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Tips To Follow For HMDA Compliance

Every year, some financial institutions fail to submit Home Mortgage Disclosure Act /Community Reinvestment Act (HMDA/CRA) data by the March 1 deadline. Those institutions are currently facing penalties, including fines of up to $500 per day for each day the data is late or inaccurate. For credit unions in need of submitting HMDA data immediately, the following tips could greatly increase their chances of avoiding hefty fines and penalties:

Every year, some financial institutions fail to submit Home Mortgage Disclosure Act /Community Reinvestment Act (HMDA/CRA) data by the March 1 deadline. Those institutions are currently facing penalties, including fines of up to $500 per day for each day the data is late or inaccurate. For credit unions in need of submitting HMDA data immediately, the following tips could greatly increase their chances of avoiding hefty fines and penalties:

Tip 1: Submit 100% Error-Free Data
Make sure your data has been edit checked and corrected to all Federal Financial Institution Examination Council (FFIEC) standards. Each year the FFIEC releases updated Validity and Quality edit checks to ensure that your data is complete and accurate. If your data is late, it is even more important that your data conforms to all of the edit standards. Additionally, not only do late institutions need to submit 100% error-free data, they need to do so "on the first try." By doing so, they are less likely to be fined or fines already issued may be waived.

Make sure your data has been edit checked and corrected to all Federal Financial Institution Examination Council (FFIEC) standards. Each year the FFIEC releases updated Validity and Quality edit checks to ensure that your data is complete and accurate. If your data is late, it is even more important that your data conforms to all of the edit standards. Additionally, not only do late institutions need to submit 100% error-free data, they need to do so "on the first try." By doing so, they are less likely to be fined or fines already issued may be waived.

Tip 2: Make Sure Geocoding Is Compliance Grade
To remain compliant with HMDA and CRA, credit unions must convert a residential or commercial property's street address into its corresponding MSA (Metropolitan Statistical Area), FIPS (Federal Information Processing Standard) State, County, and Census tract codes-a process known as geocoding.

There are two tests for validating geocode information submitted for HMDA/CRA. The first is a simple validation of the geocode combination. The second is a little trickier, testing to make sure the address you geocoded is actually in the correct Census Tract being reported for more than 95% of your applications. Unfortunately, most institutions use only one data source for geocoding and the results leave questions on how efficient that process is and how accurate the codes are. To yield the most accurate codes, CUs should consider multiple data sources rather than just one.

Tip 3: Leverage Modern Technology to Collect, Process and Submit Data Quickly and Without Error
Legacy systems are no longer able to adequately support financial institutions' compliance needs as they have limited functionality. To submit error-free data quickly, credit unions must leverage modern technology to ensure data is collected fast, efficiently and without error.

Legacy systems are no longer able to adequately support financial institutions' compliance needs as they have limited functionality. To submit error-free data quickly, credit unions must leverage modern technology to ensure data is collected fast, efficiently and without error.

Tip 4: Maintain Communication with Supervisory Agency

Furthermore, CUs should thoroughly communicate with supervisory agencies to advise they are actively collecting data for submission. Making your agency aware of HOW the data is being collected, and providing as much detail as possible about the process and intentions ensures the agency that the credit union has a solid plan for submitting data. Avoiding them and poorly communicating will only cause more problems.

By following these simple tips, credit unions can get their HMDA and CRA data submitted quickly and error-free, potentially avoiding hefty penalties for not submitting by the already-passed March 1 deadline. Additionally, these same tips should be followed next year to ensure the data is submitted on time.

John A. Woloshen is EVP and COO of RATA Associates, a provider of HMDA/CRA data compliance software and services for financial institutions. For info: www.rataassociates.com

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