As of late, there's been huge buzz about the Consumer Financial Protection Bureau and the Federal Housing Finance Agency putting together a massive National Mortgage Database.
There is no denying that there has been a great deal of discussion lately about “Big Data” in general; not just about the regulators who want to collect it.
It's part of a larger trend, actually. Indeed, technologists want to collect more and more of it and executives are not really sure what to do with it once they have it.
However, despite the endless discussions about it and the announcements from “data-driven” regulators that they are collecting it, the strategic and tactical benefits of Big Data remain elusive.
So, should we really be concerned about it? And what is Big Data anyway?
In simple terms, Big Data is the collection of massive amounts of enterprise and third-party data – both structured and unstructured – to provide an enterprise with a greater level of intelligence about their company, their customers, and the market.
For mortgage lenders and regulators, big data involves information about the actual volume of loans originated in a series of years that includes such things as product type, property type, borrower age, income, etc., which allows for various types of analyses on housing and financing options.
Using this collective data, users can identify numerous pieces of information either from an enterprise or an industry-wide perspective.
This is the new business paradigm.
It gives users the ability to understand larger markets and trends, evaluate and compare peer groups and identify how to set an organization apart from the rest — for better or worse for both consumer and company.
And so government agencies, such as the CFPB, are collecting and using Big Data to direct their supervisory activity, quantify fees and penalties, and to showcase how a data-driven organization can function.
By collecting large amounts of data, including credit histories, Home Mortgage Disclosure Act data and industry information, the regulators learn not just what individual lenders are doing, but what trends are emerging from the industry as a whole.
Using this data to benchmark specific lenders allows regulators to identify those lenders that they believe are less likely to be complying with federal requirements.
In other words, Big Data is becoming the battlefield between regulators and lenders and is acting as a catalyst for changing the way we do business.
Lenders are at the forefront of this change and for the most part are still wondering where this data is going to come from and how to put it to work in their companies.
Mortgage True View performed a case study to collect and analyze HMDA data. In 2012 alone, mortgage lenders submitted 18.6 million applications in response to government requirements. Not only does this data set comprise a large amount of data, but it is uniformly collected across all lenders regardless if they are banks, mortgage lenders, community banks or credit unions.
It is also available to and is being used by the CFPB.
So that's why the CFPB and the FHFA need to collect the personal information of homeowners.
Let's just hope they also know how to put it to use in a way that benefits both the potential homeowner and the lender alike. It would be a Big Data win-win.