Compliance Alphabet Soups - HMDA

Compliance Alphabet Soups

Each month we will serve up cans of Alphabet Soup applicable to the mortgage industry. Each flavor of Alphabet Soup will include the soup’s acronym and its actual name, and a hyperlink to the regulation, law, or rule from the agency that administers it. It’s all right here; relax and enjoy reading your favorite bowl of Mortgage Compliance Alphabet Soup.

The Home Mortgage Disclosure Act

The Home Mortgage Disclosure Act was enacted in 1975, and codified as the Federal Reserve’s Regulation C – Home Mortgage Disclosure Act (HMDA). 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 Home Mortgage Disclosure Act (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.

The FFIEC recently posted the 2020 Guide to HMDA Reporting, resource for assisting all financial institutions in their HMDA reporting. It includes a summary of responsibilities and requirements, directions for assembling the necessary tools, and instructions for reporting HMDA data. The 2020 edition reflects updates to incorporate content from the HMDA Rule issued by the CFPB in October 2019. It addresses reporting due March 1, 2021, of application and loan data for calendar year 2020.

ADDITIONAL RESOURCES:

CFPB Home Mortgage Disclosure (Regulation C) Small Entity Compliance Guide Interpretive and Procedural Rule