the mortgage industry has spent the past couple of years getting ready for the massive overhaul of Home Mortgage Disclosure Act reporting requirements, which take effect in just a few short weeks.
The expanded data requirements and new technical specifications come as the Consumer Financial Protection Bureau assumes oversight of collecting HMDA data from the mortgage industry, reporting it to the public and using the data to monitor lenders’ compliance with fair lending laws. The new collection requirements take effect in 2018 for loan data that will be reported in 2019.
To be sure, this update has taken considerable effort from lenders, their technology vendors and compliance professionals, and has serious consequences — especially considering how much more data the CFPB will have at its disposal to monitor lenders’ activities.
But what if all that work to meet these compliance requirements could be put to use as a tool for generating more loan volume? As this month’s cover story explains, some lenders are doing just that.
By comparing HMDA data with other demographic and loan performance trends, lenders are finding gaps in their customer bases that they focus on to fill declining volume and grow their market share. Likewise, by tapping into the local expertise both within and outside their organizations, lenders are creating new opportunities to provide loan products that meet the needs of the consumers in their markets.
But that’s not all. Another way to respond to the shifting demands of today’s borrowers is to work with secondary market players like Fannie Mae and Freddie Mac to pilot new loan products and test changes to underwriting guidelines that open up the credit box without taking on unnecessary risks.
These strategies are essential at a time when origination volume is struggling to maintain pace during the shift to a purchase-driven market. The industry will likely originate just under $1.7 trillion in loans in 2017, down 18% from a year ago. Volume is expected to fall again in 2018, to $1.6 trillion, and not return above $1.7 trillion until 2020, according to projections released at last month’s Mortgage Bankers Association Annual Convention & Expo.
It’s imperative for lenders to be nimble and creative in seeking out underserved markets and adapting to their needs. Not only will these strategies help lenders get through the current decline in volume, they also make good business sense in the long term, given the rapidly changing demographics of the U.S. population.