HMDA Multi-Dimensional Dynamic Benchmarking

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  • Dynamic benchmarking based on an advanced analytical business intelligence platform combines multiple dimensions – including geography, applicant profiles, and application volumes – to provide the most meaningful view of a lender’s compliance, risk, and strategic profile.


Our last HMDA Insight highlighted the impact of 2014 Loans Purchased on the St. Louis, MO-IL MSA.  Table 1 summarizes this MSA by presenting both gross (i.e., all reported) and net (i.e., net of Loans Purchased) applications.  This table provides the basis for a basic case study regarding multi-dimensional dynamic benchmarking.


Table 1 shows that:

  • Lenders with fewer than 100 applications account for approximately 80% of all lenders (and less than 10% of all applications) measured on both a gross and net basis.  
  • Lenders with more than 750 applications account for approximately 5% of all lenders (and approximately 66% of applications on a gross basis and 60% of applications on a net basis).

While it is common to evaluate a lender’s lending activity against all lenders in the relevant market, Table 2 presents a 2014 benchmark comprised of comparable application volumes.  A benchmark based on application volume enhances comparability as lenders of comparable volumes are likely more similar in terms of governance, risk management, and compliance protocols as well as operational and strategic profiles.  The Table 2 Benchmark, however, is problematic in view of the fact that the Respondents report 18,804 Loans Purchased accounting for approximately 75% of all Loans Purchased (which represents approximately 30% of the benchmark applications). 


Table 3 presents a benchmark comprised of the Top 20 Lenders based on Actioned Applications.  The Table 3 Benchmark replaces six of the eight lenders in the Table 2 Benchmark that reported significant levels of Loans Purchased (leaving Respondent 2 and 10 who report 2,973 and 1,028 Actioned Applications, respectively).


The “replacement respondents” reduce the number of Total Applications from 64,175 to 57,368 with Loans Purchased reduced from 18,804 to 8,007.  The number of Actioned Applications increases from 45,371 to 49,361.  

Five of the six replacement respondents are “in market” or market-based lenders, replacing lenders who are based in other markets as further “relevant” dimensionalization.  As shown in Table 4, the Table 3 benchmark is comprised of 11 in market-based lenders accounting for approximately 53% of the benchmark applications. 


Table 4 also shows that the Table 3 Benchmark can be further adjusted to more meaningfully evaluate top lenders in the St. Louis, MO-IL MSA by including all in-market lenders reporting more than 750 applications.  The resulting adjusted benchmark is comprised of 27 of the top 30 lenders (and 18 market-based lenders representing 67% of all benchmark lenders) accounting for approximately 58% of benchmark Actioned Applications.  The bottom-line is that comparing a lender’s in-market underwriting activity to other in-market underwriting activity results in the most meaningful benchmarking.

With the right advanced analytical Business Intelligence platform – Mortgage TrueView – the Adjusted Table 3 Benchmark can be further dynamically dimensionalized based on Denial Reason Codes, applicant attributes, and other HMDA data elements (and enterprise data elements) providing even more relevant insight into a lender’s lending profile. 

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Our next HMDA Insight will focus on Denial Reason Codes and the need for another adjustment to Action Taken Rates.

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“It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.” ― The Adventures of Sherlock Holmes, A Scandal in Bohemia

© 2016 Mortgage TrueView, Inc.  | All Rights Reserved.

This material may not be used for any commercial purpose in whole or part without the express written permission of Mortgage TrueView, Inc.



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