Hi! It’s Tory Haggerty from Tuscan Club University’s Fair Lending School and welcome to another Fair Lending Short.
In this fair lending short, we are going to talk about the importance of peer data.
You ever wonder what happens to your HMDA data when you submit it every March 1st?
The government puts it all together, takes out anything with privacy issues, and releases it to the industry.
Fair lending software companies, among others, download that and make it available to their users. You can than review your performance and see how you stack up against your peers – other banks, credit unions, and mortgage companies that take home loan applications in your area.
When reviewing peer data, you typically take out any peers that have more than double or less than half of your volume. If you only took 100 applications in a metro area, you don’t want to be compared to someone who took 2,000. They have completely different resources than you do.
Once you run your data against peers, trends begin to emerge. If you make very few loans to minority individuals or high minority areas, but peers have no problems making those loans, you have work to do. When your peers start outperforming you by twice as many applications or loans in high minority areas, you need to figure out why. If you are 3 and 4 times behind peers, you need to know that redlining cases have been settled at those thresholds.
Get software that can map your branches, applications, and loans over a minority population map. You can bore management all day with numbers and ratios, and it may go completely over their heads. When you show them a map of your branches or applications, and they complete surround or avoid high minority areas, everyone gets it.
Remember – it’s an open book test. You get to look up the answers.
Thanks for reading!
Click here to learn more about Fair Lending Compliance & Audit Training.In this fair lending short, we are going to talk about the importance of peer data.
