Don’t make the same HMDA mistakes Bank of America did

TIP:   Last fall, the CFPB fined Bank of America (BoA, the second largest U.S. bank) for violating the federal Home Mortgage Disclosure Act (HMDA) by submitting false mortgage loan data. The CFPB’s order requires BoA to take steps to fix its HMDA practices and to pay a $12 million penalty to the CFPB’s victims relief fund. 

Credit unions subject to HMDA can learn from BoA’s failures and take steps to ensure that they stay in compliance with HMDA. 

What is HMDA?

Enacted in 1975, HMDA (and its implementing regulation, Reg. C) requires many mortgage lenders to report information about loan applications and originations to the CFPB and other federal regulators. This includes gathering and reporting demographic data about mortgage applicants, like their race, ethnicity, and sex.
 
The public and regulators can use the information to monitor whether lenders are serving the housing needs of their communities and to identify possible discriminatory lending patterns.
 
For details on HMDA, please see The League’s ii Release No. B017.
 
HMDA and Reg. C apply to credit unions that meet certain tests, including having assets of more than $56 million as of Dec. 31, 2023 (up from $54 million the prior year) and having an office in a “metropolitan statistical area.” 

What did BoA do wrong?

For at least four years, the CFPB says, hundreds of BoA loan officers failed to ask mortgage applicants certain demographic questions as required by HMDA, and then they falsely reported that the applicants had chosen not to respond. Specifically, the CFPB found that BoA:

• Falsely reported that applicants declined to provide information: Hundreds of BoA loan officers reported that 100% of mortgage applicants chose not to provide their demographic data over at least a three-month period. In fact, these loan officers were not asking applicants for demographic data, but instead were falsely recording that the applicants chose not to provide the information.
• Failed to adequately oversee accurate data collection: BoA did not ensure that its mortgage loan officers accurately collected and reported the demographic data required under HMDA. For example, the bank identified that many loan officers receiving applications by phone were failing to collect the required data as early as 2013, but the bank turned a blind eye for years despite knowledge of the problem. 

What lessons can credit unions learn?

• Training loan officers and other employees responsible for collecting HMDA data related to an applicant’s ethnicity, race, and sex;
• Providing such training to newly hired employees and other employees before they begin collecting HMDA data related to an applicant’s ethnicity, race, and sex;
• Providing HMDA training to relevant employees annually;
• Electronically identifying any phone calls on which HMDA data related to ethnicity, race, and sex is collected and recorded;
• Recording phone applications and conducting audits on a representative sample;
• Providing monthly reports that show the “information-not-provided” rates;
• Providing coaching to loan officers whose “information-not-provided” rates exceed a target rate set by BoA;
• Reviewing all phone applications for any loan officer who exceeds the target “information -not-provided” rate for at least three consecutive months;
• Implementing a progressive discipline plan for loan officers that show non-compliance with HMDA & Reg. C requirements for collecting ethnicity, race, and sex data;
• Documenting changes made to an applicant’s ethnicity, race, and sex during the application process; and
• Ensuring that HMDA disclosures are identical for all types of applications including applications take by phone, in person, and online. 

If you have questions about HMDA, or any other compliance issues, please reach out to The League’s Compliance Hotline at (800) 242-0833 or by email.