The Division of Supervision and Consumer Protection ("DSC") appreciates the opportunity to respond to the Office of the Inspector General's ("OIG") draft report, Examiner Use of Home Mortgage Disclosure Act ("HMDA') Data to Identify Potential Discrimination. We agree with the overall assessment that DSC makes appropriate use of available HMDA data during compliance examinations to assess instances of potential discrimination in FDIC-supervised institutions. We also appreciate your observation that the FDIC has proactively initiated the HMDA Pricing Data Outlier Project, which encompasses a supervisory and examination strategy to identify and evaluate institutions that may pose enhanced risk for discriminatory or abusive lending practices.
The report contains three recommendations to clarify and reinforce examination guidance related to HMDA. It states:
- We recommend that the Director, DSC, revise the Compliance Examination Manual guidance to specify when and how errors and omissions of current year HMDA data should be reported in compliance examination reports, define significant inaccuracies, and identify the extent of financial institution review of HMDA data in order to resubmit corrected HMDA data to the Federal Reserve Board ("FRB').
DSC RESPONSE:
DSC generally agrees with the recommendation. While we believe that we have sufficient guidance on how errors and omissions of current year HMDA data should be treated, we also agree that clarifying existing guidance would be beneficial. Consequently, we will revise existing guidance to more clearly explain when it is appropriate to discuss current year HMDA data examination findings in the examination report, and when it is appropriate to resubmit corrected HMDA data to the FRB. We will issue new guidance in this area by June 30, 2007.
- Provide additional examination guidance on how to determine and document third-party residential mortgage lending relationships for HMDA reporting purposes.
DSC RESPONSE:
DSC generally agrees with the recommendation. While we believe that our examiners are very familiar with the reporting requirements that relate to third party residential mortgage lending relationships, we agree that it is important to properly identify and document these relationships in the work papers. We will review existing guidance and, where necessary, issue revised guidance to examiners by June 30, 2007.
3. Emphasize that examiners should complete the required checklist for HMDA data reviews.
DSC RESPONSE:
DSC agrees with the recommendation. We agree that examiners are to use the required checklist for HMDA data reviews. We will remind examiners to use the checklist for HMDA data reviews within the framework of FDIC's refocused compliance examination procedures. We will reiterate this message to supervisory staff by year-end 2006.
