We are currently using an in-house software application that not only produces the regulatory edits as part of its process, it also has some of it’s own enhanced edits for all of its users. One of those edits uses some kind of proxying ideology that looks at the first name of an applicant, and if it appears to be a possible name usually applicable to the opposite gender, the edit produces for one to review. Note that we have not currently adopted proxying for any of our analysis processes. However, I found this edit to be a good operational edit to ensure the data was carrying over correctly from the source URLA document field. During a recent internal audit, they reviewed our edit report and noted a particular application. During their review, they looked at the license of the applicant and the pronouns used by the MLO in the 1008 comments. They then took it further by having a manager speak to that MLO. It was during that conversation where I am sure the MLO was presented the evidence that the MLO stated they had populated that field in error. The applicant was not female. He meant to check off male. If one is to believe that the MLO’s recollection of the telephone conversation was not inappropriately influenced by the evidence presentment and this was truly a mistake, should this be considered a HMDA error in light of the following:

1) The applicant was presented with their documented responses during initial disclosure and at closing, and they signed off both
times without correcting what was documented (attesting to it).
2) The enhanced edit specific to the in-house software application is not a regulatory edit and not an edit we had created ourselves.
3) Looking at the driver license and making our own judgments is discriminatory in nature as one would be presuming how the
applicant identifies, or how they should identify.
4) Calling all bankers involved in applications that involve this edit is not beneficial or reliable. How can we trust their memory? How
can we trust that we are not inappropriately changing/influencing their mind/response? Could us choosing to change the gender
now without the applicant’s acknowledgement of its legitimacy, and with it is not being supported by the file, risk damaging the
reporting integrity of the application process that occurred?

I do understand and agree with Internal Audit’s desire to report everything correctly, but is this situation truly considered to be a HMDA error as the LAR truly reflected the signed application and credit decision, or is this a battle to be fought elsewhere…or is the resulting discovery by internal audit inadmissible and not to be considered due to the methodology and path they chose to get there, and that’s even if the recollection of the MLO is correct? What is your perspective of this situation? HMDA Error, no error, or observation? Should we really take our reviews as far as internal audit did in this case? Thanks for looking into this and getting back to me.

DI is to be gathered at application. If that application happens over the phone, then the LO is to read the DI section to the applicants and record their choices. I know of nothing in Reg. C that speaks to the applicants later "ok-ing" the DI previously gathered. Bottom line for me: if the LO made a mistake and didn't record the applicant's choices correctly, then yes it's a HMDA error. How/whether that would be called out in an exam is another question. I'm also not speaking to the value of this "edit" that you have.

ETA: My comment about it being called out in an exam......is an examiner going to say "this person's name sounds female, yet they're in there as male...the application and DI was taken by phone....Mr. Loan Officer, did this person say they were male?" Would that happen? I don't know, but i have my doubts. The LO could easily say "yep, that's what they said" (and who knows, maybe they did)...or they might say as your officer did "no, i made a mistake". Your LO said it was a mistake....so that means it's an error.

OK - deep breath.

So, are you saying they believe the loan officer checked the box based on visual observation or the loan officer checked the wrong box based on the answer voluntarily provided by the applicant at the time of the interview?

I am not sure I understand the exact situation we are talking about.

Randy, i took it to be the latter (only the OP knows) but either way sounds like a HMDA error to me since you can't use visual observation/surname for an application taken by phone.

I'm just going to add.....what sort of value does this proxying edit have in today's world? This software really wants to get in the business of wondering why someone named "Jennifer" is identifying as male? Really?

If that is the case and the borrower signed the final application without comment, it is a done deal, there is no going back at that point. It is all a waste of time.

My overall question is whether this should be considered an error during a data integrity review performed by our internal audit department? If it weren't for the enhanced edit created by the vendor for all their clients that I could have suppressed, they would have most likely not have it amongst their sample. What is the purpose of the HMDA app? Shouldn't it reflect all factors involved in the credit decision and the application process as it went down, not as it should have gone down? The rebuttal was that the applicant had multiple opportunities to correct what was documented, but they did not choose to do so as they signed off on it. Can one say they see possible issues after the fact by looking at an non-regulatory enhanced edit from a software vendor, a DL, pronouns in 1008 comments, and a subsequent conversation with the pertinent department that took the application? Yes, they can...however, what is documented in the file, attested to by the applicant, and utilized in the credit decision? Just like audit could find issues with the income utilized in the credit decision, but we still must report what was used, shouldn't we report the GMI signed off by the applicant...despite finding a possible issue with what was documented later? I agree with the desire for correctness and wanting to ensure what is reported is reflective of what was stated during a phone conversation, but is that what was documented, signed, and part of the application process? No. Is the methodology used to make the discovery after-the-fact 100% reliable, reflective of signed documentation, risk-free of producing errors of it's own, and not being considered discriminatory in nature? No. The thought is we report what is and take measures to inform the LOB to be more careful, so it doesn't occur again in the future. It is not a HMDA LAR error, despite it being an error elsewhere, possibly operationally. The HMDA LAR is a tool in that it reflects the application and the credit decision as it went down. It has many uses, even to identify Fair Lending, ATR, operational, and other issues. Reporting what one believes should have happened or correcting what didn't happen adversely impacts the integrity and analysis of what truly occurred. This prevents one from being able to adequately identify all issues.

Show me in Reg. C where it says that DI gathered at application by an LO through a telephone conversation can or should later be attested to by the applicant. I also don't understand when you say "it is not a HMDA LAR error".

So if i apply with your bank in a telephone application and tell your LO that i'm a non-Hispanic, white male and he records me as a Hispanic Black Female.......nothing to see here? No errors on the LAR? Nothing is an error unless the examiner in charge questions it....but if they do, as i stated above, how would it not be an error?

I'd be getting rid of the edit.

If you think you have a Loan Officer checking the wrong boxes, then you need to deal with that. If you report something that is not supported by the application and the DI form that it in the file, regardless of how it got filled out, you are asking for trouble.

Everything else is just noise and a waste of time as I have already indicated. You got audio or a video? If you do not, move on. Maybe the person actually told the officer what they logged down at the time.

Someone is making busy work out of all of the extraneous fluff. If these are internal/external auditors, you need new ones.

To raitchjay's comment..."Randy, i took it to be the latter (only the OP knows) but either way sounds like a HMDA error to me since you can't use visual observation/surname for an application taken by phone."

Your statement is also a point that we made. Despite me knowing internal audit won't state it on paper, they verbally told us that they came to their conclusion by reviewing the DL, observing the pronouns used in the 1008 comments, and finally, speaking to the LOB. They document the last step, but they do not document the 1st 2, because as we pointed out, we are unable to use that method ourselves as it is discriminatory in nature. We cannot presume how one identifies or should identify using a driver license. We also cannot call one's gender into question based on the MLO's usage of pronouns, even if they seem to contradict what is documented. You are correct, visual observation can only be utilized for a Face-to-Face application, whether in-person or video...and it must only be exercised if the applicant refuses to provide the GMI themselves...so neither we or internal audit should be utilizing the DL whatsoever. Why would I question and further investigate the documented and signed sex that is reported, even with such an ENHANCED edit specific to the software vendor that we did not request.

I have a question after reading this. Our practice is to NOT collect copies of ID for mortgage loan, but occasionally we find one in the file. If the applicant’s GMI appears to be different from the ID, do we have a problem if it was based on visual observation?

TryingtoComply, you are traveling down a dark road. The forms are marked and that is what you report. Everything else is just noise. If I am sitting in front of the MLO in a dress, he may well mark female regardless of what my State ID says because the MLO's job is to mark the form based on "visual observation".

If you believe forms are being marked in error, you do training. You do not second guess after the fact and report other than what your source documentation supports.

I am having a real hard time understanding this whole line of questioning.

Amen brother Randy!

Years ago, the OCC was doing a test of HMDA, where an application was marked male, but reported as female. They were going to write it up, and we asked the examiner to discuss with the processor (who NEVER made a mistake)! As compliance, I sat in on the short discussion.

Examiner - Tle app was marked male, but reported as female. Why?
Processor - She is my neighbor, and she checked-off the wrong box!
Examiner - But what if she is really a male?
Processor - Impossible, she was pregnant, and had a baby boy!
Examiner - I won't list it as an exception, but HMDA is a transcribing regulation. You just record what they tell you.
Processor - OK

If an applicant provided the requested information, a Financial Institution must report the
ethnicity, race, and sex information that the applicant provided. If an applicant selected
more than one ethnicity or race, a Financial Institution must report each designation the
applicant selected, subject to the limits in appendix B, which are described below.


How do you know the MLO marked the form incorrectly. They very well could have marked what they were told.

If you believe forms are being marked in error, you do training. You do not second guess after the fact and report other than what your source documentation supports. Randy is 100% correct with this comment.

" It was during that conversation where I am sure the MLO was presented the evidence that the MLO stated they had populated that field in error. The applicant was not female. He meant to check off male."

raitchjay - the point is that conversation should have never happened based on some finding from using some proxying ideology - why the [censored] would anyone be using something like that in the first place? What is the point?

I will say this: if ANY types of applications are (and should) receive more scrutiny on this issue, it is applications taken by phone. If the applicant hurriedly marks an unintended choice on DI, then the bank is simply "reporting what the applicant said". However if it is the bank that is hurriedly marking an unintended choice, that's a whole different thing. As i said from the beginning, i really don't know that these type of bank errors would ever come to light, and i hope that these types of errors are few and far between....but if they are occurring, then that's a problem...an error even.

I was just pointing out that the OP said the LO said he made a mistake. I agree (and said above) that the proxy tool is not a good idea.

The vendor uses the proxy, along with incidence of "not provided" and proportion of applications that provide race but not ethnicity or age and not sex, as a check on the sufficiency of GMI collection processes. In other words, if you have a pattern of mismatches, you may have gaps in your existing processes for collecting and reporting demographic information.

I have no problem with that, if they want to use the results to support a suggestion that additional training should be conducted to be sure there are no problems. What I have a problem with is that, after using this process to initiate an actual investigation of a suspected individual discrepancy, they are suggesting that they need to change their actual reporting.