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7 Insights You'll Get from this Free HMDA Fair Lending Report

7 Insights You'll Get from this Free HMDA Fair Lending Report

Posted by Katie O'Brien on Nov 28, 2018 9:00:00 AM
Katie O'Brien
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With this free 2018 Edition of the HMDA Fair Lending report, you will learn 7 powerful data-driven insights. From gaining a clearer understanding of your risk to finding opportunities for good PR, this report can deliver real benefits. Learn all seven of them here, and get the free HMDA Benchmark report today!

As the year comes to a close, we are launching into our Prep for 2019 Success series. For the next month, this blog will be focusing on how your financial institution can prepare for a successful, compliant, and growth-focused 2019. For the first post of the series, you'll learn 7 insights from a free HMDA Fair Lending report that we designed.

The report shows the national averages for a few key Fair Lending metrics, using the public 2017 HMDA LAR. (If you've been a reader for a while, you'll know that we sometimes refer to this report as the "HMDA Benchmark Report.")


See how your institution compares by downloading this free national HMDA benchmark report using the 2017 public HMDA LAR!


By reading this blog and requesting the report, you'll gain access to 7 data-driven insights, and be able to see how your institution's HMDA and Fair Lending performance compares to national averages, or benchmarks.

We'll first start with the broad insights you'll gain from this report, and then we will dig into the data itself.

1. Quickly flag potential Fair Lending risks.

The benefit of looking at national averages is that it helps you contextualize your institution's numbers.

For example, if the national denial rate for a prohibited basis group is 2x, but your institution is denying that same group at a rate of 4x, you know that there is potential for risk. You'll want to dive in more using your Fair Lending analysis software to see how that performance compares to the local market and your peers, to learn more about your risk exposure.

2. Identify the good work your financial institution is doing!

In some instances, you may find that your institution is out-performing the national average! While you'll still want to compare to local and peer benchmarks, this can be a good first indication that your financial institution is doing a good job managing both compliance and growth.

For example, you may be more likely to approve or less likely to deny mortgage loans to a protected basis group.

What a great press release that would be..."Amazing Bank is Three Times More Likely to Approve Mortgage Loans to African-American Applicants than the National Average." You can only get those data-driven insights by really looking into and understanding the story your data tells.

3. Consider National Trends in the Mortgage Lending Market

With this report, you'll also be able to see the basic building blocks of mortgage lending analysis: how many applications were submitted, how many were approved versus denied, and who was applying in 2017. We talked about a few of the trends in the 2017 HMDA LAR data here, but you can find more on your own with this report.

Side view portrait of businesswoman using computer at office desk

While this may not seem relevant at first, it can help you explain some of the realities you're experiencing in your own business.

Are mortgage applications at the national level up, or down? Is that reflected in the business of your bank, credit union, or mortgage company?

These national-level insights can provide good introductory facts for your next compliance presentation to the Board. If you're a TRUPOINT Analytics customer, we can even help you identify your local trends, so that you can provide even more data-driven insights in those kinds of meetings.

4. Uncover Competitive Insights That Will Help You Comply and Grow

As you review the data, you will find areas where it seems like you have an opportunity to grow. If you serve communities with a high minority population, and you see that you are slightly outperforming your peers in serving that community, there is potential to increase your lead. Your financial institution already has the trust of your community, as your numbers are showing you, so talk to the Marketing team about how you can activate those customers and encourage them to tell more people about your company.

We have a customer who uses Redlining Analytics to provide information to his bank's marketing and sales team, which in turn helps them better develop and meet their goals. You can learn more about how he does that in this case study.

5. Highlight Potential National Focal Points

With this HMDA data report, you can highlight national focal points that may be more likely to crop up in an upcoming exam.

For example, this report shows that more than 70% of HMDA applications in 2017 came from white applicants. While this looks like a huge number, when we look at the census data, we find that just over 70% of the US population is also white. So this number, while eye-catching at first glance, actually does represent the population of the nation.

If we keep digging, we find that almost 8% of applications in 2017 came from black or African-America individuals. By contrast, this group makes up almost 13% of the population in the US. There may be room to improve marketing of mortgage products to black or African-American individuals, in an effort to increase applications from this group to more accurately represent the population distribution.

Will this be a focal point of examiners in 2019? Only time will tell, but it's possible that the national-level data may lead examiners to continue to focus on marketing in Fair Lending exams in 2019.

This is just a simple, basic analysis of a few metrics. If you have a partner in your Fair Lending Analysis, they may be able to help provide additional insights. 

6. Quickly Analyze Risk in Each of the Key Areas of Fair Lending Compliance

Fair Lending risks exists in every stage of the lending process, from marketing all the way to servicing. Looking at this data can help you gain an understanding of where risks may exist in each of those steps, at least from a national perspective.

  1. Redlining Risk: Look for statistically significant differences between approval/denial rates for all applicants (minority and non-minority) in areas with relatively high concentrations of minority group residents compared with areas with relatively low concentrations of minority residents.
  2. Marketing Risk: Look to see if the proportion of prohibited basis applicants is significantly lower than that group's representation in the total population of the market area.
  3. Steering Risk: See if there are statistically significant differences in the percentage of prohibited basis applicants in loan products or products with specific features relative to control group applicants.
  4. Pricing Risk: Look for statistically significant disparities among prices being quoted or charged to applicants based on prohibited basis characteristic.
  5. Underwriting Risk: Check for statistically significant disparities among the approval/denial rates for applicants by prohibited basis group.
  6. Servicing Risk: Look for statistically significant disparities in aspects of the servicing process by prohibited basis group.

HMDA Analytics can help you understand your risk in each of these areas in just a few clicks.

7. Conduct Year-Over-Year Analysis to Find Historical Changes

It's the five-year anniversary of our first HMDA benchmark report, which we published in 2012. From then to know, we've seen some interesting changes.

Let's keep looking at application rates, just so that we stay consistent. In 2012, applications from black or African-American applicants constituted just 5.21% of the overall HMDA applications. The percentage of applications coming from white individuals was closer to 76% in 2012. Flash forward to 2017, and we see that applications from black or African-Americans is up to 7.95% of the total, or more than two percentage points, and applications from whites is down to 70.65%.

While it would take more and deeper analysis to craft the true story those numbers are telling, from first glance, we can count it as a positive development that applications from black and African-American people are increasing.

TRUPOINT Viewpoint: You can realize all seven of these insights, and more, from this 2018 Edition of the National HMDA Benchmarks Report. You can get it here today!

As you move into 2019 preparations, you owe it to yourself to have a Fair Lending analysis system that you enjoy using, that provides real insights, and that is supported by a team of dedicated Support, Success, and Analysis specialists.

Learn more by visiting our guide on building a Lending Compliance Management system.

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Topics: HMDA, Fair Lending, Lending Compliance, Nfairlending, Product Insight, Ntransmittal, Lending Compliance Management,

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