local benchmarks to identify potential risk of housing discrimination.
- Redlining is a hot topic, and relies on analysis of your REMA. The REMA is defined in part using peer data.
TRUPOINT Analytics is a powerful Fair Lending analysis tool, and we do have a HMDA module. If you’re a customer, you know that Fair Lending - HMDA Analytics has powerful ways to help you analyze your performance compared to peers.
With this updated HMDA data set, peer analysis will be a bit easier than it was earlier in the year.
4. The regulators are urging caution with this data, particularly as it may relate to discrimination.
In a notable change, the regulators are urging people to be cautious when exploring whether this data may indicate discrimination. There are a few reasons:
- The HMDA covered institutions have changed.
- The HMDA data itself has changed.
- Certain geographical boundaries (like MSAs and census tracts) have changed.
- Some data related to creditworthiness is not included in the HMDA data, which is essential for determining discrimination.
“HMDA data alone cannot be used to determine whether a lender is complying with fair lending laws. The data do not include some legitimate credit risk considerations for loan approval and loan pricing decisions. Therefore, when regulators conduct fair lending examinations, they analyze additional information before reaching a determination about an institution's compliance with fair lending laws.”
- FFIEC Press Release, "FFIEC Announces Availability of 2018 Data on Mortgage Lending"
To these items, we would recommend adding qualitative considerations, like compliance culture, policies, and procedures, that may not show up as directly in the numbers.
As we wrote about recently, the CFPB is also focusing on preventing discrimination just as much as they are in enforcing against it. You can read more about that here.
HMDA data analysis is a part of Fair Lending risk management, and is typically part of Fair Lending risk assessments. As we’ve said many times before, disparities do not always mean discrimination, but analyzing your data is the only way to know for sure!
5. Journalists and activists have access to this data, too.
This data is public. That means that Journalists and activists have access to it, too.
It’s not so long ago that the ground-breaking Reveal article was published alleging serious housing discrimination and Redlining in cities across America. That reporting relied heavily on the HMDA data. In their podcast, they even talked about the potential expansion in HMDA data and their access to it.
So even though the regulators are approaching the HMDA data and its implications in (apparently) measured ways, there is a chance that journalists and activists may be approaching the data differently. Time will tell!
Don’t forget that we are already in an election cycle, and there are indications that politicians are paying attention to the HMDA data, as well.
In any case, the data has the potential to support an existing, popular, or previously reported angle on housing discrimination. For some other reporters, analysts, and politicians, it may help prove that great progress has been made in improving access to homeownership. For financial institutions caught in the middle of such powerful stories, this public attention can present reputational and marketing challenges.
6. There are new, accessible ways to explore the data.
Just as the loan-level HMDA data is public, so too are tools for exploring it. The CFPB is phasing out the old online HMDA Explorer, and has launched a brand-new HMDA data exploration and analysis tool.
As we wrote about last month, The old HMDA Explorer was no longer compatible with the new data fields. In addition, it had not been updated since 2013. In their redesign, the Bureau met with key industry leaders to learn what the new HMDA tool should include.
This new tool is called the HMDA Data Browser. They have not quite yet released the maps and data visualizations portion of the platform, but that should be relatively soon.
However, some media organizations like Reveal (mentioned above) have already expressed an appetite for creating their own public data exploration tools. They even did a whole white paper on their methodology.
7. The agencies are already providing valuable research and insights for industry professionals and consumers.
In the FFIEC’s press release, they provided lots of data on the mortgage lending volume. When the CFPB released the HMDA dataset and the data tool, they also released some reports on the state of the industry, through their eyes and experience.
Industry professionals already have access to lots of fascinating data-driven insights, even before downloading and getting into the actual data set. This is a rich source of information and detail, and the agencies appear to be serious about aiding the public conversation surrounding it.
So What’s Next for Financial Institutions?
Now is the time for you, the financial institutions, to analyze that data. With the addition of this HMDA data set, new ways to analyze HMDA data and identify risks and opportunities are available to you. With the public loan-level HMDA data, you can reduce your Fair Lending risk, and tell your story. Learn how with a free demo of Analytics.