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FFIEC releases new HMDA examiner transaction testing guidelines

Mon, Aug 28, 2017

The Federal Financial Institutions Examination Council (FFIEC) is issuing guidelines for examiners to use in assessing the accuracy of the Home Mortgage Disclosure Act (HMDA) data institutions record and report. The HMDA Examiner Transaction Testing Guidelines (Guidelines) describe FFIEC procedures for sampling and validating HMDA data. The Guidelines should assist financial institutions seeking to better understand the approach the FDIC will use to assess HMDA data as part of the examination process.

This Financial Institution Letter applies to all FDIC-supervised institutions subject to HMDA and Regulation C. A HMDA exemption applies to institutions with assets at or below a threshold specified in Regulation C.

Highlights of the guidelines include:

  • The Guidelines will apply to HMDA data collected by financial institutions in or after 2018.
  • The Guidelines describe a data sampling process that involves prioritizing designated data fields for review or reviewing all data fields within a sample. The FDIC's examination approach will include reviewing designated data fields to be announced prior to January 1, 2018.
  • Examination staff will determine whether errors in each data field reviewed exceed a specified threshold described in the Guidelines. File or line error rates generally will not be considered.
  • The size of the sample identified for review will be driven by a financial institution's mortgage lending activities. Specifically, the number of files sampled and the error threshold for resubmission will vary based on the number of applications listed on an institution's Loan Application Register.
  • The Guidelines establish tolerances for minor errors in certain data fields involving dates or dollar amounts. Data that fall within these tolerances do not count towards error thresholds.
  • An effective compliance management system, commensurate with a financial institution's size, complexity, and risk profile, plays an important role in ensuring compliance with applicable law and in preventing recurring HMDA data errors.

The complete Financial Institutions Letter on Examiner Guidelines is available online here.