HMDA Tips Community Banks Should Not Overlook

HMDA reporting continues to be a common source of examination findings, especially when loan types and data requirements are misunderstood.

Key areas to watch include:

• Commercial Loans - Many HMDA reportable loans at community banks are commercial purpose loans secured by dwellings. Several data fields must be reported as “NA” rather than left blank. Understanding which fields apply is critical.

• Documentation - Every one of the 110 HMDA data fields should be supported by consistent documentation in the loan file. This includes ratios and compliance calculations, not just basic loan terms.

• Loan Purpose - Know the regulatory definitions, particularly for refinancings. Terms used in the secondary mortgage market do not always align with HMDA definitions. For cash out or multi purpose loans, apply the HMDA purpose waterfall to determine the correct reporting.

• Temporary Loans - Loans with terms of 12 months or less are not automatically excluded from HMDA. Construction and bridge loans may still be reportable depending on how the loan will be repaid at maturity. Documentation of the planned repayment source is essential, with specific regulatory exceptions for certain builder loans.

• Demographic Information - Demographic data is based on information collected at the time of initial application. The requirements are detailed and complex, which makes strong frontline training critical. Tools like flowcharts can help ensure consistent and accurate collection.

• Application vs. Closing Information - Some HMDA data fields reflect information at application, while others must reflect final loan terms at closing. Mixing these up is a common source of errors.

• Non Originated Loans - HMDA reporting changes significantly when a loan does not close. Requirements differ for denials, withdrawals, approved but not accepted files, and loans closed for incompleteness. Proper documentation remains essential even for non originated files.

Strong HMDA processes reduce exam risk and rework. The Bankers Solutions works with community banks to strengthen HMDA controls, documentation, and training so reporting is accurate and defensible.