Prepare Your Credit Union for Changes in HMDA Data Collection Rules (Part 2)

Prepare Your Credit Union for HMDA ChangesBy Edward Kramer, Executive Vice President of Regulatory Affairs, Wolters Kluwer Financial Services

In part I of this series, the new data fields that the Consumer Financial Protection Bureau (CFBP) seeks to collect for more HMDA reporting transparency and timeliness and concerns about potential misinterpretation of newly collected data was addressed.

To wrap-up, we will consider the known and unknown factors related to this regulatory change and conclude with a list of key tips you can use to prepare your credit union for these pending changes.

Imminent Compliance and Technology Challenges Are Clear

Although most industry observers expect issuance of the final regulation sometime in 2015, we don’t yet know which specific data fields will be included, nor the amount of time institutions will have to prepare before the requirements go into effect. We also do not know if or how much of any additional data collected will be made public by the regulators.

Protecting the privacy of personally identifiable financial information should be a priority. The inclusion of items such as credit scores, borrower age, and other personal data may raise legitimate privacy concerns, particularly if it becomes possible to identify a specific consumer by combining the new data with other publicly available data.

Despite the unknowns, one thing is certain:  the extent and breadth of the proposed new data collection fields will be considerable.  They will impose significant regulatory compliance and information technology challenges on mortgage lenders.

How Your Credit Union Can Prepare

Whatever requirements are ultimately adopted, lenders will need to evaluate their current data collection capabilities, identify gaps, and make needed investments to be compliant.  What impact will this have for your credit union’s staffing decisions, training, vendor support, and technology infrastructure—and how can you begin to prepare for these changes?

While the specifics have not yet been announced, you needn’t wait before initiating some preparatory action: 

  • Plan now for the increased data capture requirements and remember that data integrity is essential
    The changes coming will be sweeping and broad, impacting your organization in many ways. Minimally, these changes will include all new data fields outlined in the Dodd-Frank legislation—and likely, many if not all of the CFPB’s additional proposed data fields—so make sure your preparation is underway.
  • Identify all lines of business impacted by the HMDA changes
    Determine how you will organize these lines of business so that your efforts are coordinated. Ensure that all individuals responsible for implementation are connected and developing a plan of action so your organization is as ready as it can be once the final rules are announced.
  • Identify and prepare for any needed staff training
    Determine what your enterprise methodology and approach will be to manage the implementation. It’s never too early to start planning when it comes to staff training.
  • Strengthen and bolster your analytics capabilities
    The last thing you want is to submit data to the government that you haven’t already fully analyzed.  Given resource constraints, lenders might be best served in outsourcing their data analytics needs to a capable vendor.  But, whether you manage this function internally or through a third party, know the implications of that data for your organization—and how you plan to go about addressing any problems found in the analysis.  You don’t want others analyzing and interpreting your findings in advance of conducting your own comprehensive review.
  • Conduct a root cause analysis on questionable cases
    If your analyses uncover indicators of potential disparate treatment or impact of protected classes, conduct a root cause analysis to determine the extent of the problem and what is causing it. Then fix it.

Accept the fact that whatever implementation timeline is ultimately defined, the transition time for Tim Burniston EVP Wolters Kluwer Talks HMDAmanaging a regulatory change of this magnitude can never really be sufficient. But with some thoughtful and concerted advance preparation, you will be best positioned to ease some of the challenges in transitioning effectively to the new requirements.

Watch and share this short video of Tim Burniston, Executive VP at Wolters Kluwer, speaking about 4 key ideas to prepare for HMDA changes: New HMDA Fields Coming – Are You Ready?

Wolters Kluwer Financial ServicesWolters Kluwer Financial Services is NAFCU Services Preferred Partner for consumer and member business lending and deposit services. For more information on Wolters Kluwer’s products and services, visit http://www.nafcu.org/wolterskluwer/

Prepare Your Credit Union for Changes in HMDA Data Collection Rules (Part 1)

Mortgage-App-Approval-HMDA-Wolters-KluwerBy Edward Kramer, Executive Vice President of Regulatory Affairs, Wolters Kluwer Financial Services

In 2015, expectations loom large for lenders around finalization of rules for the new Home Mortgage Disclosure Act (HMDA) data collection requirements.

Created as part of the Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the regulation authorizes the Consumer Financial Protection Bureau (CFPB) to expand the current HMDA dataset in order to help “financial regulators and public officials keep a watchful eye on emerging trends and problem areas in the mortgage market.”

CFPB Seeks More Data Transparency and Timeliness

The proposed changes include required reporting of 37 new data fields, including 20 not currently required under Dodd-Frank. Those 20 fields represent additional information that the CFPB proposes to collect for analytical purposes, including:

  • Detailed property location information
  • Total points and fees
  • Rate spread for all loans
  • Information on loan features such as teasers and introductory rates, and
  • Applicant’s age and credit score

In addition, the CFPB proposes to collect data such as:

  • Borrower’s debt-to-income ratio
  • Combined loan-to-value ratio
  • Loan’s qualified mortgage status, and
  • Inclusion of manufactured housing in collateral

When the CFPB proposed the expanded HMDA data collection specifications in the summer of 2014, it argued for the need for greater transparency and timely access to regulate lending activity, citing concerns that “under the current regime, HMDA data may be reported as many as 14 months after final action is taken on an application or loan.”

Consequently, for financial institutions reporting at least 75,000 covered loans per year, which accounts for the vast majority of loan application registrations in the annual HMDA files, the new rules would require submission of HMDA data on a quarterly rather than annual basis. The CFPB estimates that this specific reporting provision would impact about 28 financial institutions that combined would report about 50% of all HMDA-reported transactions.

Potential for Data Misinterpretation Causes Concern for Many

The regulatory landscape changed dramatically with the 1975 enactment of HMDA and then again with the passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”). The latest proposed regulatory changes may have an equal or greater impact on institutions affected by the proposal. This observation is borne out in the anxiety over the new data reporting requirements evident in the October 2014 Regulatory & Risk Management Indicator report, conducted by Wolters Kluwer Financial Services.

According to the report, U.S. credit unions and banks specifically point to the Dodd-Frank Act and the associated HMDA data collection requirements as among their chief concerns. The new data collected will unleash a flood of additional public scrutiny of mortgage lending. And that development, by extension, will likely generate a new level of criticism of the mortgage industry, including credit unions, from those interpreting the newly available data.

It is clear from its recent enforcement actions and guidance that the CFPB holds accurate HMDA data as central to fair lending compliance and its ability to enforce fair lending laws. Inaccurate HMDA data will only serve to mislead the public and will not be tolerated. That said, the additional data, however accurately reported, will be an insufficient basis on which to ground definitive conclusions about discrimination on a prohibited basis. But, the data will generate more room for error as it gets interpreted – or misinterpreted – by regulators, analysts, and the public.

Tim Burniston EVP Wolters Kluwer Talks HMDAStay tuned for part 2 of this series to get additional insights about HMDA compliance and technology challenges and a list of key tips you can use to help prepare your credit union for these changes. Get a sneak peak of the tips by watching Tim Burniston, Executive VP at Wolters Kluwer highlight the HMDA changes in the short video, New HMDA Fields Coming – Are You Ready?

Wolters Kluwer Financial ServicesWolters Kluwer Financial Services is NAFCU Services Preferred Partner for consumer and member business lending and deposit services. For more information on Wolters Kluwer’s products and services, visit http://www.nafcu.org/wolterskluwer/

Protect Your Corporate Customers from Account Takeovers

Produced by Ann Davidson, VP of Risk Consulting at Allied Solutions

Manage Your RiskWere you aware that your corporate account holders are at an increasing risk of being targeted by cybercriminals?

Corporate accounts are especially vulnerable to account takeover attacks due to the fact that large wire and automated clearing house (ACH) transfers are frequently performed through these accounts, making fraudulent outgoing wire transfers or ACH credit requests harder to detect.

Additionally, these corporate accounts do not always have the most up-to-date or robust authentication layers in place on transactional activities, which makes it that much easier for criminals to obtain private credentials and take over these accounts.

To help combat these attacks, your credit union should have dynamic authentication methods in place for all consumer and business accounts, and should implement the following loss prevention recommendations:

  • Validate all account holder information when a wire transfer or ACH credit is requested
  • Pay special attention to new accounts performing large outgoing wire transfer or ACH credit requests, as these might be “money mule” accounts
  • Limit the dollar amount on outgoing wire transfers and ACH credit requests
  • Only offer in-person outgoing wire transfers and ACH credit requests
  • Have account holders sign an agreement that specifies that they will be assigned a confidential individual PIN and requires that they answer a security question prior to submitting an outgoing wire transfer or ACH credit request
  • Call back account holders’ listed phone number(s) to confirm their identities prior to performing requested outgoing wire transfer or ACH credit
  • Inform your corporate account holders that they have to do their part to stay protected from these attacks, such as:
    • Implementing anti-virus software on all company owned computers
    • Requiring password protection on all of their employees’ computers, cell phones, landlines, business accounts, and software applications
  • Continue to monitor reliable sources for updated information on risk exposures

To find out more about recommended authentication measures that can help your credit union and account holders remain more protected from this and other types of cyber crime, register for Allied Solutions webinar, Top Authentication and Identification Methods to Protect Your Credit Union.

 

Allied Solutions LogoAllied Solutions is the NAFCU Services Preferred Partner for Insurance – Bond, Creditor Placed (CPI), Guaranteed Asset Protection (GAP), and Mechanical Breakdown (MBP); and rateGenius. More educational resources and contact information are available at www.nafcu.org/allied.

New Perspectives on Vendor Due Diligence

Guest post written by Vanessa Stanfield, Client Program Director, Vendor Management, Affinion Group.

headshot_blogNow that I’m fully immersed in the world of credit unions, I’m so impressed by the incredible emphasis on members and the cooperative spirit.  The majority of my prior experience was spent working in the insurance division of a major national bank.  My roles varied from vendor management to product management – hot topics for financial institutions of all sorts.  I’m very grateful for the perspectives I gained elsewhere now that I dig into my new responsibilities with Affinion Benefits Group.  Affinion has built the culture, infrastructure, and systems to support and serve our credit union clients in many proven and innovative ways.

On any given day, my work presents me with a few key areas of focus:

1. Facilitating the completion of client due diligence requests in an efficient, thorough, and streamlined manner

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