The Home Mortgage Disclosure Act, or simply HMDA, is a federal law that requires lenders to provide mortgage data to the public. It has been on the books since 1975, but HMDA has continued to change as technology has advanced. One of the goals of HMDA has been to combat any unfair or discriminatory lending practices for the American borrower.
The expanded requirements were announced in 2015 by the Consumer Financial Protection Bureau (CFPB) with the effective date set to January 1, 2018. The updated requirements set forth by HMDA include 25 new fields that lenders will have to produce along with the robust data set already collected and shared.
Considering that the implementation of the updated HMDA data requirements is just around the corner in the new year, it’s time to understand what this means for the mortgage industry.
#1. Industry Insight
The lending data collected by HMDA has always had a public mandate. With a historic amount of detail into the loans originated across the country soon to be released, it means an incredible amount of insight is going to be available for analytics and data mining. The guidelines for the delivery of this data have also been consolidated into a consistent format making industry analysis simpler.
Regulators use HMDA to enforce fair lending practices and to discourage discriminatory behavior as quickly as possible. The previous information provided by HMDA alone was not enough for a complete picture, which often required regulatory enforcement officers to supplement their findings with other means. Now, the HMDA data will offer a much clearer picture into the types of loan products offered to different types of individual demographics. It will mean a much greater degree of scrutiny on individual lenders from both the regulatory and public sectors.
#3. Potential Liabilities
Lenders face potential liabilities from lawsuits if their lending practices are out of line. Fair warning has been provided by the CFPB that greater visibility of the mortgage industry is coming and coming quickly. Lenders must be extremely vigilant that all regulatory mandates are being met proactively. The same data that is being shared with the federal agencies and the public is also obviously available to private litigants.
#4. Greater Intelligence
With such an open view of the mortgage industry, lenders themselves can take advantage of this readily accessible data for market analysis. The new data that is going to be provided in the HMDA update includes, origination charges, discount points, lender credits, interest rates, LTV ratios, credit scores, DTI ratios, and more. This is a gold mine for data-savvy organizations to gain a competitive advantage.
Another benefit of the HMDA updated data requirements is that ambiguities in compliance that often fall into a gray area may be more easily defined and addressed by government regulators as they are discovered. Lenders and their legal teams will benefit from having clarity on compliance issues that may have been poorly defined or ambiguous in the past.
Pacific Union Financial
Pacific Union Financial, LLC is a full-service mortgage lender providing originations and loan servicing across the United States. A privately held direct lender with Fannie Mae, Freddie Mac, and Ginnie Mae approval, we originate loans through our Retail, Wholesale, and Correspondent channels. Let us know how we can help you expand your business.