Taking HMDA Reporting from Hassle to Harmony

June 25, 2021

Taking HMDA Reporting from Hassle to Harmony

There are few regulations more important in the mortgage industry than the Home Mortgage Disclosure Act (HMDA). For more than 40 years, the law has protected consumers from unfair lending practices. But it has also placed more work on lenders’ plates, especially those without the proper tools in place.

Thankfully, when the COVID-19 pandemic hit in March 2020, the Consumer Financial Protection Bureau gave lenders flexibility over reporting their quarterly HMDA data. This was a huge relief to lenders struggling to make the shift to remote work, and it also kept the housing industry chugging along. But it was only temporary.

Now that pandemic lockdowns are lifting, the CFPB is once again requiring lenders to file quarterly HMDA reports, and it has promised to enforce this requirement with stiff penalties. First quarter 2021 HMDA reports are due May 31 and second quarter 2021 reports are due on August 30. This can have significant consequences for lenders that put off investing in the proper HMDA reporting tools.

For example, federal regulators have the power to test any loan samples in a lender’s Loan Application Register (LAR) they want to. That’s a huge problem for lenders that rely primarily on staff and manual tasks for reporting HMDA data—especially today, when most lenders are receiving record numbers of loan applications. The fines for filing false or erroneous HMDA data are steep, too.

Fortunately, there is a way for lenders to meet CFPB reporting requirements with little effort.

Today’s document processing technologies are capable of automating the laborious task of identifying the final versions of crucial loan documents that contain key data points subject to HMDA. This is crucial, because a significant number of HMDA reporting errors are caused by lenders pulling data from documents that aren’t final.

Using AI-based document classification and data extraction tools, lenders can quickly scan hundreds of loan files, capture applicable HMDA data, and place it into a spreadsheet or XML file for accurate LAR reporting. It all happens in seconds, with little to no human oversight. These tools are infinitely scalable as well, which makes them invaluable when dealing with large spikes in application volume.

Modern document processing technologies can deliver other benefits as well. Because they generate highly accurate, actionable data, lenders can apply data analytics and other tools to gain better insights into their business practices and identify areas for improvement. They can also use the same technology for any kind of audit or for custom reports. This enables their staff to spend less time staring at documents, typing in data points, and performing other manual tasks that are highly prone to error.

Even better, lenders can access HMDA reporting technology in the cloud, with just a web browser and a link for uploading their files. This means lenders don’t have to spend a penny of their own money on IT costs to access technology that enables them to stay compliant.

The bottom line: HMDA reporting is serious business. But meeting the CFPB’s reporting requirements doesn’t have to cost an arm and a leg, nor does it have to distract your team from doing what it does best—growing business and making money.

If you would like to see how Paradatec’s automated document processing and data extraction technologies can streamline your HMDA reporting and ensure more accurate, higher quality data, simply email us at contact@paradatec.com. We are happy to show you how easy it can be!

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From originators to servicers, BPOs and external due diligence firms trust Paradatec to streamline document processing.

We asked a number of vendors, including the Paradatec team, to help us perform an extensive due diligence process that included an out-of-the-box, blind test with our own loan samples and proof of concept test.  Paradatec was the clear winner based on our comprehensive vetting process.

Steven Davids
Senior Vice President of Correspondent Lending, Northpointe Bank