ICYMI: NCUA’s recent HMDA observations

Greetings Compliance Friends!

In case you missed it, NCUA addressed its Home Mortgage Disclosure Act (HMDA) review observations in the Federal Reserve’s recent 2019 Fair Lending Interagency Webinar.  In the webinar, NCUA provided a brief update of its activities from 2019 examinations. NCUA uses HMDA data to assist in identifying and enforcing anti-discrimination rules. So far this year, NCUA appears to have followed its 2019 supervisory priorities by reviewing for good faith efforts to comply with the new HMDA reporting requirements. It is our understanding that NCUA will conduct more expansive fair lending reviews in 2020, in part because collection of the new data points enables the agency to conduct greater analysis of possibly discriminatory lending patterns since it’s now possible to control for more variables. Accordingly, this update provides valuable insight into the activities from recent examinations that NCUA found to be problematic. In the webinar, NCUA identified issues in the areas of reporting originations, reporting preapproval requests, as well as inconsistencies in reporting withdrawn applications and race/ethnicity/sex information.

Failure to Report Originations. When it comes to appropriately reporting loan originations, NCUA found the most issues in cases where a third party plays a role in a credit union’s lending process. According to Regulation C (which implements HMDA), if more than one party is involved in the origination of a loan, the party making the credit decision is required to report the loan. See, 12 CFR Part 1003, Supp. I, Comment 4(a)-2. Whether the loan eventually closes in the credit union’s name is not relevant for HMDA reporting purposes. Although such violations appear to be technical in nature, NCUA still views this as a major issue. As explained in the webinar, systemic HMDA errors can make the data that is collected unreliable. If the data is unreliable, it cannot be used for its intended purpose, which is to help NCUA track trends and analysis. In order to ensure that originations are properly reported, NCUA recommends additional oversight over the HMDA reporting process, especially with regard to third parties who collect data for more than one financial institution but defer the credit decision-making authority to the credit union.


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