Just like any federal regulation, the Home Mortgage Disclosure Act, or HMDA (pronounced hum-duh), can be challenging.
But knowing the challenges your financial institution may face when collecting and reporting home mortgage loan data can help strengthen your HMDA compliance program and reduce reporting errors. And the more prepared you are, the easier it will be to prevent errors and submit your Loan Application Register (LAR) without a hitch.
If you’re new to HMDA, check out this article for a crash course on what you should know. Otherwise, let’s get into why it’s important to properly track your HMDA data, common HMDA errors to watch out for, and how to prevent these errors from happening.
We’ve also created a free HMDA Review Checklist so you can feel more confident submitting your HMDA data.
Download the HMDA Review Checklist
Why It’s Important to Properly Track Your HMDA Data
An occasional HMDA error is normal (and easy to fix). But maintaining strong HMDA compliance requires consistent data collection, review, and reporting practices. If your institution has a history of poor documentation, little review, and untrained employees, HMDA errors can cause some serious headaches.
When your HMDA data is incorrect, it can lead to:
-
Increased regulatory scrutiny
-
Required corrective action
-
Increased fair lending concerns
-
Public reputation risks
Increased Regulatory Scrutiny
Examiners use HMDA data to evaluate fair lending risk, identify unusual lending patterns, and determine whether additional review is necessary. So when a mistake is found, it may trigger increased scrutiny. Believe us, you don’t want to draw unwanted attention from regulators.
Required Corrective Action
When regulators identify HMDA reporting errors, they may require your institution to:
-
Correct and resubmit data
-
Strengthen internal controls
-
Improve employee training
-
Conduct additional monitoring and reviews
-
Implement corrective action plans
While none of these are impossible to overcome, these corrective actions take time. And that’s time you could be spending strengthening your future HMDA process or making a difference in your community.
Increased Fair Lending Concerns
Because HMDA data is widely used in fair lending examinations, maintaining strong HMDA compliance isn't just a reporting requirement—it's an important part of your institution's fair lending program. Even minor coding errors can affect demographic analyses and create unnecessary questions during exams.
For example, incorrect demographic information, loan purpose codes, or application outcomes can distort fair lending analyses and potentially raise questions that otherwise wouldn't exist.
Public Reputation Risks
Unlike many compliance reports that stay behind closed doors, HMDA data is largely public.
If outside groups identify unusual patterns in your data, they may ask questions about your lending practices. Even if the issue stems from reporting errors rather than actual lending behavior, your institution may still have to explain what happened. And that’s not a conversation you want to have.
Common HMDA Errors
Now that you understand the risks of HMDA reporting errors, let's look at the most common mistakes and how to prevent them.
Here are some common HMDA errors you should watch for:
-
Missing demographic information
-
Incorrect action taken codes
-
Geocoding mistakes
-
Loan classification issues
-
Income reporting errors
-
Incorrect loan purpose coding
-
Incorrect occupancy or property type coding
-
Application and action date errors
-
Universal Loan Identifier (ULI) errors
And here are some common reasons these errors occur:
-
Failure to perform regular audits
-
Inadequate staff training
-
Lack of standardized procedures
-
Poor communication between departments
While some HMDA errors stem from missing information or reporting oversights, many are caused by inconsistent data collection processes, coding mistakes, and inadequate quality control procedures. In most cases, the root problem isn't a single bad data point—it's the lack of a reliable system for collecting, reviewing, and validating HMDA data before submission.
How to Prevent HMDA Errors
The good news is that most HMDA errors are preventable. With a little attention to detail, solid processes, and an informed team, your institution can strengthen its HMDA compliance program and significantly reduce reporting errors.
Here are some best practices that can help prevent HMDA errors before it’s time to submit your Loan Application Register (LAR).
Review Data Throughout the Year
One of the biggest mistakes institutions make is treating HMDA reporting as a year-end project.
Fortunately, HMDA regulations already encourage a more proactive approach. Financial institutions are generally required to record covered loan data on their LAR within 30 calendar days after the end of each calendar quarter. Staying current with your data not only helps you meet regulatory requirements but also makes the annual filing process much more manageable.
That said, simply updating your LAR each quarter isn't enough. By the time December rolls around, your institution may have hundreds or thousands of records to review. Waiting until then to validate your data can feel overwhelming, and rushing your review increases the chance of making additional mistakes.
Instead, use your quarterly updates as an opportunity to review your HMDA data for accuracy. Regular audits can help identify trends, recurring coding errors, and training opportunities before they become larger issues, making year-end reporting much smoother.
Train Employees on HMDA Requirements
Many HMDA errors start when the data is first collected.
Loan officers, processors, underwriters, and compliance staff all play a role in ensuring your HMDA data is accurate. Regular training helps employees understand what information must be collected, how it should be coded, and why accuracy matters.
Even small misunderstandings can create reporting issues when repeated across dozens or hundreds of applications. So set some time aside to train team members. And make sure they know to reach out if they have questions. It’s better to spend time answering questions now than run into data issues later.
Establish Clear Policies and Procedures
As you saw above, unclear policies and procedures are a big cause of HMDA errors. Remember, consistency is your friend when it comes to HMDA reporting.
Clearly documenting procedures helps ensure employees handle applications the same way every time, regardless of branch location, department, or experience level. Clear policies also make it easier to train new employees and demonstrate compliance during exams.
This doesn’t have to take a ton of time, either. Review your current process and create an outline showing team members who is in charge of what, what they need to document, why, and how to do it correctly. This expands on the last tip of training employees, and is a great way to help your team stay consistent.
Conduct Internal Audits
Errors happen even when your team is properly trained. That’s why it’s important to conduct internal audits before labeling your HMDA data as “ready to go.”
The CFPB's HMDA Platform does perform validity and quality edit checks during submission, but you shouldn't rely on those edits as your primary quality-control process.
Periodically reviewing your institution’s HMDA data helps verify that applications are being coded correctly and that your institution's data matches supporting documentation. These reviews can also uncover process gaps that may be creating recurring errors. If gaps are found, make sure to update your team’s process docs and retrain those involved.
Use HMDA Management Software to Centralize Your Data
One reason HMDA reporting becomes difficult is that data often lives in multiple places. Loan information may be stored in one system, demographic data in another, and compliance documentation somewhere else entirely.
When compliance teams spend their time chasing down information, errors become more likely.
One of the easiest ways to strengthen HMDA compliance and prevent reporting errors is to use software specifically designed to centralize your data. There are lots of different software programs available to HMDA reporters, but Kadince is the best (although we might be a little biased).
Kadince is HMDA Management software built to help your institution collect and organize home mortgage data, plus download your LAR file and submit it without the hassle. With Kadince, you can:
-
Identify missing, inconsistent, or incomplete HMDA fields automatically
-
Flag exceptions and potential issues before submission deadlines
-
Centralize your HMDA Loan Application Register in one platform
-
Filter and analyze HMDA records without rebuilding reports
-
Track trends and outliers across products, channels, and geographies
-
Eliminate last-minute scrambling and uncertainty
Software like Kadince can help you prevent HMDA errors, strengthen HMDA compliance, and build a more efficient reporting process. Schedule a 30-minute demo to see how Kadince’s HMDA Management software can help you prevent errors and save time.
And don’t forget to download the free HMDA Review Checklist so you can feel more confident submitting your HMDA data.
Download the HMDA Review Checklist
None of Kadince, Inc., its affiliates, or its respective employees, directors, officers, and agents (collectively, “Kadince”) are responsible or liable for any content or information incorporated herein. Read full disclosure.
