For an institution that adopts the practices I just outlined, and also tests to ensure that these policies are not contravened by flaws in compensation or loan-purchase practices, the changes in HMDA reporting should hold few surprises. By now, each of you has carefully reviewed your revised HMDA data to identify any potential legal or reputational risks. It is also important to maintain perspective.
The inherent limitation of the HMDA  3/4  data collection must be understood if it is to promote market efficiency and legal compliance. It is not intended to discourage lenders from entering or remaining in higher risk segments of the market. Ultimately, the cost of credit to higher-risk borrowers is lower when there is a competitive marketplace.