My blog post from April 3 explored whether and how 2018 HMDA changes cause the mortgage underwriting analysis to change. This blog similarly delves into the mortgage pricing analysis. (You will notice some common language between the two blogs.)
If you have been doing a thorough pricing analysis, the best advice is to keep doing what you have been doing. And if you haven’t, you should be aware that regulators and consumer advocates will be able to do a deeper dive into your underwriting than they could before.
Even with the augmented HMDA reporting, much remains below the surface that allows you to tell your own story in an analysis of origination system data. For example, in the context of that analysis, you will:
1. Capture pricing adjustments which could explain pricing differences;
2. Use loan product definitions to group applications that were priced similarly;
3. Track pricing exceptions (including the reason for the exception and the amount)
In the HMDA data itself, filters will allow you to exclude lines of credit, commercial purpose apps, and reverse mortgages, as well as isolate retail and wholesale/correspondent apps. Also, many types of transactions are newly identifiable in the data, including some that had not been required reporting, namely:
1. Reverse mortgages: both open- and closed-ended;
2. ARMs: consumer-purpose and closed-end mortgages, including some reverse mortgages;
3. Commercial-purpose dwelling-secured loans and lines of credit that must meet the “purpose test” of being for refi, home improvement, or home purchase;
4. Consumer-purpose HELOCs that may or may not meet the purpose test; and
5. Consumer-purpose closed-end home equity loans that do not meet the purpose test.
Finally, 2018 HMDA will give regulators access to new and modified data elements that are relevant to pricing, which are summarized in the table below.