Checklist for HMDA Integrity Success
Identification of HMDA loans – Your training systems are key in this HMDA process.
- Can your lending staff identify all the loan types – consumer and commercial – applicable to HMDA?
- Do you have a second set of eyes looking at all loans secured by a lien on a dwelling to ask the other questions that make a loan HMDA reportable?
- Have you provided training to lenders, loan assistants, and processors to identify HMDA loans?
Making the call early in the loan process makes other steps easier. Being aware a loan is HMDA reportable allows lenders and lending staff to gather all the requisite information right from the start – particularly on commercial loans.
Consistency of Initial Data Collection – How you first gather the data matters. Examine the process for initially accumulating HMDA data.
- Does the data come from the initial application and / or subsequent processes?
- Is there a consistent process across banking locations and business lines? For example, is income calculated and entered consistently?
- Some consumer real estate applications and loan software provide a direct feed to the software. If yours doesn’t, do you have tools to insure the calculation is done consistently and documentation is retained to support the calculations? These processes should all be managed at the “business line” level.
Verification of LAR Data – Set procedures to verify data as it is gathered and entered into the bank’s LAR.
- Are there periodic checks or testing completed by the bank’s internal audit department or similar risk management personnel to insure expected processes are followed and data is entered consistently with regulatory guidance?
- Is the bank following its own processes at all locations?
- Do the documents and calculations support the entries in the LAR? If not, can a pattern be discerned regarding weak points and inconsistencies?
Independent (External) Testing of LAR Entries – Leave room for no surprises from banking regulators by testing external channels.
- Who backstops your data gathering, input, and validation? External testing of the HMDA LAR and related processes will allow you as banking management to make adjustments as errors are detected.