The rule's definition of a small business, and where the revenue threshold sits

Section 1071 of the Dodd-Frank Act only counts credit extended to a "small business," and the definition is entirely about gross annual revenue: $1 million or less, as of the CFPB's reconsideration final rule (Federal Register document 2026-08494, published May 1, 2026, effective June 30, 2026). Before that rule, the ceiling was $5 million. The change matters twice over. It shrinks the population of applications you would ever report, since a borrower who clears $1 million in revenue falls outside the rule's definition of small business entirely regardless of loan size. And because the origination threshold below counts transactions to small businesses specifically, a lower revenue ceiling also lowers your raw transaction count against that threshold. An institution that looked covered under the $5 million definition may not be covered under the $1 million one, even with no change in lending activity.

Which loan products are covered and which are excluded

Covered credit transactions include term loans, lines of credit, business credit cards and merchant cash advances extended to a small business as defined above. Consumer-purpose credit, even to a business owner personally, is not covered. Trade credit, factoring, leases and public utility credit are excluded by rule. If your institution originates both business and consumer products through the same channel, the scoping question is per transaction, not per borrower or per department.

How to count originations for the 1,000-transaction threshold

Count every covered credit transaction to a small business that you originated, including renewals and refinances of existing credit and draws or advances on an existing line, in each of the two most recently completed calendar years. Denied applications and withdrawn requests do not count toward origination volume, but they still matter once you are in scope, since Section 1071 requires reporting the application, not only the originated loan. Both years have to independently clear 1,000 transactions; a strong year followed by a weak one does not make you covered, and the reverse does not make you exempt.

What data you collect once you are in scope

The May 2026 reconsideration rule reduced the data collection burden along with raising the threshold. It removed application method, application recipient, denial reasons, pricing information and number of workers as discretionary data points. What remains is still substantial: application and credit details, the census tract of the small business's principal place of business, gross annual revenue, NAICS code, time in business, and demographic information about principal owners (ethnicity, race and sex) collected directly from the applicant rather than proxied. If you built a field mapping against the pre-2026 data dictionary, that mapping now collects fields the rule no longer requires and is missing nothing it still does — the removed fields were discretionary, not required, so nothing you were required to collect went away.

Common scoping mistakes in a first collection year

The most common mistake right now is testing scope against a schedule that no longer exists. Guidance published before May 2026 described a phased rollout with separate compliance dates for lenders above 2,500, 500 and 100 originations. That schedule is gone; there is a single compliance date of January 1, 2028 for every institution that remains covered under the current threshold. A related mistake is testing the origination count against the old $5 million revenue definition, which overstates how many of your transactions actually count as small business credit under the current rule. A third: assuming an institution that was covered under the 100-transaction threshold is still covered now. The tenfold increase to 1,000 transactions moves a meaningful number of smaller lenders out of scope entirely, and continuing to build collection infrastructure for a rule that no longer reaches you is effort spent on the wrong problem.

What to do if you are within 10% of a threshold boundary

Keep counting. Falling below 1,000 covered originations in one of the two test years takes you out of scope for that test, but the two-year window rolls forward every year, and an institution sitting between roughly 900 and 1,100 originations can cross in and out of coverage from one year to the next. The practical move if you are anywhere near that band is to keep counting covered originations under the current small business definition even while you are out of scope, so that the year you do cross, you already have two clean years of data behind you instead of a reconstruction project under deadline pressure.

How to test your own portfolio against the definition

Pull your covered credit transactions to businesses at or under $1 million in gross annual revenue for each of your two most recently completed calendar years, including renewals, refinances and line draws, excluding denials and withdrawals from the origination count. If both years clear 1,000, you are covered as of January 1, 2028. Our Section 1071 coverage checker runs this same test in your browser and cites the rule it reads from, so you can check it in a minute rather than building the test yourself.

Once you know where you stand, see how Comply SBL (1071) handles the collection for institutions that are covered, or read our broader Section 1071 in 2026 overview for the fuller compliance picture. Software details are on the Comply SBL (1071) information page.

Sources: CFPB, "Small Business Lending Under the Equal Credit Opportunity Act (Regulation B)," Federal Register document 2026-08494, published May 1, 2026, effective June 30, 2026.

With the latest RATA Hosted Services (RHS) release, the first wave of ComplyBI functionality is now available to all RHS clients.

This isn't just another software update. It marks the beginning of a new era in compliance analytics.

For decades, compliance professionals have relied on static reports, spreadsheets, and manual analysis to understand their data. ComplyBI changes that by transforming compliance information into dynamic, interactive intelligence that helps you identify trends, uncover risk, and gain deeper insight into your institution's compliance performance.

Unlike generic business intelligence tools, ComplyBI is RATA's proprietary analytics platform, designed specifically for regulatory compliance. Every dashboard, visualization, and report is purpose-built around the questions compliance professionals need answered every day.

And this is only the beginning.

Our development team is actively building an expanding library of dashboards, reports, and analytical tools. New capabilities will be delivered regularly, giving RHS clients continuous access to powerful new insights and analytical capabilities as ComplyBI continues to evolve.

With ComplyBI, you'll be able to:

• Explore your data through interactive dashboards
• Identify trends, anomalies, and emerging risks more quickly
• Create meaningful management and board-level presentations
• Discover insights that traditional reports simply cannot provide
• Better understand what your data is telling you before the examiners do

One of the dashboards already in that library is peer visual analysis inside ComplyBI, comparing your lending patterns against comparable institutions instead of a static peer report.

Want to see ComplyBI's visual peer analysis for yourself? A live walkthrough shows these dashboards working against real institution data.

Ready to dive in? Start with our ComplyBI Introduction video - a quick walkthrough to get you oriented and exploring your data right away. It's the first in a series we're producing, with more in-depth videos on specific dashboards and features on the way.

We believe ComplyBI is redefining compliance analytics. While traditional compliance software helps you produce reports, ComplyBI helps you understand your data. That difference changes everything.

This weekend's release is just the first step. Over the coming months, we'll continue introducing new dashboards, visualizations, and analytical capabilities that will make ComplyBI even more valuable to your institution.

This guide walks you through conducting a comprehensive fair lending self-assessment using the same methodology regulators use when they examine your institution.

Why Conduct a Fair Lending Self-Assessment?

The regulatory agencies—OCC, FDIC, Federal Reserve, NCUA, and CFPB—expect financial institutions to have robust fair lending compliance programs. A self-assessment demonstrates that you're not just reactive to problems, but proactively managing fair lending risk.

Benefits of regular self-assessments include:

• Identify and correct issues before examiners find them
• Document your institution's commitment to fair lending
• Reduce regulatory scrutiny and exam time
• Protect against costly enforcement actions and reputational damage
• Build a culture of compliance throughout your organization

Step 1: Review Your Fair Lending Policies

Start by examining your institution's written fair lending policies and procedures. These documents should clearly prohibit discrimination and establish consistent practices.

Key questions to answer:

• Are policies current and reflective of actual practices?
• Do policies cover all prohibited bases (race, color, religion, national origin, sex, marital status, age, receipt of public assistance)?
• Are there clear guidelines for pricing, underwriting, and exceptions?
• Is there a documented process for handling discrimination complaints?
• When were policies last updated?

Red flags: Policies that haven't been updated in over two years, or policies that don't match actual business practices.

Step 2: Analyze Your HMDA Data

Your HMDA data is the foundation of fair lending analysis. Examiners will use it to identify potential disparities—so you should too.

Denial Rate Analysis

Compare denial rates across demographic groups. Calculate the denial rate disparity ratio:

Disparity Ratio = Minority Denial Rate / Non-Minority Denial Rate

A ratio above 2.0 warrants closer examination. A ratio above 3.0 is a significant red flag. A disparity ratio only tells you how your groups compare to each other; it does not tell you whether your overall denial rate is unusual for an institution like yours. For that, benchmark your lending against peer institutions using aggregate HMDA data from comparable lenders.

Geographic Analysis

Map your lending patterns to identify potential redlining. Look for:

• Assessment areas that exclude minority neighborhoods
• Significant differences in approval rates by census tract demographics
• Marketing or branch distribution that avoids certain areas

Pricing Analysis

Examine rate spread data by demographic group. Even small differences (10-25 basis points) can indicate pricing disparities worth investigating.

Step 3: Conduct Statistical Analysis

Statistical analysis goes beyond raw numbers to control for legitimate credit factors. This is the same approach examiners use.

Regression Analysis

Regression analysis examines whether demographic factors explain outcomes after controlling for legitimate underwriting variables like:

• Credit score
• Debt-to-income ratio
• Loan-to-value ratio
• Loan amount
• Property type
• Collateral value

If prohibited bases remain statistically significant after controlling for these factors, you have a potential fair lending issue.

BISG Proxy Analysis

When demographic data is incomplete (common for non-HMDA products), use Bayesian Improved Surname Geocoding (BISG) to estimate applicant demographics. This method combines:

• Surname probability from Census Bureau data
• Geographic probability from census tract demographics

BISG is the industry-standard proxy method accepted by regulators for fair lending analysis.

Step 4: Perform Comparative File Reviews

Statistical analysis identifies patterns, but comparative file reviews reveal the "why" behind the numbers. Select matched pairs of applications:

Marginal approvals: Minority applicants who were approved despite weaker credit profiles

Marginal denials: Non-minority applicants who were denied despite stronger credit profiles

Review these files side-by-side to understand:

• Were underwriting criteria applied consistently?
• Were exceptions granted fairly?
• Was documentation complete for all applicants?
• Were similar applicants treated similarly?

Step 5: Evaluate Exception Practices

Exception practices are a leading source of fair lending risk. Review all exceptions to standard underwriting or pricing guidelines.

Questions to answer:

• What percentage of loans involve exceptions?
• Are exceptions distributed evenly across demographic groups?
• Is there a documented business reason for each exception?
• Who has authority to grant exceptions?
• Are exceptions tracked and monitored?

Red flag: Non-minority applicants receiving more favorable exceptions than similarly situated minority applicants.

Step 6: Review Marketing and Outreach

Fair lending extends beyond underwriting. Examine how your institution markets products and serves communities.

• Do marketing materials reach all communities in your assessment area?
• Are loan officers incentivized in ways that might encourage steering?
• Do branch locations and hours serve all demographic groups?
• Is your website and digital presence accessible to all?

Step 7: Assess Training and Accountability

Even the best policies fail without proper training and accountability.

• Do all lending staff receive fair lending training?
• Is training conducted annually at minimum?
• Are there consequences for fair lending violations?
• Is fair lending performance part of employee evaluations?

Step 8: Document Your Findings

A self-assessment is only valuable if it's documented. Create a written report that includes:

• Methodology used for each analysis
• Data sources and time periods examined
• Findings (both positive and areas of concern)
• Recommended corrective actions
• Timeline for implementing changes
• Assignment of responsibility

This documentation demonstrates to examiners that you take fair lending seriously and actively manage risk.

Step 9: Implement Corrective Actions

Identifying issues is only half the battle. Develop and implement corrective actions for any problems found:

• Update policies and procedures
• Retrain staff on proper practices
• Enhance monitoring systems
• Consider remediation for affected applicants
• Adjust exception practices

Step 10: Establish Ongoing Monitoring

Fair lending compliance is not a one-time event. Establish ongoing monitoring processes:

• Monthly or quarterly data reviews
• Regular exception monitoring
• Annual comprehensive self-assessments
• Continuous training updates

Rather than run these ten steps by hand every cycle, you can run the same tests with Comply Fair Lending on a recurring schedule.

Tools for Effective Self-Assessment

Manual self-assessments are possible but time-consuming and error-prone. Purpose-built fair lending software can:

• Automate statistical analysis and regression testing
• Apply BISG proxy methodology accurately
• Generate matched pair samples for file review
• Produce exam-ready documentation
• Monitor trends over time

The investment in proper tools pays for itself in reduced exam risk and staff efficiency.

Get Started Today

Don't wait for your next examination to discover fair lending issues. A proactive self-assessment protects your institution, your customers, and your community.

Contact us for a demo to see how Comply Fair Lending can streamline your self-assessment process with FFIEC-aligned analysis tools.

After helping institutions file HMDA data for nearly four decades, we've seen the same errors appear again and again. Here's how to identify and fix the 10 most common HMDA edit check errors before they delay your submission.

Understanding HMDA Edit Check Types

Before diving into specific errors, it's important to understand the three types of HMDA edit checks:

• Syntax Edits: Verify data format and structure. These must be corrected before submission.
• Validity Edits: Confirm values fall within acceptable ranges. Also mandatory to fix.
• Quality Edits: Flag unusual but potentially valid data. May require verification but not necessarily correction.

The 10 Most Common HMDA Edit Check Errors

1. Invalid Census Tract (V628, V629)

The Problem: The census tract code doesn't exist in the Census Bureau's TIGER database, or it's formatted incorrectly.

Common Causes:

• Using outdated census tract codes (boundaries change every 10 years)
• Geocoding with non-compliance-grade tools
• Manual data entry errors
• Missing leading zeros

The Fix: Re-geocode the property address using compliance-grade geocoding that references the current Census Bureau TIGER file. Ensure your geocoding tool is updated for the current filing year.

2. Rate Spread Calculation Errors (V692, V693)

The Problem: The reported rate spread doesn't match the calculated difference between your loan's APR and the applicable APOR.

Common Causes:

• Using the wrong APOR table (fixed vs adjustable)
• Incorrect lock date reference
• Rounding errors
• Missing rate spread when required

The Fix: Before filing, check the rate spread against the current APOR tables using the FFIEC's official calculator or software with the tables built in. Verify you're using the correct loan term and rate type. Rate spread should be reported to two decimal places.

3. Invalid Action Taken Date (V615, V616)

The Problem: The action taken date is outside the reporting year, before the application date, or formatted incorrectly.

Common Causes:

• Date format errors (YYYYMMDD required)
• Reporting loans from the wrong calendar year
• Action date before application received date

The Fix: Verify all dates are in YYYYMMDD format. Ensure the action taken date falls within the reporting period and occurs on or after the application date. Check your data import mapping.

4. Income Inconsistencies (Q631, Q632)

The Problem: Reported income appears unusually high or low relative to the loan amount, or is missing when required.

Common Causes:

• Reporting gross vs net income incorrectly
• Including non-applicant income
• Data entry in wrong units (dollars vs thousands)
• Leaving income blank when it should be "NA"

The Fix: Report gross annual income in thousands of dollars (rounded). If income wasn't relied upon in the credit decision, report "NA" rather than leaving blank. Verify the DTI ratio makes sense.

5. Missing or Invalid ULI (S300, V696)

The Problem: The Universal Loan Identifier is missing, duplicated, incorrectly formatted, or doesn't include your LEI.

Common Causes:

• ULI doesn't start with your 20-character LEI
• Duplicate ULIs in your file
• Invalid check digit
• ULI exceeds 45 characters

The Fix: Ensure every ULI begins with your institution's LEI, followed by a unique identifier of up to 23 characters, plus a valid check digit. Use software that auto-generates compliant ULIs.

6. Property Location Mismatches (V626, V627)

The Problem: The state, county, and census tract codes don't align geographically.

Common Causes:

• Manual geocoding errors
• Mixing up similar addresses in different states
• Using county name instead of FIPS code

The Fix: Re-geocode the property address. Verify the state FIPS (2 digits), county FIPS (3 digits), and census tract (6 digits) all correspond to the same location. Use batch geocoding for consistency.

7. Loan Purpose and Occupancy Conflicts (Q633)

The Problem: The combination of loan purpose, occupancy type, and other fields doesn't make logical sense.

Common Causes:

• Investment property marked as home improvement
• Cash-out refinance coded as rate/term refinance
• Second home with non-matching lien status

The Fix: Review the business logic of each flagged loan. Verify that loan purpose, occupancy, property type, and lien status create a valid combination. Update any miscoded fields.

8. Ethnicity and Race Reporting Errors (V650-V654)

The Problem: Demographic data is missing, incorrectly aggregated, or uses invalid codes.

Common Causes:

• Using old demographic codes (pre-2018 format)
• Missing co-applicant data
• Visual observation not flagged when applicable
• Confusing ethnicity and race fields

The Fix: Use current HMDA demographic codes. Report "Information not provided" when applicants decline. Flag visual observation or surname-based identification when applicable.

9. Denial Reason Conflicts (V670, V671)

The Problem: Denial reasons are reported for approved loans, or missing/invalid for denied applications.

Common Causes:

• Denial reason reported for Action Taken = 1 (originated)
• No denial reason for Action Taken = 3 (denied)
• Using invalid denial reason codes

The Fix: Only report denial reasons when Action Taken = 3 (denied). Use valid denial reason codes (1-9 or 1111). Report up to four reasons per denied application.

10. Loan Amount vs Property Value Ratios (Q634)

The Problem: The loan-to-value ratio calculated from your data appears unrealistic.

Common Causes:

• Property value in dollars, loan amount in thousands (or vice versa)
• Using assessed value instead of appraised value
• Combined loan amount for refinances
• HELOC credit limit vs initial draw amount confusion

The Fix: Verify both loan amount and property value are reported in the same units. Use the appraised value at origination. For open-end credit, report the credit limit.

These are the same errors Comply HMDA/CRA catches automatically before you ever submit -- see how Comply catches these edits before submission.

Best Practices for Edit Check Success

Run Edit Checks Early and Often

Don't wait until February to run your first edit check. Test your data monthly throughout the year to catch systemic issues early when they're easier to fix.

Use Compliance-Grade Software

Consumer-grade tools may geocode addresses, but they don't guarantee FFIEC-compliant census tract assignments. Use software specifically designed for regulatory compliance.

Maintain Clean Source Data

Most edit check errors originate from your loan origination system. Work with your LOS vendor to ensure HMDA fields are captured correctly at the point of application.

Document Your Verification Process

For quality edits that you verify and leave unchanged, document why the data is correct. Examiners may ask about unusual patterns during your next compliance review. Comply DataMine can help you build a submission audit report that documents exactly which edits you reviewed and why.

Get Help Before the Deadline

If you're struggling with persistent edit check errors, don't wait until the last week of February. Professional compliance software can automate geocoding, rate spread calculations, and edit check validation—eliminating the most common errors before they occur.

Contact us for a demo to see how Comply can help you submit error-free HMDA data on time, every year.

This guide covers the current state of Section 1071 implementation, who needs to comply and when, and practical steps for building your compliance infrastructure.

What Is Section 1071?

Section 1071 requires financial institutions to collect and report data on small business lending applications. The goal mirrors HMDA's purpose for mortgage lending: to identify potential discrimination and ensure fair access to credit for minority-owned, women-owned, and other small businesses.

The Consumer Financial Protection Bureau (CFPB) finalized the implementing rule in 2023, establishing:

• Which institutions must report
• What data must be collected
• When compliance begins
• How data will be submitted

The Compliance Timeline Changed on May 1, 2026

The phased schedule described in earlier guidance — separate dates for lenders above 2,500, 500 and 100 originations — no longer applies. The CFPB published a reconsideration final rule on May 1, 2026 (effective June 30, 2026) that replaced it with a single compliance date and a much higher threshold:

• Origination threshold: raised from 100 to 1,000 covered credit transactions to small businesses, in each of two consecutive years
• Small business definition: lowered from $5 million or less in gross annual revenue to $1 million or less
• Compliance date: a single date of January 1, 2028, for every institution that remains covered

Important: The origination count includes all covered credit transactions to small businesses under the new $1 million revenue definition, not just approved loans. Denied applications and withdrawn requests also count toward the threshold, and both years of the two-year test must clear it.

If your institution built a 1071 program against the old 100-transaction threshold, it is worth re-testing coverage now — the tenfold increase takes many lenders out of scope entirely. Our Section 1071 coverage checker runs both the origination and revenue tests against the current rule.

What Data Must Be Collected?

Section 1071 requires collection of dozens of data points across several categories, several fewer than earlier guidance after the CFPB's May 2026 reconsideration rule removed application method, application recipient, denial reasons, pricing information and number of workers as discretionary fields. Here's an overview of the key fields, and how RATA handles 1071 small business lending data across all of them. Once you're collecting it, you can build custom reports across the 1071 data points rather than exporting to a spreadsheet for every board or examiner request.

Application Information

• Unique loan/application identifier
• Application date and action taken date
• Application method (in-person, online, telephone)
• Application recipient (direct vs. indirect)

Business Information

• Business legal name and trade name
• Business address
• Business type (sole proprietorship, partnership, corporation, etc.)
• NAICS code (industry classification)
• Number of employees
• Time in business
• Gross annual revenue

Owner Demographics

This is where Section 1071 differs most significantly from traditional business lending:

• Minority-owned status: Whether the business is minority-owned
• Women-owned status: Whether the business is women-owned
• Veteran status: Whether the business is veteran-owned
• Principal owner demographics: Race, ethnicity, and sex of principal owners

These demographic fields must be collected via a standardized form provided to applicants. Applicants may choose not to respond, in which case "not provided" is recorded.

Credit Information

• Credit type (term loan, line of credit, credit card, etc.)
• Credit purpose
• Amount applied for
• Amount approved (if applicable)
• Action taken (originated, approved but not accepted, denied, withdrawn, incomplete)
• Denial reasons (if applicable)

Pricing Information

• Interest rate
• Fees charged
• Prepayment penalty terms

How Section 1071 Compares to HMDA

If your institution already files HMDA, you'll find some familiar concepts, but also significant differences:

Key difference: Section 1071 requires collecting business ownership demographics that have no HMDA equivalent. This means new data collection forms, applicant communications, and staff training.

Preparing for Compliance

With a single January 1, 2028 compliance date now in place of the old phase schedule, preparation should still begin well before then:

1. Assess Your Origination Volume

Determine which phase applies to your institution:

• Count small business credit originations from the past two calendar years
• Include all covered transactions (not just approvals)
• Remember: a "small business" under Section 1071 is one with gross annual revenue of $1 million or less, lowered from $5 million by the CFPB's May 2026 reconsideration rule

2. Update Application Processes

You'll need to collect demographic information at the application stage:

• Implement the CFPB's standardized demographic data collection form
• Train staff on how to present the form and handle questions
• Update online application systems to include required fields
• Establish procedures for indirect lending channels

3. Build Data Infrastructure

Your systems must capture, store, and report all required fields:

• Assess current loan origination system capabilities
• Identify gaps in data collection
• Plan for secure storage of demographic data
• Establish data quality controls

4. Develop Compliance Procedures

Document your processes for examiner review:

• Written policies for data collection
• Staff training materials and records
• Quality assurance procedures
• Retention and security protocols

Common Implementation Challenges

Based on Phase 1 lenders' experiences, watch for these common hurdles:

NAICS code assignment: Correctly classifying business industries requires consistent methodology. Develop clear guidance for your team.

Principal owner identification: Determining who qualifies as a principal owner (25%+ ownership or significant management control) requires clear policies.

Applicant reluctance: Some applicants may be hesitant to provide demographic information. Train staff to explain the purpose and emphasize that providing information is voluntary.

System integration: If you use multiple lending platforms, ensuring consistent data collection across all channels is essential.

How Comply SBL Helps

Comply SBL is designed specifically for Section 1071 compliance:

• Complete field data management: Capture every required data point in a single system
• Edit check validation: Match CFPB specifications before submission
• Demographic form generation: Produce compliant applicant forms
• NAICS code lookup: Accurate industry classification tools
• Reporting and analytics: Monitor lending patterns and identify potential issues
• HMDA integration: For institutions that need both HMDA and Section 1071 compliance

Next Steps

If Section 1071 applies to your institution under the current 1,000-origination threshold:

1. Confirm your coverage against the 1,000-origination threshold in each of the last two years
2. Assess current systems for gaps in data collection capability
3. Begin staff training on demographic data collection procedures
4. Evaluate compliance software options

Visit our Section 1071 information page for additional resources, or schedule a demo of Comply SBL to see how we can help your institution prepare.

RATA Associates has been at the forefront of regulatory compliance software since 1987. As Section 1071 requirements take effect, we're helping financial institutions build compliant processes from day one.

Key Dates to Remember

Four dates matter for the 2025 filing cycle. Begin your final data review and validation on January 1, 2026. Set an internal submission deadline of February 15, 2026, which gives you two weeks of buffer to work through corrections without touching the real deadline. The CFPB filing deadline is March 2, 2026, and no extensions are granted. Your modified LAR becomes available for public disclosure review on March 31, 2026.

Your Pre-Filing Checklist

1. Verify Data Completeness

Start by reconciling your Loan Application Register against your core system, because a loan count that does not match is the fastest way to find records that never made it in. The gaps tend to cluster in predictable places: Q4 2025 closings booked late in the year, loans purchased from other institutions, and applications that were withdrawn or denied rather than originated. All of those are reportable, and all of them are easy to lose when the LAR is assembled from an export that was scoped to closed loans. Comply HMDA/CRA can automate the LAR preparation steps in this checklist, from completeness checks through submission.

2. Validate Geocoding Accuracy

Geocoding errors cause more edit check failures than any other single data problem, and you should be targeting 95%+ accuracy to keep resubmission risk down. Every property address needs a valid census tract assignment, and each state, county and tract combination has to be valid for 2020 Census boundaries rather than an earlier vintage. Pull the addresses that failed geocoding entirely into a manual review queue, because they will not fix themselves and they will fail at the Platform. It is also worth sanity-checking the geocoded results against your institution's actual lending footprint: a cluster of records in a market you do not lend in usually means an address parsing problem rather than a new branch. You can geocode the LAR before you file instead of checking these after the fact, and RATA offers compliance-grade geocoding services for institutions that would rather outsource the step entirely.

3. Run Edit Check Validation

The FFIEC HMDA Platform runs three categories of edit against your file, and all three can be run internally first. Syntactical edits check format and structure: field lengths and formats matching the specification, required fields populated, numeric fields containing numbers. Validity edits check logical consistency, so action taken dates have to fall within the reporting year, loan amounts have to sit in a reasonable range, and rate spreads have to be calculated for the loans that require them. Quality edits are reasonableness checks that flag unusual patterns, outlier values, and geographic distributions that do not look right for an institution of your size and footprint. Quality edits do not block submission, but each one you leave unexplained is a question an examiner can ask later.

4. Review Rate Spread Calculations

Rate spread reporting depends on the applicable Average Prime Offer Rate, and the errors here are almost always about which APOR table was used rather than the arithmetic. Confirm your methodology matches CFPB requirements, then confirm the calculation pulled the correct table for each loan's lock date rather than the current one. Exempt transactions need to be identified as exempt rather than left blank or calculated anyway. Finally, look at the tails: any rate spread that seems unusually high or low is worth checking by hand before it becomes a quality edit you have to explain. You can calculate the rate spread for every reportable loan against the current APOR tables with our free calculator when you need to verify a figure outside your software.

5. Confirm Reportable Transaction Scope

Not every transaction belongs in the file. Include applications you received in any disposition, whether approved, denied, withdrawn or closed for incompleteness, along with loans you originated, loans you purchased from other institutions, and preapproval requests where applicable. Exclude commercial purpose loans, transactions below reporting thresholds, and in certain cases loans secured by properties outside your assessment areas. Over-reporting is a real risk, not only under-reporting: a record that should not be in the file still gets edit-checked, still gets published in your modified LAR, and still has to be defended.

6. Validate LAR Formatting

The submission file itself has to meet FFIEC specifications before the Platform will accept it. That means a pipe-delimited file in the correct field order, UTF-8 encoding without a byte order mark, and no header row. Two fields cause most of the format-level rejections at this stage: your Legal Entity Identifier, which must be current and valid rather than expired, and the calendar year field, which must match the reporting period rather than the year you are filing in.

7. Test Submission Platform Access

Technical access is the cheapest item on this list to verify and the most annoying one to discover on deadline day. Log in to the HMDA Platform at https://ffiec.cfpb.gov/filing/ in January and confirm your credentials are still active, since passwords expire and staff turnover leaves accounts behind. While you are in there, check that the Platform recognizes your institution's LEI and pull up your submission history from prior years, which is useful context for the sign-off package below.

8. Complete Internal Sign-Off Process

Most institutions require management approval before anything is submitted, and that approval is easier to get when the package is already assembled. Prepare summary statistics for management review, document any data anomalies alongside the explanation for each, and obtain sign-off from your compliance officer or an executive. Then keep the documentation. The record of who reviewed what, and why an unusual pattern was left as it was, is exactly what examiners ask for later, and reconstructing it from memory in year three is not realistic.

Common Last-Minute Issues to Avoid

The problems that derail filings in late February are almost always problems that were visible in January. Address standardization issues cause geocoding failures, which cause edit failures, so validate addresses early rather than the week before filing. Late-year closings get missed, which is why the January reconciliation in step one matters. Rate spreads calculated against the wrong APOR date look correct until they do not. Password expirations and credential problems stop a submission dead for reasons that have nothing to do with your data.

The one that catches people out most often is underestimating correction time. Quality edits require explanations, and researching an unusual pattern well enough to document it properly takes considerably longer than fixing a syntactical error. Budget for it.

How Comply HMDA/CRA Streamlines Filing

Comply HMDA/CRA automates most of this checklist. Integrated geocoding with 95%+ accuracy removes manual address lookups. Built-in edit checks match FFIEC logic and catch errors before submission rather than after. The rate spread calculator uses current APOR tables automatically, so the wrong-table problem in step four does not arise. LAR export generates properly formatted submission files, and the audit trail documents your review process for examiners without anyone assembling it by hand.

Ready to Simplify Your HMDA Filing?

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In the lead-up to the change in administration, the CFPB and DOJ have settled redlining claims against non-depository mortgage companies.  On January 17, 2025, the CFPB settled redlining claims against a non-depository mortgage company, Draper & Kramer Mortgage Corporation, based on activity from 2019 to 2021 in the Chicago-Naperville-Elgin and Boston-Cambridge-Newton metropolitan statistical areas (Chicago and Boston MSAs, respectively).  The CFPB's settlement includes a $1.5 million civil money penalty and a prohibition against the company from engaging in any residential mortgage lending activities for five years.  

The week prior, on January 7, 2025, the Department of Justice (DOJ) settled redlining claims against a non-depository mortgage company, The Mortgage Firm, Inc., based on activity from 2016 to 2021 in the Miami-Fort Lauderdale-Pompano Beach Metropolitan Statistical Area (Miami MSA).  The DOJ's action resulted from a CFPB referral to the DOJ in 2022.  The DOJ's settlement includes a $1.75 million loan subsidy fund that the company is required to offer to qualified applicants for down payment assistance, closing cost assistance, and other similar purposes. 

Both cases involve the typical allegations of modern-day redlining lawsuits, which I'll briefly summarize below.  I'll also provide some thoughts as to why, despite the change in administration, redlining should still be a focus of lenders during the next administration. 

I.  CFPB Settlement 

The CFPB's complaint in this case is typical of past modern-day redlining actions, including a Home Mortgage Disclosure Act (HMDA) data peer analysis that shows statistically significant disparities in the percentage of applications and originations from majority-minority census tracts between the company and peer lenders.  Essentially, the CFPB alleged that the mortgage company's peer lenders generated applications from majority-Black and Hispanic areas (where a majority of residents identity as either Black or Hispanic) at over 2.5 times the rate and over 3 times the rate of the company in the Chicago and Boston MSAs, respectively.  The CFPB alleged certain other statistically significant disparities as well.  Before a regulator runs that analysis for you, you can map your lending footprint against census tract demographics to see the same geographic gaps yourself.  In addition to the HMDA peer analysis, the CFPB made the allegations described below regarding the company's marketing. 

A. Office Locations

The CFPB alleged that the company's office locations (13 in the Chicago MSA and six in the Boston MSA) were "based on where its loan officers lived," and that none of the company's loan officers in the Chicago and Boston MSAs lived in majority-Black and Hispanic neighborhoods during the years in question.  The CFPB alleged that the company did not try to compensate for its lack of offices in majority-Black and Hispanic areas, such as assigning loan officers to solicit applications in, or incentivizing lending in these areas.  

B. Loan Officer Demographics

The CFPB also went back to another typical redlining card: the race and ethnicity of the loan officer staff.  The CFPB alleged that the "vast majority" of the company's loan officers in both MSAs were white.  The CFPB stated that of the company's 89 loan officers in the Chicago MSA, 76 of them were white, eight were Hispanic, and none were Black.  And in the Boston MSA, the CFPB stated that of the company's 29 loan officers, 27 were white, and none were Black or Hispanic.   The CFPB alleged that the company relied almost entirely on its loan officers to develop referral sources, conduct outreach to potential customers, and conduct other marketing.  The CFPB also stated that the company's marketing displayed its loan officers, all of whom appeared to be white.  The CFPB also alleged that the company did not make efforts to hire loan officers that serve or had ties to referral sources in majority-Black and Hispanic areas.  

C. Marketing

The CFPB alleged the following facts about the company's marketing: 

• The company's direct mail was concentrated in majority-white areas.  Only 9.31% and 4.68% of the company's direct mail in the Chicago and Boston MSAs, respectively, were to majority-Black and Hispanic areas.  
• "Virtually all" of the models in its newspaper and magazine advertisements "appeared to be white."  
• The company did not target magazines or newspapers outside of majority white communities until April 2021, and the advertisements were unlike those in majority-white areas as they only contained text.  
• The company provided an annual marketing budget to its loan officers, but did not monitor where the loan officers marketed.  
• The most frequently used pre-approved advertisements only contained images of "white-appearing" loan officers, and other models were almost all "white-appearing."  
• The company advertised at open houses in the Chicago MSA, almost all of which were in majority-white areas, and almost all of the flyers included images of "white-appearing loan officers and real estate agents."  
• The company marketed to past customers using a customer relationship management service, and over 91% and 96% of those past customers marketed to using this service were outside of majority-Black and Hispanic areas in the Chicago and Boston MSAs, respectively. 
• The company did not circulate any marketing materials in Spanish, or have any Spanish-language marketing until May 2021, and only provided those materials to two loan officers in the Chicago MSA who spoke Spanish.  This was only the second time LEP issues were used by the government in a redlining lawsuit against a non-bank mortgage company, the DOJ's settlement discussed in this blog post being the first.

D. Emails

The CFPB also alleged that loan officers sent and received emails "containing racist content or otherwise reflecting discriminatory animus."  The CFPB likely reviewed thousands of emails, but cited only four emails from three loan officers: two emails from one loan officer, and two emails from two other loan officers.  

E. Failure to Address Redlining Risks and Conclusion

The CFPB notified the company in 2019 in a Supervisory Letter of its redlining risks, but the CFPB stated that the company did not adequately address the deficiencies.  The company did not perform any internal redlining analyses, or adequately train its employees with respect to redlining.  The company allegedly did not analyze its HMDA data for redlining risk until 2022.  The CFPB concluded in the complaint that the company discriminated and discouraged applicants and prospective applicants in the majority-Black and Hispanic census tracts in the Chicago and Boston MSAs.  The CFPB alleged that the company's "discriminatory practices…were intentional and had the effect of discriminating on the basis of race, color, or national origin."  

Waiting until an examiner or the CFPB flags a disparity is what turned this into an enforcement action rather than an internal finding. Comply Fair Lending is built for proactive fair lending testing -- running the same HMDA peer analysis before regulators do.

II.  DOJ Settlement 

The DOJ's complaint generally contained similar facts as the CFPB's, as both were typical of the modern-day redlining theory.  In addition to the same type of HMDA peer analysis, the DOJ made allegations regarding the company's marketing, as described below.

A. Office Locations

The DOJ alleged that, of the company's nine offices in the Miami MSA that were open during most of the time period in question, eight were located in majority-white neighborhoods.  And the one office that was in a majority-Black and Hispanic neighborhood was surrounded by majority-white neighborhoods.  Interestingly, of the five offices open only briefly during the time period, three were in majority-minority neighborhoods: one was in a majority-Black and Hispanic neighborhood and two were in high-Black and Hispanic neighborhoods.  But the DOJ alleged that "these offices were only open for a few months and received only a small number of mortgage applications" (seems like it would be basic business sense to close an office that only generated a small number of applications, but that's not how fair lending works).  The DOJ alleged that "by concentrating nearly all its offices in majority-white areas," the company discriminated against, and discouraged, residents of majority-Black and Hispanic neighborhoods.  

The DOJ also alleged that the company assigned all of its loan officers to its office locations, and "did not direct, train, or incentivize its loan officers or other staff to take steps to compensate for its lack of a physical presence in majority- or high-Black and Hispanic areas or to otherwise serve the credit needs of these communities."  The DOJ noted that the company "established new offices and hired new loan officers based on their preexisting and potential books of business," and did not make efforts to hire loan officers serving these majority-minority neighborhoods. 

B. Loan Officer Demographics

The DOJ, like the CFPB, used the race and ethnicity of the loan officer staff in its complaint.  The DOJ alleged that none of the company's 46 loan officers in the Miami MSA were Black, despite the MSA's 20% Black population.  The DOJ also alleged that, although company did have 15 Hispanic loan officers in the MSA, only four were employed for at least one year, despite the MSA's 45% Hispanic population.  The DOJ also took issue with the company advertising its loan officers on its website, because they were mostly non-Hispanic white.  The DOJ said that "the advertising of mostly white loan officers on [the website]…discriminated against" and discouraged residents of majority-Black and Hispanic neighborhoods.  

C. Marketing

Regarding marketing efforts, the DOJ alleged that the company relied on referral networks that were centered in majority-white census tracts. The DOJ said that the company did not make efforts to develop referral networks in these majority-minority neighborhoods, and did not monitor where its loan officers distributed marketing materials.  In addition, the DOJ alleged that the company's website featured stock images of people who only appeared to be non-Hispanic white.

D. Lack of Spanish Language Access

What is also noteworthy, in light of the government's recent focus on limited English proficiency (LEP), is that the DOJ called out that the company did not translate its website into Spanish or indicate on its website which offices could assist Spanish-speaking clients. The DOJ also alleged that the company knew its referral partners would refer Spanish-speaking customers elsewhere, but failed to take steps to solicit these referrals.  The DOJ has focused on LEP issues in other redlining settlements, so this is not an entirely new issue.  But this was the first time this issue was used by the government in a non-bank redlining lawsuit.

E. Emails

The DOJ also cited emails between company employees that contained allegedly derogatory terms, such as "ghetto" and "hood."  The DOJ likely reviewed thousands of emails from the company, and cited only five emails from three loan officers.  The DOJ also took issue with the fact that the company only warned the loan officers about the emails and did not discipline them.

F. Fair Lending Monitoring and Training

The DOJ alleged that the company did not monitor for fair lending risk until 2020 and only began addressing fair lending risk after the CFPB informed the company that it found evidence of redlining.  The company also allegedly did not enforce any fair lending training requirements. 

III. Another Recent DOJ Redlining Settlement Shows Even Credit Unions Are Not Immune

There was another recent DOJ settlement worth noting, because it was against a federal credit union, rather than against a bank.  On October 10, 2024, the DOJ announced a settlement of redlining claims against Citadel Federal Credit Union.  The settlement includes a $6 million loan subsidy program.  It marked a historic development in the DOJ's Combating Redlining Initiative as it was the first redlining settlement involving a credit union.  The DOJ alleged that the credit union avoided offering home loans or providing mortgage services to majority-Black and Hispanic neighborhoods in the Philadelphia area from 2017 to 2021.  While Citadel is a credit union and therefore has a limited customer base subject to its charter, it is a community credit union that generally allows all people in Philadelphia and certain surrounding counties to join.  

The DOJ's allegations involved similar facts as past redlining enforcement actions, including a HMDA peer analysis, only one branch outside of majority-white neighborhoods, and a failure to market to minority areas or in Spanish.  The DOJ also pointed to an internal report that warned Citadel of its potential redlining risks, which Citadel allegedly failed to address.  

This settlement shows that the government can and will use its modern-day redlining theory against any type of institution, whether a bank, credit union, or non-depository lender.

IV. Thoughts on Why Lenders Should Remain Focused on Redlining Risk

Aside from these actions being against non-banks, these are fairly typical redlining settlements for the DOJ and CFPB.  It is somewhat surprising that the companies did settle, rather than choose to defend themselves until the Trump administration.

Considering the change in administration, you may be wondering why you should pay attention to these settlements.  A lot of people think the Trump administration will shut down fair lending enforcement.  But that's not what happened during the last Trump administration.  Recall that during the last Trump administration, the CFPB under former Director Kraninger filed the historic first federal redlining lawsuit against a non-bank mortgage company: Townstone Financial (which our law firm helped defend).  That Trump-era lawsuit not only aggressively extended redlining theory to non-bank mortgage companies, but also trampled all over the First Amendment rights of the company and its owner to engage in political speech and social commentary on AM talk radio.  Not only that, many of the CFPB's redlining investigations that began under former Director Cordray involving non-bank mortgage companies were continued under both former Acting Director Mulvaney and former Firector Kraninger.  Many thought at that time that such investigations and cases would not move forward under a Republican administration.  For these reasons, it would be prudent to not take for granted that fair lending (or aggressive enforcement theories in general) will simply disappear under the next CFPB leadership.  

In addition, redlining can still be enforced at the state level and by private litigants (such as consumer advocacy groups).  The DOJ and CFPB's long line of redlining settlements has given state agencies the appearance of a precedent that this theory is valid (and unfortunately, the 7th Circuit U.S. Court of Appeals made a terrible decision in the Townstone Financial litigation, which I spoke about on our firm's podcast).  The only way this made-up redlining theory will go away is if it's challenged in court.  But as we've seen since this theory began in the 1990s, nearly all lenders have chosen to settle rather than fight.  State agencies and attorneys general will likely take advantage of that and begin enforcing this redlining theory if they perceive even the slightest slowdown at the CFPB.  And we've seen that states have already begun fair lending enforcement.  For example, in October 2024, the New Jersey Attorney General issued a report accusing an FDIC-shuttered bank, Republic First Bank, of redlining against Black, Hispanic, and Asian communities in New Jersey in violation of New Jersey's anti-discrimination law.  Like in federal claims of redlining, the New Jersey Attorney General used HMDA peer analysis and office locations, but also looked at other factors not typically found in federal redlining claims, such as: a higher frequency of underwriting exceptions for jumbo loans (which were predominantly made to white borrowers) compared to conventional loans; and steering of minority and low-income borrowers to higher-cost loan products (such as FHA loans).  The New Jersey Attorney General filed a claim with the FDIC as receiver seeking recovery.  And recall that the states of Delaware, New Jersey, and Pennsylvania were also involved in the CFPB and DOJ's Trident Mortgage enforcement action.  

Further, recall that the Equal Credit Opportunity Act's (ECOA) statute of limitations is five years (and other statutes of limitations under federal and state law may be long enough for claims as well).  This means that activity during the next four years could become the subject of an enforcement action if there is Democrat administration in four years.  And finally, the reputational risk from merely a claim of discrimination by a government agency or private litigant could be significant. 

For these reasons, all lenders, including banks, credit unions, and non-depository mortgage companies, may find it prudent to remain focused on and monitor for redlining risk even during the next administration.  And as I've said before, it may be prudent to use outside counsel for such analyses because of attorney-client privilege. 

Source

Washington, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) took action to end Trident Mortgage Company's intentional discrimination against families living in majority-minority neighborhoods in the greater Philadelphia area. The CFPB and DOJ allege Trident redlined majority-minority neighborhoods through its marketing, sales, and hiring actions. Specifically, Trident's actions discouraged prospective applicants from applying for mortgage and refinance loans in the greater Philadelphia area's majority-minority neighborhoods. If entered by the court, the settlement, among other things, would require Trident to pay a $4 million civil penalty to the CFPB to use for the CFPB's victims' relief fund. The Attorneys General of Pennsylvania, New Jersey, and Delaware also finalized concurrent actions.

"Trident illegally redlined neighborhoods in the Philadelphia area, excluding qualified families seeking to own a home," said CFPB Director Rohit Chopra. "With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach."

"Last fall, I announced the Department's Combatting Redlining Initiative and promised that we would mobilize resources to make fair access to credit a reality in underserved neighborhoods across our country," said Attorney General Merrick B. Garland. "As demonstrated by today's historic announcement, we are increasing our coordination with federal financial regulatory agencies and state Attorneys General to combat the modern-day redlining that has unlawfully plagued communities of color."

"This settlement is a stark reminder that redlining is not a problem from a bygone era. Trident's unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth and devalued properties in their neighborhoods," said Assistant Attorney General Kristen Clarke of the Justice Department's Civil Rights Division. "This settlement ensures that significant lending resources will be infused into neighborhoods of color in and around Philadelphia that have historically experienced racial discrimination. Along with our federal and state law enforcement partners, we are sending a powerful message to lenders that they will be held accountable when they run afoul of our fair lending laws."

Trident Mortgage Company is a limited partnership incorporated in Delaware. Trident is a wholly owned subsidiary of Fox and Roach/Trident LP, which is owned by Home Services of America, Inc. The ultimate holding company of Trident is Berkshire Hathaway, Inc.

Until it stopped accepting mortgage loan applications in 2021, Trident was a non-depository mortgage company operating in Delaware, Maryland, New Jersey, and Pennsylvania. Trident's lending focus was first mortgage loans and refinancing home loans. Between 2015 and 2017, about 80% of Trident's mortgage applications came from the Philadelphia Metropolitan Statistical Area (referred to as the Philadelphia MSA.) The Philadelphia MSA includes the cities of Philadelphia, PA, Camden, NJ, and Wilmington, DE, as well as Cecil County, Md.

The complaint describes how Trident redlined majority-minority neighborhoods in the Philadelphia MSA and actively discouraged applications from the people living in those neighborhoods. Trident's self-defined market areas included majority-minority neighborhoods. However, Trident's application data show it did not serve neighborhoods within its market areas equally. Only 12% of its mortgage loan applications came from majority-minority neighborhoods, even though more than a quarter of neighborhoods in the Philadelphia MSA are majority-minority. Of the mortgage loan applications Trident did receive from applicants in majority-minority neighborhoods, most of the applicants were white. For example, in Philadelphia MSA neighborhoods that were more than 80% minority, more than half of the applications Trident generated were from white applicants.

Trident's discriminatory actions, alleged by the CFPB and the DOJ, violated the Equal Credit Opportunity Act and the Consumer Financial Protection Act. The DOJ also alleged a violation of the Fair Housing Act. Specifically, the government's investigation uncovered a wide range of problematic conduct by Trident, such as:

• Distributing racist language and messages about certain neighborhoods: Trident's loan officers, assistants, and other employees received and distributed e-mails containing racial slurs and racist content. In addition to using racist tropes and terms, communications sent on work e-mails included content specifically related to real estate properties' locations and appraisals. The racist content also targeted the people living in majority-minority neighborhoods.   
• Avoiding sending its loan officers to market to majority-minority neighborhoods: Trident's loan officers worked out of 53 different offices in the Philadelphia MSA, the locations of which were displayed on Trident's website. Fifty-one of those offices were in majority-white neighborhoods. The other two offices were in neighborhoods with minority groups representing roughly 50% of the population. All 23 offices within the Philadelphia and Camden metropolitan areas that were within Trident's lending area were in majority-white neighborhoods.
• Developing marketing campaigns and advertisements that discouraged and ignored minority mortgage loan applicants: For example, between 2015 and May 2018, Trident conducted fifteen direct mail marketing campaigns. All the individuals pictured in the campaigns' marketing materials—both models and Trident employees—appeared to be white. These direct mail marketing campaigns would have discouraged applicants from majority-minority neighborhoods. Additionally, Trident targeted its marketing materials to majority-white neighborhoods. Trident's open house flyers, for instance, were overwhelmingly concentrated in majority-white neighborhoods, and its online advertisements appeared for home listings overwhelmingly located in majority-white neighborhoods.

Enforcement Action

Congress entrusted the CFPB to enforce the Equal Credit Opportunity Act, which prohibits discrimination in any aspect of a credit transaction on a prohibited basis, including race, color, and national origin. The proposed order, if entered by the court, would be CFPB's first nonbank mortgage redlining resolution and it would require Trident, among other things, to:

• Pay $18.4 million into a loan subsidy program: To increase nondiscriminatory access to credit, Trident will establish a loan subsidy program. A lender it contracts with to make the loans will offer loans to qualified applicants on a more affordable basis when borrowing to purchase properties in majority-minority neighborhoods in the Philadelphia MSA. The loan subsidies can include closing cost assistance, down payment assistance, and payment of mortgage insurance premiums. Through the lender it contracts with to make loans under the subsidy fund, Trident will ensure the lender has four offices located in majority-minority neighborhoods. These lending offices will provide similar services to those provided through Trident's offices.
• Pay a $4 million fine: Trident will pay a $4 million penalty to the CFPB, which will be used for the CFPB's victims' relief fund.
• Pay an additional $2 million: Trident must spend $2 million to fund advertising to generate applications in redlined areas and take other steps to serve the credit needs of majority-minority neighborhoods in the Philadelphia MSA.

In addition to the CFPB and DOJ's enforcement action, the states of Pennsylvania, New Jersey, and Delaware have entered into concurrent agreements with Trident and its real estate services affiliate, Fox & Roach LP.

Read today's complaint and proposed order.

Combatting Illegal Physical and Digital Redlining

Today's action is part of a renewed effort by federal agencies to combat illegal redlining by mortgage lenders in violation of federal law. The DOJ's enforcement of fair lending laws is a priority for their Civil Rights Division, which is leading an initiative to combat redlining. In addition, the CFPB continues to issue policy guidance and monitor markets for digital redlining.

The Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors, and the Office of the Comptroller of the Currency recently proposed updated rules implementing the Community Reinvestment Act, which was passed in 1977 to combat redlining. While these rules will only impact insured banks, several states have passed similar laws that apply to nonbank mortgage lenders, which now originate the majority of mortgage loans in the United States.

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ), in cooperation with the Office of the Comptroller of the Currency (OCC), took action today to put an end to alleged redlining by Trustmark National Bank.  The CFPB and DOJ allege that Trustmark discriminated against Black and Hispanic neighborhoods by deliberately not marketing, offering, or originating home loans to consumers in majority-Black and Hispanic neighborhoods in the Memphis metropolitan area. The CFPB and DOJ also allege that Trustmark discouraged consumers residing in or seeking credit for properties located in these neighborhoods from applying for credit.

If entered by the court, the settlement would require Trustmark to put $3.85 million into a loan subsidy program for impacted neighborhoods, increase its lending presence there, and implement proper fair lending procedures. The order would also impose a $5 million civil money penalty against the bank, and will credit the $4 million penalty collected by the OCC toward the satisfaction of this amount.

"Trustmark purposely excluded and discriminated against Black and Hispanic communities" said CFPB Director Rohit Chopra. "The federal government will be working to rid the market of racist business practices, including those by discriminatory algorithms."

"Lending discrimination runs counter to fundamental promises of our economic system.  When people are denied credit simply because of their race or national origin, their ability to share in our nation's prosperity is all but eliminated," said Attorney General Garland. "Today, we are committing ourselves to addressing modern-day redlining by making far more robust use of our fair lending authorities. We will spare no resource to ensure that federal fair lending laws are vigorously enforced and that financial institutions provide equal opportunity for every American to obtain credit."

"The OCC has had a long history of strong partnership with the DOJ's Housing and Civil Enforcement Section of the Civil Rights Division, referring potential fair lending violations and sharing our extensive examiner, economist, and legal findings, as we did in the Trustmark matter," said Acting Comptroller of the Currency Michael J. Hsu.  "Today's announcement is important because it signifies the unified and unmitigated focus that each of our agencies has placed on the enforcement of the Fair Housing Act and the Equal Credit Opportunity Act. Our collective efforts are critical to addressing the discriminatory lending practices that create and reinforce racial inequity in the financial system."

Trustmark is a national bank headquartered in Jackson, Mississippi with 196 branches in five southern states. It currently operates 22 branches in the Memphis metropolitan area. This matter arose from the OCC's examination that identified potential redlining, resulting in investigations by the CFPB and DOJ.

Deliberately discriminating against Black and Hispanic communities in Memphis

The joint complaint alleges that Trustmark violated the Fair Housing Act (FHA), the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, and the Consumer Financial Protection Act of 2010 (CFPA). ECOA and Regulation B prohibit creditors from discriminating against applicants and prospective applicants in credit transactions on the basis of characteristics such as race, color, and national origin, including by redlining or engaging in conduct that would discourage on a prohibited basis a prospective applicant from applying for credit. Specifically, the joint complaint alleges that Trustmark:

• Avoided locating branches in majority-Black and Hispanic communities: From 2014 and 2018, only four of Trustmark's 25 branches in the Memphis metropolitan area were located in majority-Black and Hispanic communities, although 50% of the census tracts in the Memphis MSA are majority-Black and Hispanic. Two of the branches were established or acquired in majority-white neighborhoods in Memphis and are only now in majority-Black and Hispanic neighborhoods because of shifting demographics. Trustmark also closed its only limited-service branch located in a majority-Black and Hispanic neighborhood in the Memphis MSA in 2015. 
• Avoided assigning loan officers to majority-Black and Hispanic communities: During the relevant time period, Trustmark did not assign a single mortgage loan officer to any of its Memphis branches located in majority-Black and Hispanic neighborhoods. Thus, mortgage-lending services were not available to walk-in customers in majority-Black and Hispanic neighborhoods. Moreover, Trustmark relied almost entirely on its loan officers—all located in branches in majority-white neighborhoods—to conduct outreach to potential customers and distribute mortgage lending marketing materials.
• Failed to monitor its fair lending compliance: Trustmark's internal fair lending policies and procedures were inadequate to ensure the bank was providing equal access to credit to majority-Black and Hispanic neighborhoods in the Memphis metropolitan area.  Further, Trustmark did not establish internal governance and oversight committees to oversee fair lending until August 2018, months after the OCC initiated a fair lending examination of the bank.
• Discouraged applicants and prospective applicants in majority-Black and Hispanic neighborhoods: Trustmark is required under the Community Reinvestment Act to select an area and to meet the credit needs of residents in that area. In doing so, the bank designated three counties of the Memphis MSA that together contain 90% of the majority-Black and Hispanic census tracts in the entire Memphis MSA. From 2014 to 2018, however, Trustmark's "peer lenders" generated 2.5 times more home mortgage loan applications from majority-Black and Hispanic neighborhoods in the Memphis MSA than Trustmark, showing the effect of Trustmark's discouraging acts and practices.

Enforcement Action

Congress entrusted the Bureau to enforce the CFPA, ECOA, and ECOA's implementing Regulation B. The proposed consent order, if entered by the court, would require Trustmark to:

• Invest $3.85 million via a loan subsidy program: To increase nondiscriminatory access to credit, Trustmark will establish a loan subsidy program that will offer loans to qualified applicants on a more affordable basis when borrowing to purchase properties in majority-Black and Hispanic neighborhoods in Memphis. The loan subsidies can include closing cost assistance, down payment assistance, and payment of mortgage insurance premiums.
• Increase physical presence in and outreach to majority-Black and Hispanic neighborhoods: Trustmark will open a new lending office in a majority-Black and Hispanic neighborhood within the Memphis metropolitan area and fund $200,000 in targeted advertising per year to generate applications for mortgage loans in majority-Black and Hispanic neighborhoods.
• Comply with fair lending requirements: Trustmark will take remedial steps to improve its fair lending compliance and serve the credit needs of majority-Black and Hispanic neighborhoods in the Memphis metropolitan area.
• Pay a civil penalty: The order will require Trustmark to pay a $5 million penalty to the CFPB, and will credit the $4 million penalty collected by the OCC toward the satisfaction of this amount.

Read the complaint filed with the court.

Read the proposed order filed with the court.

###

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

The Bureau found that Washington Federal, headquartered in Seattle, Washington, violated HMDA, its implementing regulation, Regulation C, and the Consumer Financial Protection Act of 2010 (CFPA) by failing to report accurate data about its mortgage-loan applications to the Bureau.  Washington Federal is currently subject to a 2013 consent order with the Bureau based on the Bureau's previous findings that Washington Federal violated HMDA and Regulation C.  

Washington Federal reported HMDA data for over 7,000 mortgage applications in each of 2016 and 2017.  The Bureau found that these data included significant errors, with some samples having error rates as high as 40%.  The Bureau found that the errors in Washington Federal's 2016 HMDA data were caused by a lack of appropriate staff, insufficient staff training, and ineffective quality control, and that the errors in its 2017 HMDA data were directly related to weaknesses in Washington Federal's compliance-management system.  Weaknesses were specifically found in the areas of board and management oversight, monitoring, and policies and procedures. These significant errors in reported mortgage-application data violated Regulation C and HMDA.  These violations also constituted violations of the CFPA.

The consent order is available at: https://files.consumerfinance.gov/f/documents/cfpb_washington-federal-na_consent-order_2020-10.pdf

It's been a major issue for our industry. In fact, one of our feature stories for the December magazine, written by our Managing Editor Sarah Wheeler, details the new risks HMDA reporting represents for lenders.

And earlier this year HousingWire warned lenders that if they think compliance is hard now, just wait until the new HMDA regulations kick in.

Most of the 2015 updates to HMDA take effect in January 2018.

However, now, both the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau — both now led by Trump-administration leaders (more, below) — announced they will not be assessing penalties on HMDA data collected in 2018 and reported in 2019.

What's more, the CFPB also intends to open a rulemaking to reconsider various aspects of the new 2015 updates to the rule, such as institutional and transactional coverage tests and the rule's discretionary data points.

"The Bureau recognizes the significant systems and operational challenges needed to meet the impending requirements under the rule," the CFPB stated. "Accordingly, for HMDA data collected in 2018 and reported in 2019, the Bureau does not intend to require financial institutions to resubmit data unless data errors are material, or to pay penalties with respect to data errors."

And the OCC, which regulates national banks, made a similar announcement, saying it did not intend to require data resubmissions unless the error was material.

The CFPB said lenders should take this time to identify any cracks in their systems and make good faith efforts to fall in line with the new HMDA reporting requirements.

These changes come after former CFPB Director Richard Cordray stepped down from his position as director, and, after a short power struggle, was replaced by President Donald Trump's pick for acting director, Mick Mulvaney. The new acting director has long been outspoken about his dislike for the CFPB.

And over at the OCC, Thomas Curry stepped down as comptroller of the currency on May 5 after sitting in the position for more than five years. The position was then filled by Keith Norieka, who resigned recently after serving in the position for approximately six months. Finally, Joseph Otting, who the Trump administration nominated back in June, was officially sworn in in late November as the next Comptroller of the Currency.

Upon taking over as comptroller, Otting issued a statement that laid out his vision for how the agency should regulate the banking industry. Namely, it appears that Otting will seek to reduce the regulatory "burden" that banks currently face.

And of course, the decision has garnished support from the housing industry, who otherwise may have had to face penalties or long resubmission processes.

"NAFCU supports the CFPB's decision not to require credit unions to resubmit HMDA data where submission errors are not material, with NCUA taking a similar approach," said Brandy Bruyere, vice president of regulatory compliance. "We also appreciate that the bureau will reconsider the scope of HMDA in a future rulemaking."

"The 2015 HMDA rule requires collecting a significantly greater number of data points than what was mandated by Dodd-Frank, and relief for smaller institutions was only temporary," Bruyere said. "NAFCU is glad to see the CFPB, under acting Director Mulvaney's leadership, is willing to hear credit unions' concerns. In the new year, we will continue to advocate for more credit union exemptions from this burdensome rule."

Source: https://www.housingwire.com/articles/42142-hmda-enforcement-defanged-by-trump-led-regulators

HMDA, which was originally enacted in 1975, requires many lenders to report information with respect to applications they receive for certain types of mortgage loans and certain loans that they purchase. The Dodd-Frank Wall Street Reform and Consumer Protection Act directed the Bureau to expand the data collected and reported under HMDA to include additional information regarding, for example, mortgage loan underwriting and pricing, and authorized the Bureau to require other data. To that end, the Bureau issued a rule in 2015 that requires financial institutions to collect and report additional mortgage information beginning on January 1, 2018.  In August 2017, the Bureau issued a final rule making technical corrections, clarifying certain reporting requirements, and increasing the threshold for collecting and reporting data on home equity lines of credit for two years. 

The Bureau recognizes the significant systems and operational challenges needed to meet the impending requirements under the rule. Accordingly, for HMDA data collected in 2018 and reported in 2019, the Bureau does not intend to require financial institutions to resubmit data unless data errors are material, or to pay penalties with respect to data errors. Accordingly, collection and submission of the 2018 HMDA data will provide financial institutions an opportunity to focus on identifying any gaps in their implementation of the additional requirements and making improvements in their HMDA compliance management systems for future years. The Bureau expects that any supervisory examinations of 2018 HMDA data will be diagnostic, to help institutions identify compliance weaknesses, and will credit good-faith compliance efforts.

The Bureau also intends to engage in a rulemaking to reconsider various aspects of the 2015 HMDA rule such as the institutional and transactional coverage tests and the rule's discretionary data points. More specifically, the rulemaking may re-examine lending-activity criteria that determine whether institutions are required to report mortgage data. The rulemaking may also look at adjusting the new requirements to report certain types of transactions. Finally, the rulemaking may re-assess the additional information that the rule requires beyond the new data points specified under the Dodd-Frank Act.

For data collected in 2017, financial institutions will submit their data in 2018 in accordance with current Regulation C.  Beginning with data collected in 2017, institutions will submit data using the Bureau's new HMDA Platform. The online platform will be used to upload financial institutions' loan and application registers, review edits, certify the data, and submit the data for the filing year.

Similar statements regarding HMDA implementation are being coordinated with the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Administration.

The Bureau's public statement on HMDA compliance is available at: http://files.consumerfinance.gov/f/documents/cfpb_statement-with-respect-to-hmda-implementation_122017.pdf

Source: https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-public-statement-home-mortgage-disclosure-act-compliance/

We will incorporate these edits into Comply 17 which we expect to officially release in the middle of August. Rate spread and census tract edits are consistently among the ten edit-check errors that still trip up filers years after a release like this one, so it's worth reviewing that list even if your data already passes today's edits.

Distressed nonmetropolitan middle-income geographies and underserved nonmetropolitan middle-income geographies are designated by the agencies in accordance with their CRA regulations. The criteria for designating these areas are available on the Federal Financial Institutions Examination Council (FFIEC) website (http://www.ffiec.gov/cra). The designations continue to reflect local economic conditions, including unemployment, poverty, and population changes.

As with past releases, the agencies apply a one-year lag period for geographies that were listed in 2016 but are no longer designated as distressed or underserved in the current release. Revitalization or stabilization activities in these geographies are eligible to receive CRA consideration under the community development definition for 12 months after publication of the current list.

The current and previous years' lists can be found on the FFIEC website, along with information about the data sources used to generate those lists.

• 2017 List of Distressed or Underserved Nonmetropolitan Middle-Income Geographies (PDF)
• Source Information and Methodology (PDF)

The implementation of the CFPB 2018 HMDA changes is now about a year and a half away. The new changes will more than double the number of reportable HMDA data fields that institutions must collect, edit and submit. In analyzing the new fields that were added to the HMDA requirement, we have identified 14 fields that presently exist within RATA Comply HMDA/CRA and 39 fields that will need to be created. The new fields to be added are for automated underwriting, expanded race and ethnicity as well as general loan and property data points.

New Format

The submission format for the 2016 data will be unchanged from the last few years. The 2017 submissions will contain the exact same data but they will be wanting to receive it in the new pipe-delimited format. We guess they are just wanting institutions to get used to using that format but we believe it will cause confusion. For the next three years' submissions institutions will use three different formats to submit the data!

1. 2010-2016 Fixed-Length 380 byte record with revised format of Transmittal and LAR Records
   
2. 2017 Pipe Delimited (TXT) records with same old data from 2016
   
3. 2018 Pipe Delimited (TXT) records with new 2018 HMDA changes fields

Edit Changes 

As yet to be determined are the required edit changes for the 2018 reporting year. These edits will likely be substantial, given the new fields and the number of enumerated values for those fields, as well as the rules regarding the combining of the field values. We foresee a significant increase in the number of edits, both Quality and Validity, which will need to be incorporated upon release. As yet, there has been no public activity on the CFPB's part in regards to new edits.

Universal Loan Identifier

The Universal Loan Identifier (ULI) has been a source of concern for many clients. Due to its requirement in the submission file we have come up with a solution that will help institutions standardize the ULI in Comply. RATA will be adding Legal Entity Number to Reporting Entity Properties in Comply. During an import, the process will automatically determine if an application number is already in the ULI format or not. If it is in the format it will break it down into its individual components. If the application number does not contain a ULI it will be automatically calculated in Comply. On the application screen Comply will show the application number separately and will also show a read-only field with the calculated ULI with Lender number including the check digit. So basically Comply will have the ability to use an existing ULI if available from your loan origination system(s), or in event you do not have one, it will be created for you.

Security

Many of the comments regarding the final changes expressed serious security concerns with the new fields being captured and submitted; the reporting of Age, Credit Score, Combined LTV and Debt-to-Income for example could be used for any number of improper purposes. Since the Comply software is housed within your infrastructure, the data will be secured using your facility's security measures, so there is no concern from the Comply perspective. From the perspective of the CFPB however, this is still an open issue. Many industry commenters have remarked on the need for enhanced security and redaction of certain data when disseminating it to the public. The CFPB simply states that they will take a balanced approach in determining what data to distribute and will make that determination at a later date.

Additional Information

Learn more about the upcoming 2018 HMDA changes on the CFPB HMDA Rule Implementation page. If you're preparing for a more recent filing cycle, the current HMDA filing preparation checklist covers the deadlines and edit checks in effect today.

By appointment we would like to have a web meeting with your entire team to discuss:

• Your current processes
  
• Review the Comply components that you currently have
  
• Discuss any issues or challenges you are having related to HMDA/CRA, Fair Lending or Peer Analysis
• Discuss any questions you have regarding the 2018 HMDA changes and RATA's plans
  
• Demonstrate the new Comply DataMine and Audit tools as well as any other tools you don't current utilize
  
• Determine any additional action items needed – training, consulting, products, services, etc.

RATA Customer Care Scheduling

The meetings are typically done at 2:00 PM (EST). You can call us to schedule your appointment or go to www.rataassociates.com/customercare to see available dates and sign up yourself. If that time does not work for you at all, simply call us and we can set up a custom meeting on an available day.

Team RATA is here to help you with HMDA/CRA, Fair Lending, Regression and data analysis in any way we can. Your feedback is very important to us and will help us determine how to make the software even better. We look forward to our meeting.

Regulation C implements the Home Mortgage Disclosure Act (HMDA). The Home Mortgage Disclosure Act (HMDA) requires many financial institutions to maintain, report, and publicly disclose information about mortgages. HMDA was originally enacted by Congress in 1975. These public data are important because they help show whether lenders are serving the housing needs of their communities; they give public officials information that helps them make decisions and policies; and they shed light on lending patterns that could be discriminatory. 

In October 2015, the Bureau issued the 2015 HMDA Final Rule, after a multi-year policy development process, which implemented Dodd-Frank amendments to HMDA. The 2015 HMDA Final Rule changes the types of institutions and transactions subject to the regulation, the types of data that institutions are required to collect, and the processes for reporting and disclosing the required data.

Through outreach, we have learned that there are parts of the 2015 HMDA Final Rule that we could clarify, which would help financial institutions comply and would improve the data. Today we released a proposal to amend Regulation C to provide such clarifications. The CFPB is committed to well-tailored and effective regulations and has sought to carefully calibrate its efforts to ensure consistency with respect to consumer financial protections across the financial services marketplace.

Comments on the proposal will be due 30 days after it is published in the Federal Register.

Visit Owning a Home: Tools and resources for homebuyers.

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today issued a proposal to facilitate compliance with the 2015 updates to the Home Mortgage Disclosure Act (HMDA) rule. The changes proposed today would help financial institutions comply with the 2015 HMDA Final Rule by clarifying the information they are required to collect and report about their mortgage lending.

"The Home Mortgage Disclosure Act shines a much-needed spotlight on the mortgage market, which is the largest consumer financial market in the world," said CFPB Director Richard Cordray. "Today's proposal reflects the Bureau's ongoing and substantive engagement with stakeholders in the marketplace, and will help industry meet its new reporting obligations."

HMDA, which was originally enacted in 1975, requires many lenders to report information about the home loans for which they receive applications or that they originate or purchase. The public and regulators can use the information to monitor whether financial institutions are serving the housing needs of their communities, to assist in distributing public-sector investment so as to attract private investment to areas where it is needed, and to identify possible discriminatory lending patterns.

As directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB updated the HMDA regulation in 2015 to improve the quality and type of data reported by financial institutions. Most of the updated requirements take effect in January 2018, and the industry is working to bring operations into compliance. Through public outreach and engagement the CFPB has identified opportunities to clarify parts of the 2015 HMDA Final Rule, which would help financial institutions comply.

Today's proposal contains a number of clarifications, technical corrections, and minor changes to the HMDA regulation. These include clarifying certain key terms, such as "temporary financing" and "automated underwriting system." The proposal would also, for example, establish transition rules for reporting certain loans purchased by financial institutions. Another proposed change would facilitate reporting the census tract of a property, using a new geocoding tool the CFPB plans to provide online. 

The CFPB is committed to well-tailored and effective regulations and has sought to carefully calibrate its efforts to ensure consistency with respect to consumer financial protections across the financial services marketplace. The CFPB seeks input from a wide range of stakeholders and invites the public to submit written comments on the proposal. The proposal will be open for public comment for 30 days after its publication in the Federal Register.

A copy of the proposed rule is available here: http://files.consumerfinance.gov/f/documents/201704_cfpb_NPRM_HMDA.pdf

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today released a proposal to amend Equal Credit Opportunity Act regulations to provide additional flexibility for mortgage lenders in the collection of consumer ethnicity and race information. The CFPB believes the proposed amendments will provide greater clarity to lenders regarding their obligations under the law, while promoting compliance with rules intended to ensure consumers are treated fairly.

"This law is a key part of the government's commitment to root out discrimination," said CFPB Director Richard Cordray. "This proposal will help industry comply with the law and help protect consumers against illegal discrimination."  

The Equal Credit Opportunity Act (ECOA) is a federal civil rights law that protects against discrimination in the financial marketplace. Regulation B, the CFPB's rule implementing ECOA, includes restrictions regarding lenders' ability to ask consumers about their race, color, religion, national origin or sex, except in certain circumstances. These circumstances include required collection of the information for some mortgage applications under Regulation B.

The CFPB's proposal would provide compliance flexibility for individual mortgage lenders, and would also support the broader mortgage industry's ability to use consistent forms and compliance practices. Under the proposal, mortgage lenders would not be required to maintain different practices depending on their loan volume or other characteristics, allowing more lenders to adopt application forms that include expanded requests for information regarding a consumer's ethnicity and race, including the revised Uniform Residential Loan Application.

The proposal also contains other amendments to Regulation B and its commentary to facilitate compliance with Regulation B's requirements for the collection and retention of information about the ethnicity, race, and sex of applicants seeking certain types of mortgage loans. 

The CFPB is committed to well-tailored and effective regulations and has sought to carefully calibrate its efforts to ensure consistency with respect to consumer financial protections across the financial services marketplace.

The CFPB seeks input from a wide range of stakeholders and invites the public to submit written comments on the proposal. The proposal will be open for public comment for 30 days after its publication in the Federal Register.

A copy of the proposal is available here: http://files.consumerfinance.gov/f/documents/201703_cfpb_NPRM-to-amend-Regulation-B.pdf 

The Home Mortgage Disclosure Act of 1975 requires many mortgage lenders to collect and report data about their mortgage lending to appropriate federal agencies and make it available to the public. Federal regulators, enforcement agencies, community organizations, and state and local agencies can use the information to monitor whether financial institutions are serving housing needs in their communities. It also helps direct public-sector investment to attract private investment to areas where it is needed. And the data is used to help identify possibly discriminatory lending patterns, and compliance with the Equal Credit Opportunity Act, the Fair Housing Act, and the Community Reinvestment Act. Inaccurate HMDA data can make it difficult for the public and regulators to discover and stop discrimination in home mortgage lending or for public officials and lenders to tell whether a community's credit needs are being met. Rather than waiting for a CFPB review to surface a data or fair lending problem, you can run statistical fair lending analysis on your own portfolio first.

As part of its supervision of larger banks and nonbank mortgage lenders, the CFPB reviews the accuracy of HMDA data and the adequacy of HMDA compliance programs. In 2013, the CFPB issued a bulletin putting mortgage lenders on notice about the importance of submitting correct mortgage loan data. The CFPB has conducted HMDA reviews at dozens of bank and nonbank mortgage lenders, and has found that many lenders have adequate compliance systems and produce HMDA data with few errors.

However, in its supervision process, the CFPB found that Nationstar's HMDA compliance systems were flawed, and generated mortgage lending data with significant, preventable errors. Nationstar Mortgage also failed to maintain detailed HMDA data collection and validation procedures, and failed to implement adequate compliance procedures. It also produced discrepancies by failing to consistently define data among its various lines of business. Nationstar has a history of HMDA non-compliance. In 2011, the Commonwealth of Massachusetts Division of Banks reached a settlement with Nationstar to address HMDA compliance deficiencies. The samples reviewed by the CFPB showed substantial error rates in three consecutive reporting years, even after that settlement was reached. In the samples reviewed, the CFPB found error rates of 13 percent in 2012, 33 percent in 2013, and 21 percent in 2014. 

The CFPB's Order requires Nationstar to:

• Pay a $1.75 million penalty: Nationstar Mortgage will pay a $1.75 million penalty to the CFPB's Civil Penalty Fund. 
• Develop and implement an effective compliance management system: Nationstar will assess and undertake any necessary improvements to its HMDA compliance management system to prevent future violations. 
• Fix HMDA reporting inaccuracies: Nationstar Mortgage must review, correct, and make available its corrected HMDA data from 2012-14. 

Since the CFPB's examination, Nationstar has been taking further steps to improve its HMDA compliance management system and increase the accuracy of its HMDA reporting. 

In 2015, the CFPB published a rule updating HMDA data collection and reporting. This rule will improve the quality and type of data that is collected and reported, and shed more light on consumers' access to credit. Most of the rule's provisions take effect on Jan. 1, 2018. The CFPB's action against Nationstar relates to data for 2012-14, which was collected and reported under the rule that predates the CFPB. 

The full text of the order is available at: 
http://files.consumerfinance.gov/f/documents/201703_cfpb_Nationstar-Mortgage-consent-order.pdf

The CFPB's HMDA Bulletin can be found at: 
http://files.consumerfinance.gov/f/201310_cfpb_hmda_compliance-bulletin_fair-lending.pdf 

The CFPB's HMDA Resubmission Schedule and Guidelines can be found at: 
http://files.consumerfinance.gov/f/201310_cfpb_hmda_resubmission-guidelines_fair-lending.pdf

The annual adjustments are required by the CRA rules. Financial institutions are evaluated under different CRA examination procedures based upon their asset-size classification. Those meeting the small and intermediate small institution asset-size thresholds are not subject to the reporting requirements applicable to large banks and savings associations unless they choose to be evaluated as a large institution.

Annual adjustments to these asset-size thresholds are based on the change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), not seasonally adjusted, for each 12-month period ending in November, with rounding to the nearest million.

As a result of the 0.84 percent increase in the CPI-W for the period ending in November 2016, the definitions of small and intermediate small institutions for CRA examinations will change as follows:

"Small bank" or "small savings association" means an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $1.226 billion.

"Intermediate small bank" or "intermediate small savings association" means a small institution with assets of at least $307 million as of December 31 of both of the prior two calendar years and less than $1.226 billion as of December 31 of either of the prior two calendar years.

These asset-size threshold adjustments are effective upon publication in the Federal Register. In addition, the agencies will post a list of the current and historical asset-size thresholds on the website of the Federal Financial Institutions Examination Council (http://www.ffiec.gov/cra).

Federal Register Notice (PDF)

WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) is issuing warning letters to 44 mortgage lenders and mortgage brokers. The Bureau has information that appears to show they may be required to collect, record, and report data about their housing-related lending activity, and that they may be in violation of those requirements.

"Financial institutions that fail to report mortgage information as required make it harder to identify and address discriminatory lending," said CFPB Director Richard Cordray. "No mortgage lender that is required to report their loan data can avoid this responsibility."

The Home Mortgage Disclosure Act, which was originally enacted in 1975, requires many financial institutions to collect data about their housing-related lending activity, including home purchase loans, home improvement loans, and refinancings that they originate or purchase, or for which they receive applications. Annually, these financial institutions must report to the appropriate federal agencies and make the data available to the public. The public and regulators can use the information to monitor whether financial institutions are serving the housing needs of their communities, to assist in distributing public-sector investment so as to attract private investment to areas where it is needed, and to identify possible discriminatory lending patterns.

Data transparency helps to ensure that financial institutions are not engaging in discriminatory lending or failing to meet the credit needs of the entire community, including low- and moderate-income neighborhoods. Financial institutions that avoid their responsibility to collect and report mortgage loan data hinder regulatory efforts to enforce fair lending laws.

The CFPB identified the 44 companies by reviewing available bank and nonbank mortgage data. The warning letters flag that entities that meet certain requirements are required to collect, record, and report mortgage lending data. The letters say that recipients should review their practices to ensure they comply with all relevant laws. The companies are encouraged to respond to the Bureau to advise if they have taken, or will take, steps to ensure compliance with the law. They can also tell the Bureau if they think the law does not apply to them. The CFPB, in sending these letters, made no determination that a legal violation did, in fact, occur.

A sample letter is available at:
files.consumerfinance.gov/f/documents/102016_cfpb_HMDA_Non_Reporter_Warning_Letter.pdf

In October 2015, the CFPB finalized a rule updating the reporting requirements of the Home Mortgage Disclosure Act regulation. The rule will improve the quality and type of data that is collected and reported, including shedding more light on consumers' access to credit. Most of the provisions of the final rule will take effect on Jan. 1, 2018.

In October 2013, the CFPB released a bulletin putting mortgage lenders on notice about the importance of submitting correct mortgage loan information.

For mortgage loan questions or to submit a complaint, consumers can contact the CFPB at (855) 411-2372 or visit consumerfinance.gov

The Summary of Deposits (SOD) annually provides deposit totals for each of the more than 91,000 domestic offices operated by more than 6,000 FDIC-insured commercial and savings banks, savings associations, and U.S. branches of foreign banks.

Users can locate offices in a particular geographic area and create custom market share reports for a geographic area such as state, county, and metropolitan area.The FDIC has expanded the market share reports to allow users to see market growth and market presence for specific institutions. Data dating back to 1994 can be downloaded for analysis.

To receive annual updates of the SOD, go to the subscription page on the FDIC website.

Links:

• Deposit Market Share Report
• Summary of Deposit Find Office

• applications, originations, purchases and sales of loans, denials, and other actions related to applications
• loan amount
• loan type (conventional, Federal Housing Administration (FHA), Veterans Administration (VA), Rural Housing Service (RHS) or Farm Service Agency (FSA))
• purpose (home purchase, home improvement, or refinancing)
• property type (1-4 family, multifamily, or manufactured housing)
• owner occupancy
• preapproval (home purchase loans only)
• property location (metropolitan statistical area (MSA), state, county, and census tract)
• applicant and co-applicant characteristics (race, ethnicity, sex and income)
• pricing-related data
• type of purchaser
• whether a loan is subject to the Home Ownership and Equity Protection Act (HOEPA)
• whether a loan is secured by a first or subordinate lien, or is unsecured

The data released today also include disclosure statements for each financial institution, aggregate data for each MSA, nationwide summary statistics regarding lending patterns, and Loan/Application Registers (LARs) for each financial institution (LARs are modified to protect borrower privacy). The FFIEC prepares and distributes this information on behalf of its member agencies.

Understanding the Data

The 2015 HMDA data use the census tract delineations, population, and housing characteristic data from the 2010 Census and the combined 2006–2010 American Community Surveys, as has been the case since 2012, when these delineations and data were first used. In addition, the data reflect metropolitan statistical area (MSA) definitions released by the Office of Management and Budget in 2013 that became effective for HMDA purposes in 2014.

Caution should be used when comparing HMDA data across multiple years for specific geographic areas due to the changes in MSA and census tract boundaries and updates to the population and housing characteristics of census tracts.

The HMDA data are the most comprehensive publicly available information on mortgage market activity. Among other uses, the data help the public determine how financial institutions are serving the housing needs of their local communities, and facilitate fair lending and compliance examinations. When examiners evaluate an institution's fair lending risk, they analyze HMDA data in conjunction with other information and risk factors, in accordance with the Interagency Fair Lending Examination Procedures available at http://www.ffiec.gov/PDF/fairlend.pdf.

The current HMDA data alone cannot be used to determine whether a lender is complying with fair lending laws. The data do not include many potential determinants of loan application and pricing decisions, such as the applicant's credit history, debt-to-income ratio, the loan-to-value ratio, and other considerations. Therefore, when examiners conduct fair lending examinations, including ones involving loan pricing, they analyze additional information before reaching a determination about an institution's compliance with fair lending laws.

Observations from the 2015 Data

For 2015, the number of reporting institutions declined about 2.5 percent from the previous year to 6,913. While there were some new reporters in 2015, this number was more than offset by the number of institutions that reported in 2014 but did not do so in 2015. In most cases, this is because of mergers and acquisitions.

The 2015 data include information on 12.1 million home loan applications, of which 7.4 million resulted in loan originations, and 2.1 million in purchased loans, for a total of 14.2 million actions. The data also include information on approximately 531,000 requests for preapprovals for home purchase loans.1.

The total number of originated loans of all types and purposes increased by 1.4 million between 2014 and 2015, or 22 percent. Refinance originations increased by 36 percent, and home purchase lending increased by 13 percent.2

From 2014 to 2015, the share of 1–4 family home purchase loans made to low- and moderate-income borrowers (those with income of less than 80 percent of area median income) rose slightly from approximately 26 percent in 2014 to roughly 27 percent in 2015, while the share of refinance loans to low- and moderate-income borrowers decreased from 24 percent to 22 percent.3

In terms of borrower race and ethnicity, the share of home purchase loans for 1–4 family properties made to black borrowers rose from 4.9 percent to nearly 5.2 percent, the share made to Hispanic-white borrowers rose from 7.5 percent to 7.9 percent, and those made to Asian borrowers declined slightly from 5.7 percent to 5.5 percent. The share of refinance loans made to black borrowers decreased from 5.2 percent to 4.9 percent, the share made to Hispanic-white borrowers rose slightly from 6.0 percent to 6.1 percent, and those made to Asian borrowers rose from 4.5 percent to 5.1 percent.

In 2015, black and Hispanic-white applicants experienced higher denial rates for conventional home purchase loans than non-Hispanic white applicants. The denial rate for Asian applicants is more comparable to the denial rate for non-Hispanic white applicants. These relationships are similar to those found in earlier years and do not take into account potential differences in risk characteristics across demographic groups.

In 2015, the FHA-insured share of first-lien home purchase loans for 1–4 family, site-built owner-occupied properties increased to 25 percent from 21 percent in 2014, reversing a downward trend in the FHA's market share since 2009. The VA-guaranteed share of such loans remained at approximately 10 percent in 2015. The overall government-backed share of such purchase loans, including FHA, VA, RHS and FSA loans, was 39 percent in 2015, increasing from 37 percent in 2014, but down from 54 percent in 2009. One reason for the rise in the FHA's market share may have been that the FHA significantly reduced its annual mortgage insurance premiums by 0.5 percentage points in January 2015 for loans with terms greater than 15 years.

The FHA-insured share of first-lien refinance mortgages for 1–4 family, site-built owner-occupied properties also increased in 2015, to about 14 percent from 9 percent in 2014, while the VA-guaranteed share of such refinance loans decreased by approximately 1 percentage point to 9 percent.

The 2015 HMDA data also include information on loan pricing for loans classified as "higher-priced." Higher-priced loans are defined as loans with annual percentage rates (APRs) that exceed the average prime offer rates (APORs) by at least 1.5 percentage points for first-lien loans and at least 3.5 percentage points for subordinate lien loans.4 The data on the incidence of higher-priced lending shows that nearly 6 percent of first-lien loans originated in 2015 have APRs that exceed the loan price reporting thresholds, down from nearly 8 percent in 2014.

About 22 percent of the FHA's first-lien home purchase loans had APRs above the reporting threshold for higher-priced loans, significantly down from 45 percent in 2014.5 As discussed earlier, the FHA lowered its annual mortgage insurance premiums in 2015, which had a direct effect on the APRs of FHA loans, because the APR includes the cost of mortgage insurance.

As noted above, the HMDA data identify loans that are covered by HOEPA. Under HOEPA, certain types of mortgage loans that have interest rates or total points and fees above specified levels are subject to certain requirements, such as additional disclosures to consumers, and are also subject to various restrictions on loan terms. For 2015, 1,249 loan originations covered by HOEPA were reported: 494 home purchase loans; 186 home improvement loans; and 569 refinance loans.

Additional HMDA Information

Financial institution disclosure statements, individual institutions' LAR data, and MSA and nationwide aggregate reports are available at http://www.ffiec.gov/hmda. The FFIEC now offers these reports in Excel format for both current and historical data. Refer to the HMDA data products at http://www.ffiec.gov/hmda/hmdaproducts.htm for descriptions and formats. HMDA data tools also are available at http://www.consumerfinance.gov/hmda. More information about HMDA data reporting requirements is available on the FFIEC website at http://www.ffiec.gov/hmda/faq.htm.

Financial institutions are required to make their disclosure statements available at their home offices. For other MSAs in which financial institutions have offices, an institution must either make the disclosure statement available at one branch within each MSA or provide a copy upon receiving a written request. Questions about a HMDA report for a specific institution should be directed to the institution's supervisory agency at the following phone numbers:

• Federal Deposit Insurance Corporation — 877-275-3342; hearing impaired — 800-925-4618
• Board of Governors of the Federal Reserve System, HMDA Assistance Line — 202-452-2016
• National Credit Union Administration, Office of Consumer Protection — 703-518-1140
• Office of the Comptroller of the Currency, Compliance Policy Division — 202-649-5470
• Consumer Financial Protection Bureau — 202-435-7000
• Department of Housing and Urban Development, Office of Housing — 202-708-0685

An FFIEC disclosure statement on the reported 2015 CRA data, in electronic form, is available for each reporting commercial bank and savings association. The FFIEC also has prepared aggregate disclosure statements of small business and small farm lending for all of the metropolitan statistical areas and nonmetropolitan counties in the United States and its territories. These statements are available for public inspection on the FFIEC web site (www.ffiec.gov/cra).

Attachments:
Fact Sheet on 2015 Data – With Tables