Other questions that are not addressed on the
current application include construction method
of the property and the subject property interest
when the home is a manufactured home. Will
you require a printed document to answer these
questions, or do you feel confident that just having
the information marked in your system will be
acceptable to a regulator or your investors? If you
are going to require the documentation, will you
produce your own addendum to the URLA and can
you tie it to the application so that the questions
are being addressed by the LO on every loan
application?
One of the more challenging requirements is
identifying and reporting the “relied upon data.”
Identifying which data fields were truly “relied
upon” may be very difficult and possibly create
substantially more work for your underwriting
team. From the technology aspect, once the credit
decision is made, will your system capture and lock
down those identified “relied upon” data points?
What if information changes between the approval
and closing—for instance, if the hazard insurance
coverage comes in less than anticipated, updating
the system to show the updated amounts to
calculate the accurate monthly payment will affect
your DTI; does your system have the capability to
capture and retain the “relied upon” data for the
credit decision as well as the data used to close the
file so that your system of record accurately reflects
the closing information?
While most lenders are working on the HMDA
revisions solely from an origination standpoint,
companies are also going to have to make
significant changes in their HMDA data auditing
processes. Adding 25 new data fields will
substantially increase the audit time per file. Have
you considered the impact of these new data fields,
additional auditing requirements and whether you
are adequately staffed to manage auditing this new
data to meet your organization’s audit expectations?
Auditing HMDA data may have previously been
an entry level position, merely comparing data on
one screen to data on a different screen.With the
amount of logic and situational based questions in
the new HMDA regulations, auditors will require
either prior industry origination knowledge or you
may need to provide more in-depth training and
crystal clear procedures in order to ensure the level
of accuracy necessary to meet the requirements of
your regulators.
Lenders may believe utilizing OCR technology
in order to streamline the audit process may be a
solution to the challenge of auditing the additional
data points; however, due to lacking integrations
between the GSEs’ automated underwriting systems
and credit repositories into the LOS’, determining
which data points were “relied upon” and existing
loan documentation omitting some of the data
points (e.g. construction method and property
interest) creates obstacles that may inhibit the
possibility—and benefit—of automation.
There is no doubt that complying with the new
HMDA revisions is going to present significant
challenges for all lenders in many areas across the
business. Throw in a significantly revised URLA, and
that only adds to the fun. Fortunately for lenders,
we have become accustomed to implementing new
regulations without receiving detailed guidance
(think TRID). Unfortunately, it appears the new
HMDA reporting regulation will follow the same
track.
Good luck with your HMDA implementation.
Burton Embry is executive vice
president and chief compliance
officer for Primary Residential
Mortgage and president of
the Mortgage Compliance
Professionals Association of
America. He can be reached at
BEmbry@Primeres.com.
Cassandra Wayman is the HMDA/
Fair Lending Manager for Primary
Residential Mortgage. She has
enjoyed 8 years working at
Primary Residential Mortgage,
starting as a HMDA data
auditor. She can be reached at
Cwayman@Primeres.com.
MCM
