A significant number of lenders are submitting the data required by Home Mortgage Disclosure Act with formatting errors, according to a new study.
Such mistakes could get lenders penalized, says David Moffat, president and chief executive officer of Mortgage TrueView in Media, Pa.
"Regulators have made it clear that lenders face significant fines and penalties for noncompliance with HMDA reporting requirements," he said in a press release, and inadequate data reporting could raise that risk.
Mortgage TrueView reviewed 2013 HMDA data filed by nearly 400 lenders, including seven of the top 10 and 15 of the top 20. The survey was based on their 2013 public loan application register filings. It found 10% of these respondents "had critical errors in their filings, including missing data fields, incomplete data fields, incomplete records and incorrect data formats," the company said.
The data indicate that despite constant scrutiny from regulators, many lenders are unaware of their fair lending requirement failures, Moffat said. Mortgage companies and banks are leaving themselves vulnerable to fair lending exams and penalties "by not properly monitoring and managing their HMDA reporting." In his view, they are not taking full advantage of the insights offered in HMDA data.
For example, data reviews of the regulatory risk indicators show loan denial rates increased 13% year-over-year in 2013. Denial rates for white applicants increased to 21% from 17% the previous year, while denial rates for nonwhite applicants increased to 28% from 23%. Denial rates for female applicants increased to 26% from 21%; for males it increased to 21%, from 17% in the previous year.
HMDA data analysis "also tells lenders where there may be missing opportunities," said Becky Walzak, executive vice president and director of regulatory compliance with Mortgage TrueView.