9 Lessons Learned During 2018 HMDA Submissions
2019 was the year all lenders finally got to experience the pleasure of submitting all the new data points required under the CFPB's expanded HMDA data collection and reporting requirements. This process was not without incident, but the lessons learned this year will help lenders better prepare for next year.
Since QuestSoft clients represent approximately 42% of all HMDA submissions, we are in a unique position within the industry. We were able to help many lenders work through different issues as they went through the scrubbing and submission process. The following are our observations from this year.
The CFPB Isn't Always Right
Ronald Reagan used to say that the nine most terrifying words in the English language were, “I’m from the government and I’m here to help.” While it may be difficult to think the government makes mistakes, with the significant amount of data and programming required, issues definitely can occur. In coordination with our clients, several conflicts were identified during initial testing of the CFPB Submission Platform. The CFPB was responsive to our questions and observations, and they quickly implemented any necessary changes.
Keep Compliance Software Updated
If you are using a software vendor for HMDA submissions, it's imperative that you keep the software updated especially during HMDA season, to ensure all changes have been implemented and tested. With the increased focus on information security, IT departments may have more controls around software updates. So, it's always good to plan ahead by making IT aware of the potential need to update loan origination and regulatory reporting software.
QuestSoft always releases a year-end update that contains everything needed to submit your data successfully. Additionally, we publish documentation on our HMDA HQ and Submission Central web pages. This year we added a HMDA Submission Tips page to keep you updated on any changes to the CFPB submission process. As always, our Release Notes provide detailed descriptions of changes to Compliance RELIEF and we encourage customers to read them to ensure they fully understand new features and functionality.
As the old adage goes, “Garbage in, garbage out!” 2018 HMDA submission challenges were not limited to the expanded data fields. The introduction of the S.2155 partial exemption created a unique set of questions and concerns. Even though most lenders had scrubbed their data early on, the last few weeks prior to submission revealed a great deal of missing data and/or errors within their LAR. Information that was either not collected, not consistently recorded, or changed as the result of an LOS update caused hours of additional work and last minute changes.
Test Your HMDA Data Routinely
HMDA reviews should be conducted quarterly at a minimum. Still, many lenders faced significant challenges with their HMDA submission during the last two weeks of February. In 2019, with three times the data, the potential for errors and data integrity issues were significant. Many lenders were experiencing fire drills during the final two weeks before the submission deadline. Establishing routine testing – whether it’s monthly or quarterly - enables you to identify issues and allocate resources to make needed system and/or process changes to ensure that your institution has accurately collected the necessary data. It's also better for your health (mental and physical)!
Know How to Handle Quality Edits
Validity Edits are easy—either the data is in the correct format and represents a valid value or it’s not and these edits MUST be corrected prior to submission. Quality Edits can cause a bit of confusion and frustration. Quality Edits as the name implies, indicate potential problems with the quality of the data, but do not necessarily require any correction to the data. For example, let’s say the application date is equal to the action taken date. Is this wrong or was an action really taken on the same date? Quality Edits require you to make decisions on a case by case basis and can often result in a significant amount of time to review. This is why we recommend reviewing these edits at least quarterly. In many cases, quality edits may require more research to ensure the data is accurate.
Compliance officers are busy people and often schedule their time in advance. However, some lenders wait until the HMDA deadline is right around the corner before they begin identifying potential issues with the submission process. The problem with waiting to submit until the very last possible date is that everyone is busy – vendors, internal staff, and the CFPB —which means it's harder to get support when things go wrong. During peak submission times in February, the CFPB may not respond as quickly to questions submitted through their website or via email. QuestSoft's Support Department received over 12,000 calls from January 2nd to March 1 this year, which resulted in a queue for call handling due to the increased volume.
Use the Right Web Browser
One issue we discovered early on was that the CFPB Submission Platform seemed to perform better using the Chrome browser. Lenders reported experiencing freezes and other issues with the platform using Internet Explorer in particular. A common fix cited by the CFPB for stalled HMDA submissions was to clear your browser's cache. The easiest way is to add ?cache=flush to the end of your current URL and hit enter. This will reload the page and clear your cache—which helped solve a few occurrences of freezing.
Resubmit Your Data
Many people are unaware that you can resubmit your data to the CFPB. While this is NOT an excuse to submit data with errors, it allows you to correct errors identified after you have submitted your data - even after the deadline has passed. Before resubmitting your data, you might want to rename your old hmda.txt file, in case you wish to save it for posterity.
The FIG is Your Friend
Lucky for us, the CFPB has provided a significant amount of documentation to assist with HMDA. One reference tool that is invaluable is the Filing Instructions Guide which is updated each year and when regulatory changes occur. While 170 pages may seem daunting, simply press control + F (find) and enter the key term you are looking for to jump to all references to your search. Keep in mind that it is always best to check the CFPB website to ensure you are using the most current version of the FIG.
While 2018 HMDA submissions are complete, we hope this post helps prepare any new filers for the year to come. While the requirements may change, the lessons learned from previous years continue to help make each year's submission a little smoother. If you're interested in reducing your HMDA processing and submission time, contact us today.