Home Mortgage Disclosure Act (HMDA) data collection and reporting has been in place since 1975, and it still presents a common challenge for many financial services organizations. However, monitoring non-HMDA-related loans for fair lending risk can be even more difficult since organizations are prohibited from gathering information on an applicant’s race, gender, and ethnicity.
While HMDA-reportable loans require lenders to provide these details, non-HMDA-applicable loans don’t require the same level of information. That can make monitoring for fair lending risk more complex for non-HMDA loan data related to both consumer and commercial lending – and especially for small businesses and applications that originate through third-party agents such as fintechs and indirect lenders.
Doing nothing with non-HMDA loan data, however, is obviously not an option. Regulators are continually scrutinizing organizations for noncompliance, and a single fair lending violation can tarnish your organization’s reputation, result in civil money penalties or orders of consumer redress, and potentially derail strategies for growth.