HMDA Advice From the FRB
When HMDA advice comes from the Federal Reserve, it is worth paying attention. In a recent speech to the Financial Services Roundtable, FRB Governor Bies outlined ways that institutions should prepare for the first release of pricing data.
Technology and lending activities have changed significantly since HMDA was first enacted. This, together with the rapid growth of lending to higher-risk borrowers, makes the new HMDA information valuable for supporting both market efficiency and compliance with consumer protection and anti-discrimination laws. For example, the pricing data can help lenders identify markets with high priced loans where entry by other lenders might increase competition and lower costs to consumers. Consumer organizations and public agencies can use the data to decide where to target consumer education and development efforts.
Before that happens, institutions should take a careful look at their own data and be ready for public reactions. Some institutions have already been asked for their public LAR. This means that waiting a few months to analyze your data is not a good idea. Get on it now. Governor Bies advises that you need to know how your data will look to the public. You should also have a high degree of confidence that your data is accurate. Understand any price disparities and look at the variables that caused the disparities. Finally, be prepared to answer questions on what HMDA data does and does not reveal.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 4, 4/05
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