HMDA Examiner Testing Guidelines

The FFIEC released its HMDA Examiner Transaction Testing Guidelines for institutions that report HMDA data.  The Guidelines will apply to examination of HMDA data collected beginning in 2018 and reported beginning in 2019.

From the CFPB:

The Guidelines will help ensure accurate data and address reporting burden concerns

When examining financial institutions, federal supervisory agencies with HMDA supervisory authority may verify the accuracy of HMDA data within a sample of reported transactions. If examiners find that the number of errors in the sample exceeds certain thresholds, an institution will be directed to correct and resubmit its HMDA data.  

In light of the new data fields that will be required beginning in 2018, the Guidelines:

  • Eliminate the file error resubmission threshold under which a financial institution would be directed to correct and resubmit its entire Loan Application Register (LAR) if the total number of sample files with one or more errors equaled or exceeded a certain threshold
  • Establish, for the purpose of counting errors toward the field error resubmission threshold, allowable tolerances for certain data fields
  • Provide a more lenient 10 percent field error resubmission threshold for financial institutions with LAR counts of 100 or less, many of which are community banks and credit unions

At the same time, the Guidelines ensure HMDA data integrity by maintaining field error resubmission thresholds that safeguard the accuracy of each data field, and thus all data, reported under HMDA. Furthermore, under the Guidelines, examiners may direct financial institutions to change their policies, procedures, audit processes, or other aspects of its compliance management system to prevent the reoccurrence of errors.

The Guidelines include procedures, tolerances, ethnicity or race data errors, and determination of sample sizes.  Staff involved with HMDA data compilation and reporting should review the Guidelines to understand what examiners will be looking for in the future.

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