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Explained: What Is Geocoding and What Do Banks Use It For?

Jul 25, 2017 by Brian Arnesen

Geocoding takes addresses or descriptions of locations and turns them into a specific location on the earth’s surface. Through this process we can gather demographic data about these specific locations. While geocoding is used by many industries for various purposes, the mortgage industry uses geocoding to submit a variety of accurate data to government regulators.


So, what if a borrower misspells their address on a loan application? (For example, "South Point Drive" instead of "S Pointe Dr.") Having an accurate tool such as Instant Geocoder can help by providing a list of possible alternatives, enabling you to find the exact address match and ensure your records are correct. 

instant geocodeGeocoding data can also help you determine lending activity (Denials & Originations) in your community, as well as specific demographics to assist in fair lending efforts. Geocoding is specifically used for submitting Home Mortgage Disclosure Act (HMDA) and Community Reinvestment Act (CRA) data, but institutions can use geocode data to discover new business opportunities and allow businesses to see where their competitors are making (or not making) loans.

Traditionally, the FFIEC has provided a free single address geocoding engine which is fairly accurate, but time consuming to use. QuestSoft’s Instant Geocoder uses a similar proprietary database, but allows for batch geocoding at lighting fast speeds, as well as quarterly updates. Our last release included over 460,000 updates to the database! Incorrect geocoding can result in a variety of problems, with the most detrimental being incorrect information about the demographics of the borrower or property. Though the CFPB has yet to release their upcoming geocoding solution (meant to replace the FFIEC for HMDA), it is rumored to use freely available data that is not nearly as accurate as Instant Geocoder or the FFIEC.

Starting in 2018, geocoding for HMDA will change. The four traditional fields (State Code, County Code, MSA and Census Tract) will be combined into two fields:

  • County Field – Which is a combination of State Code and County Code
  • Census Tract – Which is a combination of State Code, County Code and Census Tract. The census tract code is a sub-division of a county that is updated by the Census Bureau. Census tracts often have between 1,200 and 8,000 people, and a census tract can be up to 4 numbers long plus a two-digit suffix such as 1927.01.

QuestSoft’s Instant Geocoder has been used as the gold standard in the financial industry but is also used in other industries. Insurance companies use Instant Geocoder to analyze census tract information to determine crime statistics, demographics, racial makeup, income levels, households, or accident occurrences. The healthcare industry can use geocoding data to determine the source or spreading of outbreaks. To view more applications for geocoding click here.

So now that you know a little bit more about geocoding and its importance, contact us today to see how QuestSoft’s Instant Geocoder can work for you!

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