The Home Mortgage Disclosure Act deadline looms closer, but many questions still remain unanswered.
To combat this, HousingWire set to work to bring readers answers to the most asked questions as we countdown to the end of the year.
However, lenders also have a bit more breathing room now, as regulators announced they will not be assessing any penalties for 2018 HMDA data filed in 2019.
Before reading today’s question, make sure you’re all caught up in the series by the previous parts of this series:
This is the final part, part 10.
How should LOS providers differentiate to help lenders today?
One expert explained that the key for LOS providers will be ensuring consistency in their systems’ underwriting decisions.
“LOS providers should integrate with systems that ensure consistency in underwriting decisions, as well as prices given,” LoanScorecard Executive Director Ben Wu said. “Some lenders already use Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Prospector, but in the case of non-agency loans, they will need to turn to an alternative automated underwriting system to show how the underwriting and pricing applied to each loan were based on the same objective criteria.”
“LOSs should also be able to capture and store all of this data so that each decision could be understood and justified in an audit,” Wu told HousingWire.
And another expert said lenders should automate as much as possible in order to reduce the risk of fair lending violations.
“Automate as much as possible,” said Scott Dunn, Wipro Gallagher Solutions head of product management, strategy and compliance. “This will help to reduce the risk of non-compliance and allow LOS providers such as WGS to differentiate from the competition.”
“Customers need this kind of help from technology providers in order to keep up with the demands of regulatory changes,” Dunn told HousingWire. “Providing ease and adaptation of the functionality has a positive impact and helps to bridge any training gaps that operations personnel have to quickly get up to speed with when there are such massive waves and transformation of the rules.”
But most importantly, LOS providers must ensure that their systems are up to date with the latest HMDA changes.
“LOS providers need to assure lenders that the origination systems are up to date with data requirements,” ComplianceTech, a provider of fair lending and CRA solutions, explained. “In addition, lenders should be able to utilize the data in the system for external analyses. It should be relatively easy for Lenders to extract data from the LOS to use in fair lending analytical tools.”
Beji Varghese, Navigant Capital Advisors managing director, gave a list of what LOS providers should do:
- Provide support for “covered” transactions including open ended transactions
- Support for multiple channels like retail, wholesale and correspondent
- Calculate Universal Loan Identifier taking into consideration the capability to support multiple Legal Entity Identifier’s. Additionally they should also be able to store ULI’s on purchased transactions
- Ability to generate the Loan Application Register file as required
- Help lenders map their data to the new requirements
- Assist with UAT testing
- Establishing illogical condition checks for various fields to prevent incorrect reporting
“Most of the LOS providers are updating the user interfaces to ensure data capture for the new requirements,” Digital Risk Staff Attorney Meaghan James said. “The LOS providers also must consider the 2017 GMI data versus the new rule requirements.”
“This work should lead to updated LAR exports which will be reportable for 2019,” James told HousingWire. “If the provider has correspondent lenders, they will need to ensure fields are exchanged or passed.”