January 1, 2018, not only brought a new year for financial institutions. On that day, the new regulations of the Home Mortgage Disclosure Act (HMDA, or regulation C) went into effect.
This law initially arose in 1975 because of growing public concern about the shortage of mortgage loans for acquisition or remodeling in some communities. The general fear was that banks and other lending institutions were discriminating against certain urban sectors by race, ethnicity, or religion. The HMDA data collection initially aimed to help make the residential mortgage lending market more transparent.
This law was significantly amended in 2010 when Congress passed the Dodd-Frank Act, which among other changes expanded the scope of data to be collected, maintained, and disclosed. Now in 2018, the new law brings more regulations. If you're part of a mortgage lender, it's essential that you know about them.
What's New with HMDA 2018?
In addition to expanding the type of credit institutions that must report their numbers (community banks are now included), the most significant change brought about by this new regulation has to do with the structure and amount of data that funders must collect and report.
The Dodd-Frank Act had amended the HMDA to require financial institutions to collect a new set of data points. Now the final rule of the HMDA requires a more complex system of data to be collected and published by lenders. These are the changes to the data required by the HMDA:
- 25 new data points
- 14 revised fields from previous requirements
- 9 data points almost unchanged
This means that there are now 48 unique data fields that lending institutions must collect and report on most residential mortgage loans. This is a big challenge for any mortgage lender, first of all, because they must modify the data they had previously collected to present the numbers under the new format.
Also, there are still many institutions that report their HMDA data manually. Although this process was already complicated itself, with high possibilities of making mistakes in the handling of the information, it is now much more. For any financial institution that wants to stay in business, it will be virtually impossible to efficiently collect and report the information required by the standard manually.
How to Make the HMDA Data Collection Efficiently?
You and your lending institution are adapting to new changes in the standard, a process that is already complex. It is best if you automate as many processes as possible regarding the collection and preparation of the information you are required to submit.
In that sense, it is advisable to have a technological tool that allows you to build and verify a record of HMDA loan applications from scratch. ComplianceTech has for you the Fair Lending Magic™.
This powerful tool will not only allow you to keep an accurate record of your HMDA data but will let you do all the complex statistical analyses of fair loans in a matter of minutes. Take control of consumer, business, auto and mortgage activities in our one-stop solution. Contact us and get your demo today; you'll be more than satisfied.