Turning a Headache on its Head Transforming the HMDA/CRA process into a winning marketing strategy By John A. Woloshen
OCTOBER 2010
MICHIGAN MORTGAGE PROFESSIONAL MAGAZINE
NationalMortgageProfessional.com
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Each year, lenders are required to ded- ering 2009 lending activity, such as icate valuable time and resources to applications, originations, purchases compiling and submitting Home of loans, denials and other actions, Mortgage Disclosure Act (HMDA) and such as incomplete or withdrawn Community Reinvestment Act (CRA) applications. data. While typically viewed as a burAccording to the FFIEC, the total densome process necessary for main- number of originated loans of all types taining regulatory comincreased by nearly 1.8 pliance, there is a signifimillion, up 25 percent cant benefit to be derived from 2008. This is largely if done properly—one due to a 67 percent that can positively impact increase in refinancings. your marketing strategy. Additionally, FHA loans Once institutions subwere up 37 percent in mit HMDA/CRA data at the 2009 and VA loans were beginning of each year, up by 6.7 percent. the Federal Financial CRA data was released Institutions Examination in August for small busiCouncil (FFIEC) then releasness, small farm and es that data to the public. community development This presents useful infor- “Much is revealed by lending reported by cermation that lenders can tain commercial banks analyzing relevant use to effectively compare and savings institutions. HMDA/CRA data, their marketing efforts to A total of 941 lenders and doing so can those of their competitors reported data about origand determine where enable institutions to inations and purchases of opportunities for improve- better strategize their small business and small marketing and sales ment lie. farm loans, a two percent approach.” decrease from the 965 2009 HMDA/CRA lenders reporting data in data indicate 2008. And of the 941 significant market institutions reporting 2009 data in changes 2010, more than 40 percent were not On Sept. 20, HMDA data from mortgage “large” institutions under the applicalending transactions was released. ble regulation and, therefore, reported HMDA data was collected from 8,124 either voluntarily or because they U.S. financial institutions including elected to be evaluated as “large.” banks, savings associations, credit CRA lending, however, is down. The unions and mortgage companies, cov- total number of small business loans
reported in 2009 decreased by 42 percent from 2008, and the number of community development loans originated decreased 29 percent, from 22,287 in 2008 to 15,882 in 2009. Institutions need to not only make note of these national trends, but also focus on community trends that directly impact their own businesses. Much is revealed by analyzing relevant HMDA/CRA data, and doing so can enable institutions to better strategize their marketing and sales approach.
Using 2009 HMDA/CRA data for strategic marketing Evaluating HMDA/CRA data can help institutions make significant and highly strategic changes to their marketing efforts. An institution can evaluate its lending activity alone to look for weak areas, such as identifying communities with little lending activity. Any weak areas may need a different marketing strategy or different loan products to generate activity. Since HMDA/CRA data is public information, it provides a detailed view of what other lenders are doing in specific markets. Institutions can compare their lending patterns to any number of other institutions to see how others are doing in any given area. By comparing one’s own lending activity to a competitor’s activity, institutions will have better information to guide strategic changes where necessary, offer new loan products, increase marketing efforts in more competitive areas, reduce marketing efforts in less competitive areas, etc. This should lead to more focused marketing and crossselling.
Analyzing peer data There were more than 19 million appli-
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cations in the 2009 HMDA data. While this information is public and readily available at no cost, analyzing the data can be costly and time-consuming for lenders in need of evaluating hundreds of institutions. There can be a significant amount of information to consider, and lending institutions need a viable solution to evaluate this data effectively and efficiently for marketing purposes. Using a Web-based tool built on modern, .NET technology, institutions can more easily gauge how they compare and rank with their peers. Ideally, a system should enable an institution to perform evaluations by selecting a specific geographic area. Once you determine your criteria, you can filter the Loan Application Register (LAR) data, a register that lists all loan applications taken by a savings association, select institutions you consider to be your peers based on criteria such as volume or geographic vicinity, and then run analysis reports. Once the information is analyzed, different types of reports can be generated, such as table reports, top peer reports, ranking reports, market share reports, pricing reports or spatial assessment reports. HMDA/CRA data provides some of the best, most cost-effective market research available. Institutions that take advantage of this information are better positioned to improve their marketing efforts and move themselves into a more competitive position. John A. Woloshen is executive vice president and chief operating officer of RATA Associates, a provider of HMDA/CRA data compliance software and services for financial institutions. For more information, call (407) 831-7282 or visit http://hmdacomply.com.
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