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See Why the Public HMDA Data Affects Your Fair Lending Compliance

See Why the Public HMDA Data Affects Your Fair Lending Compliance

Posted by Trey Sullivan on Sep 24, 2015 2:30:00 PM
Trey Sullivan
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Earlier this week, the FFIEC released the availability of the public 2014 HMDA LAR data. It is important because regulators will now expect 2014 HMDA to be a part of your fair lending loan analysis. 

FFIEC-HMDA-LAR-2014When the Home Mortgage Disclosure Act (HMDA) data file goes public every September, it launches financial institutions nationwide into an annual fair lending loan analysis frenzy. Lenders must analyze their loan data to determine if lending disparity exists between borrowers.  

The release of the 2014 HMDA LAR (Loan Applicant Record) data is important because:

  • Regulators analyze the HMDA data to identify fair lending issues, like disparities, that may trigger an exam or regulatory scrutiny.
  • Regulators will expect the latest HMDA data (2014) to be incorporated into your fair lending analysis as soon as possible.
  • Using the HMDA data to proactively identify and monitor for disparities and fair lending risk will enable the institution to reduce, monitor, and manage fair lending compliance risk more effectively.

Why Should Financial Institutions Analyze Their Data?

Financial institutions that proactively analyze their data can investigate causes for disparities, and then manage and minimize fair lending risks before the regulators arrive. Disparity doesn’t always mean discrimination, but analysis is the only way to know for sure.

It’s essential to conduct this fair lending analysis with the new 2014 HMDA data set for a few reasons. First, the regulators will be using the most recent data set when they conduct their analysis, so you certainly want to be seeing and responding to what they will be seeing. Second, this new data set redefines peer benchmarks, so the context for your institution’s performance has changed in the eyes of the regulators.

To illustrate that point, here are a few high-level data points from the 2014 HMDA LAR file:

  • The number of HMDA-reporting institutions dropped approximately 2 percent, from 7,191 in 2013 to 7,062 in 2014.
  • The number of HMDA LAR declined dramatically from 17,016,159 in 2013 to 11,875,465 in 2014.
  • The total number of originated loans of all types and purposes declined by about 31 percent from 2013 to 2014.
  • Black and Hispanic applicants experienced higher denial rates again in 2014, while the denial rates for Asian applicants is closer to the denial rate for non-Hispanic white applicants.

loan-149873_1280-1Again, this new data may change how regulators interpret and understand your institution’s activity. These changes in the 2014 HMDA data will affect your institution’s benchmarks when compared to other lenders in your area.

Anyone Can Conduct fair lending Data Analysis, and Everyone Should

fair lending compliance relies on regular analysis of your data. Whether you’re new to fair lending data analysis or an old pro, a small community bank or a multi-billion dollar institution, know that it doesn’t have to be overly complex or difficult. There’s no need to spend hours on analysis, break the budget, or wrestle with difficult software. There are alternatives that will save your institution time, money, reduce risk, and make you and your institution look good in the eyes of management, the board, and the regulators. And what could be better than that?

Ncontracts Viewpoint: This public HMDA data may seem intimidating, but it’s an incredibly valuable resource for financial institutions as they monitor, reduce and manage their fair lending risk. Regulators recommend that all institutions analyze and review their data in the context of other lenders to build the strongest compliance controls and understand their fair lending risk.

If thinking about analyzing your data gives you stress or leaves you with more questions than when you started, there’s room for a better process. We’d love to show you what that might look like with Ncontracts on your team. State of the art software, bundled with outstanding service, support and fair lending expertise is a winning combination that more than 500 of your peers are using today.

To learn more about the most advanced and easy-to-use fair lending analytics tool available today, request a free demo of Nfairlending!


Curious about how you can build your own Lending Compliance Management Program? We;ve got you covered there, too!

Topics: HMDA, Fair Lending, Lending Compliance, FFIEC, Nfairlending, Product Insight, Mortgage Lenders, Lending Compliance Management,

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