How the New CFPB 2018 HMDA Rules Will Affect Fair Lending Examinations
The CFPB’s new HMDA rules will require institutions to expand their reporting and disclosure of loan data starting January 1, 2018. Previously, we discussed How The New HMDA 2018 Rules Increase Risk For Fines, but the new rules will also impact fair lending analyses.
The CFPB has stated that fair lending enforcement is a priority and has issued more than $45 million dollars in remediation since 2016 for violations. Institutions that are able to take advantage of the new HMDA data expansion will not only have smoother examinations, but will also be able to make data-backed business decisions.
For the last decade, fair lending compliance has meant monitoring your HMDA data for patterns of irregularities and digging deeper with a “HMDA Plus” file to examiners, or more data for a comprehensive internal analysis. Since community groups lacked this extra data, all they could do was make a calculated guess of a fair lending disparity. Bottom line is you always knew in advance if there might be a fair lending problem based on the request for specific additional data.
The new CFPB HMDA data requirements eliminate this delay and place the ability to do an automated fair lending analysis instantly in the hands of the examiner BEFORE they meet with you. Additionally, based on a new standard for pricing data submissions and universal rate spread calculations, publicly published data will most likely result in every lender knowing the pricing practices of each one of its peers.
Not only will regulators be able to identify if you are a likely fair lending offender within minutes of your submission, but competitors will know your profit margins and pricing strategy (and you will know theirs).
There are both challenges and advantages to this new world of transparent data availability. We believe you can use this additional data to further protect yourself from false accusations and promote more responsible and profitable lending based on newly expanded peer data.
Through this expanded data, you will be able to tell the best story possible and prove how your fair lending efforts exceed your peers.