As expected, the Federal Financial Institution Examination Council (FFIEC) member agencies issued new data resubmission guidelines under the Home Mortgage Disclosure Act (HMDA) effective for the 2018 data collection year. The change coincides with the substantial expansion of the HMDA data reporting fields that is effective January 1, 2018.
When examining an institution’s HMDA Loan Application Register (LAR), regulators will assess if the correction and resubmission of any data is required based on a review of a sample of reported loans. Currently for institutions that have a total of less than 100,000 loans or applications on their annual LAR, which is the vast majority of HMDA reporting institutions, (1) an institution must correct and resubmit its entire LAR if 10% or more or of the entries in the sample contain errors, and (2) an institution must correct and resubmit an individual data field in the LAR if there are errors in that field with 5% or more of the entries in the sample. An institution can be required to correct and resubmit data even if the 10% or 5% thresholds are not reached, if the errors would make analysis of the institution’s data unreliable. Regulators will first assess a smaller set of entries in a LAR, and if one or no errors are found they typically cease the verification process at that point.
Under the new guidelines, there are revised thresholds for requiring resubmission, and for assessing if a full review of the sample will be performed based on errors in the initial smaller set of loans. Assessment of the data will be conducted on an individual data field basis. The new testing sample sizes and thresholds are as follows:
For institutions with fewer than 30 LAR entries, the resubmission threshold is still 3, so the effective resubmission threshold percentage is higher than 10%. As is the case currently, even if the thresholds are not met an institution can be required to correct one or more data fields and resubmit one or more data fields in its HMDA LAR if examiners have a reasonable basis to believe that errors in the field or fields will likely make analysis of the HMDA data unreliable.
Under the revised guidelines, if an institution has a total of 1,000 entries on its LAR, the regulator would first review an initial sample of 35 loans. If the regulator finds two or more errors in a data field, the regulator would then review the full 79 loan sample. If four or more errors are found in any data field, the institution would be required to resubmit its LAR with the applicable data field corrected.
Unlike the current approach, under the new guidelines there are tolerances for certain data fields, and an error within the applicable tolerance will not be considered an error for either threshold. The tolerances are as follows:
- Date of Application: Three calendar days or less with regard to the date the application was received or date shown on application form and the date reported in the LAR.
- Loan Amount: One thousand dollars or less in the amount of the covered loan or loan applied for and the amount reported in the LAR.
- Date Action Taken: Three calendar days or less with regard to the date the action was taken and the date reported in the LAR, provided that the difference does not result in reporting data for the wrong calendar year.
- Income: Errors in rounding the gross annual income relied upon to the nearest thousand.
Subject to an exception, for purposes of the guidelines a “data field” generally refers to an individual HMDA Filing Instructions Guide (FIG) field, and such fields are identified by a distinct Data Field Number and Data Field Name. The July 2017 version of the FIG for data collected in 2018 is available here. The exception is for information on the ethnicity or race of an applicant or borrower, for which a data field consists of a group of FIG fields as follows:
- The Ethnicity of Applicant or Borrower data field group—comprised of six FIG fields with information on an applicant’s or borrower’s ethnicity (FIG Data Field Numbers 19-24);
- The Ethnicity of Co-Applicant or Co-borrower data field group—comprised of six FIG fields with information on a co-applicant’s or co-borrower’s ethnicity (FIG Data Field Numbers 25-30);
- The Race of Applicant or Borrower data field group—comprised of eight FIG fields with information on an applicant’s or borrower’s race (FIG Data Field Numbers 33-40); and
- The Race of Co-Applicant or Co-borrower data field group—comprised of eight FIG fields with information on a co-applicant’s or co-borrower’s race (FIG Data Field Numbers 41-48)
If one or more of the six data fields for such a data field group has errors, this would count as one error.