When HMDA Will NOT Require Us to Collect Demographic Data (Bonus: HMDA Hotlist)
Our first Wednesday newsletter sent out directly by our website. Same content (compliance/lending). Same time (Wednesdays at 6:00 am). Should just be easier to read and search for things. Let me know if there are any issues okay?
So for today's topic, we'll look at demographic and also provide you a recommended "HMDA Hotlist" - 5 items that you should provided your team to get ready for HMDA.
Demographic Data
The expanded requirements for ethnicity, race, sex, and age is probably the most significant change coming with the new HMDA requirements. Understanding how to collect this will be a major training topic throughout the coming year. Here's a picture of what the new collection form will look like (this is all just for one borrower):
But maybe just as important - understanding when NOT to collect this information.
Let's jump into that issue now ...
When NOT to Collect Demographic Data
Here is the list of circumstances when we would NOT collect the demographic data of a borrower. E-mail me if I forgot one and I'll update this post!
1. Third Borrower*
We only collect demographic data on two borrowers. In cases where there is a third borrower, their demographic data is not collected. How do we choose who the "third" borrower is? It will simply be taken in order of how the application is filled out. See below that the third co-borrower is Nancy Johnson in this example:
*Or second co-borrower - however you want to look at it. :/
2. Guarantor
We also do not collect demographic data on someone signing as a mere "guarantor." The HMDA rule doesn't directly define "guarantor", but does refer to it as someone "who is only secondarily liable." (See page 741 ... I know, I know). This basically tracks with separate TILA language on this. So I don't see this causing mass panic - they're just reusing old language. No one's ever called me with an urgent question about whether someone qualified as a guarantor.
3. Purchased Loans
When you purchase a closed loan, you may choose not to report the applicant's ethnicity, race, sex, and age. Why might you choose to report that voluntarily? That's an issue for another day ...
4. Borrower is Not a Natural Person (LLC, Trust, etc)
We only collect demographic data on human beings - so we do not collect it when the applicant is actually an organization, such as an LLC, partnership, or Trust.
But Note: Be careful to distinguish identify who the applicant is. For example, while we do not collect demographic when a Trustee (human being) signs for a loan on behalf of a Trust, we DO collect demographic data when the loan is actually to the Beneficiary of a Trust individually.
So there you go!
Bonus: HMDA Hotlist -
Planning a training for staff on the upcoming HMDA requirements? Have them come prepared, so they get the most out of the training session. Here are the best materials to provide:
Executive Summary from private law firm
Appendix B - Instructions on Demographic Data
1003 Addendum for Demographic Data
These should give you a strong start on bringing everyone in your shop up to speed on these new requirements.
In Other News
Fraud watch! Story on Arizona loan officer recently sentenced to 3 years in prison. He was part of a conspiracy that netted $2.3 million and relied on straw buyers and fake documentation.
Everybody wants to keep score, right? How much fun would basketball be if we didn't have a scoreboard? Well how do you keep score? Mortgage origination teams may simply rely on total origination as a measure of success. But what about loan servicers? How do we "keep score" with servicing. How do we easily and effectively measure customer satisfaction? Maybe to start we check out recent JD Power Mortgage Servicing results - interesting findings show key measures of customer satisfaction include: (1) Onboarding process is key opportunity to impress or distress customers, (2) Satisfaction takes huge hit when a customer believes their time is wasted (speed), and (3) digital abilities became more important - with satisfaction dropping among customers who are not relying on website.
On My Mind ...
What are your thoughts on the apparent rise of the "Freelance" economy? Some estimate that 40% of the American workforce will be freelance employees by 2020. Generally speaking, freelance employees sacrifice some security for more freedom.
So assuming you can handle the stress of not knowing whether you'll have a job a week from now, being a freelancer seems like it has other challenges. Maybe you feel isolated. Maybe it would be hard to focus on actually being good at your job when so much time must be devoted to finding the next job. Not to mention the simple logistics of it -- it's one thing for a company with a hundred employees to have secure online portals, licenses, and keep IT professionals on retainer - it's a whole other thing for a single freelancer to handle that.
Seems like a win for an employer though. Maybe you pay more per hour, but it's a variable cost. Plus, you're probably getting someone more engaged and self-sufficient - easier to manage overall. Certainly an interesting take on things ...
"Who says you can’t drive an Uber in the morning, design websites all afternoon, and cater your own food company at night? The old economy would lead you to believe that you should pick one job, work hard for the next 40 years at that company, and then retire. Not the new economy. The more diverse your skill set, the more opportunities come your way."
Or maybe - just maybe - employers could start giving employees a little more freedom, allowing them to have the best of both worlds.
"Crisis is the challenge and the opportunity to uncover what we value, rediscover what we need, redefine what gives us pleasure, re-create a meaningful life, and reconfigure the inner workings of self. .... [Y]our current crisis could be the best thing that ever happened to you. In fact you can make sure your crisis is the best thing that ever happened to you, even if it seems right now as if all is lost. .... Crisis forces you to break down barriers and to entertain new possibilities, possibilities that may feel strange, yet are older and more authentic than anything that you are living to date."
- Laura Day, Welcome to Your Crisis: How to Use the Power of Crisis to Create the Life You Want
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