WASHINGTON -- Regulators vowed Wednesday to crack down on banks that make mistakes in their Home Mortgage Disclosure Act reports.
"We are finding lots of erros in exams when we go in," said Griffith L. Garwood, director of consumer and community affairs at the Federal Reserve.
"It is clear we need to get tougher with those institutions that are filing poor data," he added in a speech to the American Bankers Association's National Regulatory Compliance Conference.
Mr. Garwood admitted that some of the problem may be with unclear regulations. He said the central bank is trying to clarify its rules and will issue a staff commentary on the issue this summer.
From Warnings to Fines
A spokeswoman for the Office of the Comptroller of the Currency said penalties could range from a warning to hefty civil money penalties.
Besides facing supervisory action, banks that file faulty data will find themselves in longer exams, Mr. Garwood said. He encouraged the audience to use computer software to screen out errors.
The Federal Deposit Insurance Corp. could be filing some referrals to the Justice Department on this issue by fall, according to Janice Smith, director of consumer affairs at the agency.
She said the agency is finding many inaccuracies in HMDA data through "HMDA DIP" - for "disparity investigative project - a program it began at the beginning of the year.
Ms. Smith also said the FDIC is close to going to print on selftesting guidelines. "They will not be mandatory," she said. "We just want to provide institutions with more information."
The guidelines will have three main sections, Ms. Smith said. The first will discuss the difference between internal and external testers; the second will be a section on comparative analysis of loan files; and the third part will be a reference section for bankers.
While Ms. Smith said the FDIC has no current plan to hire fair-lending testers, Stephen M. Cross, deputy comptroller for compliance management at the Office of the Comptroller of the Currency, spoke about his agency's matched-pair testing program.
Results of the pilot test, begun early this year, will be released by yearend, he said. Mr. Cross said it is necessary to test because a person discouraged from filing a loan application leaves no record of possible discrimination.
'Only Prudent Course'
"There are people in the world who discriminate," said Mr. Cross. "Some of those people are bankers. The only prudent course of action for the OCC was to undertake a pilot testing program."
Mr. Cross described as unfounded industry concern that test data would be given to the public before being released to the institution involved.
"The banks will get the information first," he said. "this is not an attempt to publicly embarrass an institution."
