Maintaining and collecting HMDA data can be challenging. As a HMDA Bank, you must accurately collect and report data because of the various critical purposes for which the data is used.  Errors exceeding the tolerances can result in HMDA-LAR resubmission, regulatory violations, and civil money penalties.

This article will look at the components that make a HMDA program operate successfully. The components that will be highlighted include the following:  Board and Management Oversight; Policy and Procedures; Training; and finally, monitoring and reporting. These components should be considered in the context of the size, complexity, and risk profile of the Bank.

The Board is ultimately responsible for administering an effective HMDA program and must recognize the inherent risk of the HMDA process. The Board must be diligent in its oversight in keeping cognizant of the Bank’s efforts to comply with HMDA and fair lending requirements.  The old saying “Tone at the Top” goes a long way when it comes to a HMDA program. The Board and management can affect the tone by committing appropriate resources (human and capital) on the front end to save burdens and headaches on the back end.

Policy and procedures should provide a framework and roadmap for performing the day-to-day HMDA responsibilities. When establishing the Bank’s procedures, A to Z of your HMDA process, start by defining HMDA and reportable transactions through the HMDA-LAR submission process. The procedures should be a comprehensive field manual–more than what can be covered here. However, we will leave you with a few ideas to ensure your HMDA reporting goes smoothly.

Train, Train, and Train some more! Training should include the technical aspects of the regulation along with any specific Bank procedures.  Be sure to include all personnel that is responsible for HMDA. Such as loan originators (consumer & commercial), processors, audit, and compliance. Effective training reflects each individual’s role in the collection process and provides sufficient detail to aid staff in identifying the transactions to be reported and the data to collect. Regular training will help your team stay up to date and create consistency between departmental lines. Also, consider establishing/training a HMDA expert within your Bank to serve as a central point of contact. This expert can be a reliable resource for all individuals involved in the HMDA data collection process.

Monitoring and Reporting

A successful HMDA program

will have periodic monitoring of the accuracy of data collected and a report of any findings/deficiencies. Monitoring and reporting should be an ongoing process. Not just a last-minute function before submission. The Bank should consider the following regarding their monitoring process:

The key concept in a successful HMDA Program is the establishment of consistently applying collection, verification, and reporting processes. Combined with adequate training, tools, and HMDA data reviews, a bank leverages these components to develop and bolster its HMDA compliance program.