As the first quarter of 2018 ends, many compliance officers will be interested in doing a preliminary analysis of their 2018 HMDA data. This blog focuses on how underwriting analysis changes going forward.
If you have been doing a thorough 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:
- Use loan product definitions to group applications that were underwritten according to the same guidelines;
- Track underwriting exceptions and compensating factors; and
- Capture additional criteria commonly used in underwriting, such as cash reserves.
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:
- Reverse mortgages: both open- and closed-ended;
- ARMs: consumer-purpose and closed-end mortgages, including some reverse mortgages;
- Commercial-purpose dwelling-secured loans and lines of credit that must meet the “purpose test” of being for refi, home improvement, or home purchase;
- Consumer-purpose HELOCs that may or may not meet the purpose test; and
- 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 underwriting, which are summarized in the table below.
New and Modified Data Elements
|Data element||Proposed to be released publicly in unmodified form||Submitted to CFPB; release proposed to involve modification or complete redaction|
|Applicant and co-applicant credit score||Score model code||Scores themselves; free form name of the model used|
|Combined loan-to-value ratio||CLTV|
|Automated underwriting system (AUS) recommendations||Codes indicating the AUS names and the AUS recommendations||Free-form AUS names and recommendations|
|Denial reasons||Up to four codes now required for all lenders||Free-form reasons for denial|