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#165376 - 03/01/04 08:43 PM HMDA Exception Rate
Anonymous
Unregistered

For any of you examiners or HMDA experts out there, if you are conducting your own internal reviews for HMDA Exceptions, how do you calculate the error percentage rate? Do you say, I looked at 10 loan files and 3 loan files had a HMDA exception which is a 30% error rate?? OR do you take the number of possible exceptions from the 17 data field entries for HMDA for each loan file and say times the number of files you looked at to get The total number of possible HMDA exceptions from the files in the same which would be 170 possible entries and then divide 10 by 170 to get a .05% error rate. We want to do our reviews as close as to how an examiner would do it and wanted to know which % was the right one to use. Any thought?

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#165377 - 03/01/04 09:26 PM Re: HMDA Exception Rate
Geoz Offline
100 Club
Joined: Apr 2003
Posts: 148
Colorado
I'm not an examiner but I get a kick out of doing HMDA so I'll take a shot at this! I find it most effective to present 2 types of error rate charts in each audit report. Including the previous audit's error rates shows trends. I usually show the past 3 quarters compared to the subject audit period.

The first chart is the overall error rate --- this is the number of files contained one or more errors in "key" reporting fields divided by the total number of files reviewed, for example - a total of 7 files with one or more errors in any of the key fields would be compared to the total population of 60 files reviewed - the resulting error rate is 12% (anything over 5% we expand the review considerably).

In a second chart I track an error rate for each individual "key" field (most fields are key!). For instance, with a popoulation of 60 files, if 3 files had income errors I show an "income error rate" of 5%. 5 files with purpose code errors would have an 8% error rate. Any field having an error rate of more than 5% leads to an expanded review.

Providing a breakdown of indivual error rates lets me target my training efforts and also streamline my review if I have to go back and "do over."

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#165378 - 03/01/04 09:31 PM Re: HMDA Exception Rate
Geoz Offline
100 Club
Joined: Apr 2003
Posts: 148
Colorado
I should have said that in my experience, examiners also look at it two ways - an overall error rate as well as individual key fields. Your example of a 30% error rate is the overall. I'm don't use your second method of calculating individual errors but am interested to see other responses.

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#165379 - 03/01/04 10:30 PM Re: HMDA Exception Rate
hmdagal Offline
Power Poster
hmdagal
Joined: Dec 2002
Posts: 3,814
We calculate an error rate similar to Popeye, except for the overall error rate. We include all errors in this calculation, not just the key field errors.

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#165380 - 03/02/04 12:13 AM Re: HMDA Exception Rate
Anonymous
Unregistered

That works too. There isn't much we don't consider a material error under HMDA - mostly dates (if an application date is correct within a couple days I'll note it to management but not count it. However, once the number of errors in a non-material individual field is 5% or greater we automatically consider it to be material - which is how our examiners look at it.

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#165381 - 03/02/04 02:43 PM Re: HMDA Exception Rate
Anonymous
Unregistered

I think what our examiners do is they take HMDA errors in a particular Loan File and count that as a loan with HMDA errors to try and decide if there are significant violations of HMDA or not. For instance, if 3 loan files out of 10 had HMDA errors whether one or more in a file,
that would be a 30% error exception for HMDA to determine patterns of non-compliance. Then when they decide if they need to assess civil money penalties or not, they take all
the possible fields on all the files (10 x 17 fields = 170 possible entries) and decide if the error % is over 10%.% is lower in this case. So they look at it in two different ways; one to detect a pattern and the second to assess cmp. Hope this helps.

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#165382 - 03/02/04 07:16 PM Re: HMDA Exception Rate
Geoz Offline
100 Club
Joined: Apr 2003
Posts: 148
Colorado
That's interesting...I've never calculated an error rate against the total individual fields (your example of 10 files x 17 = 170). At this point you are not considering how many files had errors, but how many individual errors were identified? For instance, if you had 20 individual fields with errors (regardless of the number of files looked at) you divide 20 by 170 = 12% error rate and this is subject to civil money penalties?

I would really like to hear from an examiner (preferably FDIC!). I didn't get a straight answer when I asked this question of my regulator other than they consider "material errors." Surely this doesn't rest with individual examiners.

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