Inland Mortgage figures it can save 60% of the time it spends on geocoding HMDA data and eliminate the potentially costly errors associated with them by letting a specialist handle those responsibilities. But while saving time and eliminating errors are crucial, Inland believes it can reduce costs by about $40,000 a year by going that route.
Inland is entrusting the bulk of its geocoding responsibilities to Centrax, a Dallas-based compliance software firm specializing in automating government regulatory compliance requirements such as geocoding, demographic analyses, and reports required by the Community Reinvestment Act and Home Mortgage Disclosure Act.
Geocoding - the identification of loan types within an institution's delineated communities by census tract as required by CRA and HMDA - is the measuring tool bank regulators prefer to be used when institutions report CRA and HMDA data. While geocoding is not a requirement, not using it can draw attention to lenders that don't.
But for banks intent on doing their own geocoding, the process requires that compliance officers painstakingly study and annotate geocoded maps to determine what loans were made in low- and moderate-income areas.
That process, however, can be fraught with potential mistakes ranging from misspelled street names to outdated maps or information. Many institutions have found that firms that do geocoding - like Centrax and TRW - have become proficient at updating information and, subsequently, can save them time and money.
"We hope to cut our employee [geocoding work] time by 60%," said John Thompson, regulatory compliance officer for Inland, an Indianapolis-based lender that generated more than $3.6 billion in originations in 1993. "Our branches said they've had [staffers] spending at least one full day a week gatheringgeocoding information.
"We have in excess of 40 branches, so that's 40man-days a week - or l6,000 man-hours a year," he said. And at $5 an hour to perform the geocoding process by hand, we're spending about $80,000 a year. By spending 30,000 for Centrax, we've eliminated 80% of the work involved and about $40,000."
"The Centrax system can review about 10,000 records in about 10 minutes on a 486/66," said John Sparks, a principal with the Centrax group. He said the program was designed to seek out the glitches in geocoding information that make it such a chore for compliance officers.
"Some addresses won't code," he said, "sometimes because there are of things like rural codes and misspelled street names. Centrax runs the first process and kicks all nonmatches out into seven categories." A feature within Centrax, Soundex, isolates data within those categories and compares - or "scrubs" - them with similar data until a match is found. Sparks said Centrax guarantees a 90% geocoding matchrate, and guarantees Centrax will remain in compliance with HMDA regulations.
Updates to Centrax' 600 mb geo-coding database are made every six months, Sparks said, and all geocoded information, metropolitan statistical area, census tract and county code information are automatically assigned to each application based on address and zip code combinations. The system also produces the Loan/Application Register for submission to the appropriate regulatory agency and disclosure statements and aggregate MSA reports produced by the government.
The system is PC-based and runs in a DOS environment;a windows-based system and a local area network system are planned for early 1995. A singleuser system, Sparks recommends an IBM-compatible 486/66 PC with at least 640K of memory to run the program. He also suggests a hard drive that supports partitions larger than 32mb. Due to the volume of data, Centrax does not use diskettes for source information.
Sparks said the system is being used by more than 250 institutions - mostly thrifts and commercial banks - at more than 500 locations, including Bank of America, which is running 23 systems, Citibank (four systems), and First Union (10 systems). But mortgage companies have found the program useful as well, including two of the biggest - Countrywide Funding and Norwest Mortgage, which handles its entire geocoding system from one location.
The Centrax system is leased - with a minimum three-year agreement - at an annual cost of between $4,000 and $36,000, depending on the needs of the institution. The First National Bank of Wazoo, Miss.,for example, is the smallest institution leasing the system from Centrax and operates the scaled-down $4,000 Citytrax version of the program. For lenders needing more than one system, additional units cost $1,580 each.
Sparks said Centrax also offers other ancillary products, including:
* Fastrax, an on-line inquiry system that provides immediate demographic information about either an existing customer who is requesting further services or a potential new customer; and
* Calltrax, a stand-alone PC system that records and tracks conventional officer calls and places the census tract of each call on each call record.