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Key Compliance Issues for Fall 2019

Oct 4, 2019 by Loretta Kirkwood

As fall approaches and we begin the countdown to 2020, our concerns remain focused on HMDA, CRA, fair lending, and regulatory examinations.  

The focus on HMDA continues to be a priority for lenders and regulators.

The 2018 HMDA aggregate data was released in early September – much later than originally planned. It is interesting to note that the data has been published in two separate views – snapshot data and dynamic data. The snapshot data is as of August 31, 2019 while the dynamic data is updated every Monday to reflect the most currently submitted 2018 HMDA data. The underlying question is which dataset will examiners use when comparing lender performance to peers?

The deadline for submitting comments on proposed changes in the Advanced Notice of Proposed Rulemaking (ANPR) and Notice of Proposed Rule Making (NPRM) is October 15, 2019. Only 46 comments have been submitted on the ANPR which would eliminate data points required today such as disaggregated race and free form text fields. Make your voice heard – submit a comment today!

The Filing Instructions Guide (FIG) has been updated for 2020. It includes new and revised syntactical, validity and quality edits.

Burning question – Will CRA changes be coming soon?

Much discussion surrounds the modernization of CRA to address today’s financial environment including delivery of services through technology and based on customer preference. The original request for comment was published in September 2018 by the OCC – with over 1,587 comments submitted. The June 2019 publication of “Perspectives from Main Street: Stakeholder Feedback on Modernizing the Community Reinvestment Act” by the Federal Reserve summarized roundtable discussions.

So, it stands to reason that change is coming … we just don’t know what that change will be. Will the changes include expanded coverage to other financial institutions, increased data capture, standardized examination procedures, disclosed thresholds, etc.?

Fair and responsible lending continues to create examination challenges.

The issue of managing fair and responsible lending risk is the inability to apply a standard approach across all lenders. Industry associations, attorneys, and consultants provide their view on what risk management efforts are most appropriate. Lenders do not have the same business model or market risks. The key to managing fair and responsible lending risk is in developing a method of identifying and controlling risk consistent with the lender’s business model and strategic plan.

Regulatory examinations continue to evolve.

We continually hear from clients that examinations are “different” this year. The focus on HMDA data integrity was absent throughout 2018 and much of 2019, but recent examinations have focused on the 2019 year-to-date LAR. Questions have been raised about the method of application – what percentage of applications are received face-to-face vs. telephone, internet, and mail? Data points being reviewed are not limited to previously identified key fields – and include many fields that are not made publicly available.

It is likely that much of the focus on HMDA data is intended to assist regulators in understanding the challenges lenders face in data capture. However, it’s important to be prepared for the review of HMDA data and identify areas where confusion still exists.