Compiling and submitting Home Mortgage Disclosure Act and Community Reinvestment Act data is time-consuming and typically a cumbersome process, but the end result can be rewarding for lenders.
Lenders are required to submit application data to the Federal Financial Institutions Examination Council each year to maintain regulatory compliance. The council then releases the data to the public, providing lenders with some of the most useful information to not only evaluate their own lending activity, but also compare their activity to their competitors'.
HMDA data for 2009, released in September, was collected for more than 8,100 financial institutions. Loans originated increased by 25% from 2008, primarily from an increase in refinances and Federal Housing Administration loans.
CRA data for 2009, released in August down from 2008. Specifically, small-business loans dropped 42% and community development loans declined by 29%.
Lending institutions have a means to make extremely strategic marketing and overall business decisions that can enhance their business in 2011. But beyond comparing lending activity with national trends, lenders can look specifically at local competitors and their activity.
HMDA/CRA data is released annually on all lending institutions, providing detailed information including what type of loans they are originating and where geographically the loans are being originated.
If a competitive lender, for example, is making a significant number of FHA loans in a certain geographic area, another lender can make very strategic changes to their marketing efforts to better target prospective borrowers in that specific area.
Additionally, lending institutions can better determine if they need to offer a certain type of loan product. Using the same example, if a competitive lender is originating a large number of FHA loans and your bank is not, you might want to consider doing so if you find that, through analyzing the data, FHA loans are more popular options for your community. Lenders can also evaluate their own activity alone and identify where marketing efforts need to be improved, de-emphasized or maintained.
Equally important to simply obtaining the data is evaluating it. How bankers analyze the data often determines how successful their efforts will be. The challenge is that there often is a significant amount of information to consider. While the data is freely available to the public, meaningful analysis that will improve marketing efforts and lending activity can be a time-consuming and expensive process.
By automatically evaluating data and comparing information based on different criteria, such as geographic location, bankers can make an accurate assessment faster and institute changes that will directly support the bank's lending strategy.