WASHINGTON -- In an effort to improve the quality of mortgage lending data, the Federal Reserve has instituted a new program to catch lenders that file late or inaccurate information.
Under the new program, Home Mortgage Disclosure Act reporters at Fed-supervised institutions will be placed under the same monitoring and enforcement rules that are now in place for other types of reports, such as call reports.
That means the board will begin considering civil money penalties for lenders that repeatedly submit late, incomplete, illegible, or inaccurate data.
The board has not yet levied an enforcement action against a lender under the new program, which took effect earlier this year. HMDA data for 1993, which were due in March, will be the first to be scrutinized under the new policy.
Concern has mounted in the last few years that many banks may be submitting HMDA data to regulators that arc grossly inaccurate. In examinations of many banks, regulators have found shocking differences in the data submitted to the agenCies and the actual loan files.
This concern has heightened as regulators and enforcement officials have grown more reliant on the data as part of their investigations into lending discrimination. All the agencies routinely use the data to help them target their lenders.
What is more, the agencies have come under heavy fire from Congress and activists for not monitoring the data more carefully. An analysis by the General Accounting Office last year rebuked the agencies for not vigilantly monitoring data quality.
And the Fed's own inspector general recently issued a report criticizing the agency's procedures for ensuring data quality.
No one knows for sure how much of the data is inaccurate. But all the agencies say they have found significant problems at some institutions. And all of them say they have grown more vigilant about detecting problems.
Requiring lenders to completely resubmit their HMDA data is no longer an uncommon occurrence. And the possibility of levying civil money penalties on repeat HMDA violators has not been ruled out by any of the regulators.
The Federal Deposit Insurance Corp. is considering a formal policy of fines for HMDA inaccuracies, said Ken Quincy, a senior compliance official there. The staff has prepared a proposal, but the board has not yet considered it.
"All of the agencies have indicated it's fairly widespread," he said. "The message to banks is that this data is important to us, to them, and to the community. It behooves them to get it in on time and correct."
The Comptroller's office already includes HMDA data in its monitoring of the reports that banks submit. Possible penalties for late or inaccurate filers will be considered in the future on a case-by-case basis, an OCC official said.
At the Office of Thrift Supervision, no new surveillance program has been implemented, but some thrifts have been cautioned about their erroneous data.
But the Fed fired the loudest warning shot to the industry, in denying an acquisition bid last year by Shawmut National Corp. That denial resulted in part from significant errors found in the HMDA data.
Only after Shawmut had totally revamped its data collection process - in addition to settling an investigation with the Justice Department - did the agency reverse its decision.
And the Fed's new enforcement program will serve as another warning to both bank holding companies and state member banks. Problems detected in review of either the data submitted each March - or individual loan files during routine compliance exams - will be considered for penalties.
Supervisors will first warn the institution of problems with the data's integrity. But if these do not spur the lender to improve its practices, further supervisory actions will be considered, according to a Fed document detailing the new policy.
Allen Fishbein, general counsel of the Center for Community Change, says he has been shocked by the extent of incomplete or inaccurate data some lenders have released. But most, he says, appear to be doing a good job of ensuring the data's integrity.
"By not going after those that don't [comply], we're allowing all the data to be tainted, when that's not the ease," he said. "The ones that aren't doing what they should should be punished."