On September 22, 2014, in accordance with the Home Mortgage Disclosure Act (HMDA), the FFIEC released to the public the HMDA database for the 2013 reporting year. The public data can be leveraged as an asset that can support Fair Lending and CRA compliance as well as marketing efforts.  The following are five ways lenders can use the 2013 and earlier releases of HMDA data to support their compliance programs and business goals.

1. Benchmarking for Compliance3b06ebd[1]

Agencies rely on HMDA data to evaluate lender compliance regarding Fair Lending and CRA regulations, so it makes sense that lenders leverage these data for the same purpose. The adjacent table is a simple example of how a local community bank can quickly benchmark its lending patterns against other lenders in the area. Additional insights can supplement a basic HMDA analysis through the application of statistical methodologies and the integration of demographic and housing data to provide lenders with a holistic picture of its current level of compliance.

2. Understanding the Competition

Mortgage lenders are in a unique position in that they have access to precise competitive data that companies in other industries would covet. HMDA data allow mortgage lenders to calculate market share, evaluate new competitors, compare underwriting results, and monitor market trends by competitor, product, geography, and applicant demographics. The example to the left is a basic table of top 10 lenders by market share for the years 2012 and 2013.

3. Identifying M&A Opportunities

The competitive insights that come from HMDA data can also be leveraged as an exploratory tool to evaluate merger and acquisition opportunities. In this example, we simulate a combination of two lenders from adjacent counties to highlight growth trends, lending performance, and high-level Fair Lending/CRA compliance implications before and after the combination.

4. Locating Places to Advertise0c03608[1]

Pairing public HMDA data with a geographic information system (GIS) is a great way to identify advertising placement opportunities by finding growing areas in their markets. In addition, product and demographic mortgage data can be used to support targeted marketing efforts to satisfy strategic and compliance objectives. In this example, we have blended 2013 public HMDA data with real estate listing data to find hot areas of mortgage market demand. In the graphic, the darker shades represent higher demand areas .  Initiating targeted marketing efforts in these areas may be the most efficient use of resources for finding new mortgage lending opportunities.

5. Finding Areas for New Service Locations

In addition to finding advertising opportunities, HMDA data can be turned into an insightful tool for uncovering new areas for future expansion plans. In this example, we have blended 2013 HMDA data and zip code business data to highlight high demand but under-served areas as represented by the darker shaded regions.


About the Author: Jonathon Neil

Jonathon is a Senior Consultant for ADI with expertise in Fair Lending compliance, CRA compliance, data mining, and geographic information systems. You can contact Jonathon at jneil@adiconsulting.com or 703.665.3707.

April 9th, 2015|