Over the past several years we have experienced significant changes to HMDA. There are recent proposed changes that may impact your compliance responsibilities.
HMDA was enacted in 1975, and in July 2011, rule-writing authority for Regulation C was transferred to the Consumer Financial Protection Bureau (CFPB). The HMDA requirements are intended to provide the public with data about certain applications for loans and their ultimate dispositions. The data can be used:
- To help determine if financial institutions are serving the housing needs of their communities;
- To assist public officials in distributing public-sector investment to needy areas as an inducement to private investment; and
- To assist in identifying potential discriminatory lending patterns and enforcing antidiscrimination statutes.
Regulation C requires specific financial institutions to collect, record, report, and disclose information about their mortgage lending activity. It also requires those institutions to disclose certain HMDA data to the public. Regulation C and HMDA are considered part of the consumer protection laws and regulations; however, if the transaction meets the HMDA reporting requirements, it is covered whether the purpose of the application or loan is for consumer purpose or business purpose.
Covered institutions must collect certain data regarding applications their mortgage lending activity for each calendar year. The collected data must be recorded, within thirty calendar days after the end of the calendar quarter in which final action is taken (such as origination or purchase of a loan, or denial or withdrawal of an application), on a loan application register (LAR) in a prescribed format. The HMDA reporting requirements include timely and accurate compilation of the information and reporting the calendar-year data to the appropriate regulatory agency by March 1 of the following calendar year. Once the data has been submitted to the Federal agency, reviewed for accuracy and field validation, and any discrepancies have been resolved, the institution receives a report (‘disclosure statement’) compiled from its submission. Disclosure requirements for public review are also mandated.
The CFPB issued a final rule for HMDA reporting. New data collection requirements began January 1, 2018, and the 48 new, revised, and current data points will first be reported in 2019. There are 25 new data points, 14 fields modified from previous requirements, and nine unchanged, bringing the total to 48 unique data fields. The new rule entails many changes and revisions, and some of them involve revisions to:
- Institutional coverage
- Transactional coverage – the new rule modifies the types of transactions in that Regulation C generally applies to consumer-purpose, closed-end loans and open-end lines of credit that are secured by a dwelling. Also, a home improvement loan is not subject to Regulation C unless it is secured by a dwelling. Additionally, the new rule applies to business-purpose, closed-end loans and open-end lines of credit that are dwelling-secured and are home purchase loans, home improvement loans, or refinancings.
- Applicant information collection and reporting
- Annual reporting
- Disclosure requirements
The Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) was signed by the president on May 24, 2018, which amended the HMDA by adding a section that provides partial exemptions from HMDA’s requirements for certain transactions made by certain financial institutions. Shortly thereafter, the CFPB released an interpretive and procedural rule that further clarified the changes:
- For a financial institution to qualify for the partial exemptions, it must have originated less than 500 closed-end mortgage loans in each of the two preceding calendar years, or it must have originated less than 500 open-end lines of credit in each of the two preceding calendar years, and it has at least a ‘Satisfactory’ CRA rating.
- Upon qualification for the above partial exclusion, a financial institution is exempt from the expanded HMDA data requirements which are 26 items that do not have to be collected and reported retroactive to January 1, 2018.
Recently, the CFPB published a Notice of Proposed Rulemaking (NPRM) that would provide relief for smaller lenders regarding data reporting requirements. Clarification for partial exemptions is also addressed in the proposal. The proposed changes would raise the coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the HMDA rules.
- Closed-End Mortgage Loans
The NPRM documents two options for institutional and transactional coverage threshold:
- Increase to 50 closed-end mortgage loans or
- Increase to 100 closed-end mortgage loans.
Either option would permanently increase the coverage threshold.
Note that the proposal addresses that financial institutions originating fewer than 50 closed-end mortgage loans, or 100 closed-end mortgage loans, in either of the two preceding calendar years would not be required to report data as of January 1, 2020.
- Open-end lines of credit
The NPRM addresses the extension of the current temporary institutional and transactional coverage threshold of 500 for another two years to January 1, 2022. After that time, the threshold would be permanently set at 200.
The proposal also mentions that financial institutions that originate at least 200 open-end lines of credit and less than 500 open-end lines of credit would not be required to begin collecting HMDA data until 2022.
- EGRRCPA partial exemptions and 2018 Rule
The CFPB aims to incorporate into Regulation C the EGRRCPA’s partial exemptions. Regarding the 2018 rule interpretations and procedures, the proposal would incorporate them into Regulation C. Also, certain interpretive issues regarding the partial exemptions not addressed in the 2018 rule would also be implemented.
- Read more on the NPRM at 84 FR 20972 and comments are due by June 12, 2019.
In addition to the NPRM, the CFPB issued an Advance Notice of Proposed Rulemaking (ANPR) where it is seeking comments regarding potential changes to the data points that the 2015 HMDA Rule added. Plus, the CFPB is asking for comments about the costs and benefits of requiring that financial institutions report certain commercial-purpose loans made to a non-natural person and secured by a multifamily dwelling. Read the ANPR at 84 FR 20049. Provide your comments by July 8, 2019.
Mortgage Compliance Magazine wants to hear from you! Bring the talent in our industry to the forefront by submitting a nominee from your organization. From your submissions, we will select and showcase one Mortgage Compliance Professional of the Month from nominees in regulatory compliance from banks, credit unions, or mortgage companies. Get started here!
Like Mortgage Compliance Magazine and the weekly “NewsLINES”? Tell your friends and colleagues about us! Send them this link for their free subscription.
Around the Industry:
On the Horizon
Federal Reserve Board Vice Chair for Supervision Randal Quarles recently testified before the Senate Committee on Banking, Housing, and Urban Affairs regarding the FRB’s regulation and supervision of the financial system. He discussed steps taken by the by the Board to improve the framework, by integrating post-crisis innovations more fully into its supervisory processes; directing attention and resources to the places and institutions that merit them most; and making its regulatory standards as simple, efficient, and transparent as possible. Read more here.