Ready or not, here they come...new data collection and reporting requirements for the Home Mortgage Disclosure Act (HMDA). The CFPB has dedicated 214 pages in the Federal Register (the equivalent of 600+ printed pages) to amending Regulation C. Although the rules's effective date is the first of January 2018, there are staggered implementation dates starting as early as January 1, 2017 and extending through January 1, 2020
With this convoluted hodgepodge of deadlines and data points, it's no wonder that speculation and rumor abound. This blog gives you the down-and-dirty, high-level version of what the new rules will entail.
New Coverage Rules
Uniform loan-volume thresholds apply to both depository and nondepository institutions. An institution must have originated at least 25 closed-end mortgage loans or at least 100 open-end lines of credit in each of the two preceding calendar years to report HMDA data. There is also a separate test to determine whether closed-end, open-end or both types of loans must be reported. An institution that meets only the 25 closed-end mortgage loan threshold are not required to report their open-end lending, and that covered institutions that meet only the 100 open-end line of credit threshold are not required to report their closed-end lending.
Institutions and Transactions Subject to the Rules
A federally-insured depository institution's coverage criteria remain the same. To be covered by the rule, the institution must have originated at least one home purchase or home refinance loan, secured by a first lien on a 1-4 family dwelling. The institution must also meet a minimum asset size threshold (currently $44M). The institution must have a home or branch office in a Metropolitan Statistical Area (MSA) as of the preceding December 31.
For-profit mortgage lenders who are not depository institutions have different coverage tests. They must have either: (i) originated at least $25 million in home purchase or refinancing loans; OR (ii) 10% or more of their loan originations are home purchase/refinance loans. If such a lender also meets any one of the following three criteria during the preceding calendar year, they are covered: total assets (alone or when counting the assets of any parent company) of greater than $10 million; 100 or more home purchase or home refinance loans; or a home or branch office in an MSA.
Dwelling-secured loans or lines of credit that are for personal, family, or household purposes are covered; therefore, closed-end home-equity loans, home-equity lines of credit, and reverse mortgages are subject to the regulation. Commercial loans follow a purpose-driven test: only if they are for the purpose of home purchase, home improvement, or refinancing are they reportable. Home improvement loans that are NOT dwelling-secured, and agricultural loans and lines of credit, are excluded from coverage.
Changes to Data Collection
Many data collection proposals from the 2014 proposed rule did not survive into the final rule. There are four categories of data collection, comprising a total of 35 fields with thousands of possible data combinations:
- Applicant/borrower and underwriting data
- Property information
- Loan information
- Transactional identifiers
Changes in the collection of applicant(s) ethnicity, race and sex data affect transactions where the applicant provides such data. In such cases, lenders must allow applicants/borrowers to self-identify using ethnic and racial categories that are "disaggregated" (i.e., uncombined, such as separating out the various subcategories associated with being of Hispanic or Asian descent). If the financial institution completes the data, then the aggregated categories must be used.
All of Continuity's clients will receive comprehensive free training on the new data fields and how to implement them, while those who have our Tools Library will enjoy the persistent compliance of having all HMDA-related tools updated for them before the new rules go into effect.
New Processes for Reporting and Disclosure
The March 1 data submission deadline remains in effect. However, there is a new requirement for large-volume reporters - those reporting more than 60,000 transactions in the preceding year - for quarterly submissions. Disclosure to the public at home or branch offices is no longer required, and lenders may instead notify persons seeking such data that the information is available on the Consumer Financial Protection Bureau website.
Stay tuned for more in-depth coverage as the deadlines draw closer!