United States: Heads Up On Final HMDA Rule

As we reported in November, the CFPB issued a final rule on October 15, 2015 amending Regulation C to implement changes to HMDA made by the Dodd-Frank Act requiring financial institutions to collect and report additional home loan information. While required collection of the new loan data points will not begin until January 1, 2018, it is not too early to begin thinking about it and planning for the changes. This article will provide an overview of the final rule including the changes in covered institutions and covered loans, key compliance dates, and reporting requirements.

Compliance Dates. The good news is that no new Reg. C requirements go into effect in 2016. HMDA reporters will report 2015 loan data and collect 2016 data for reporting in early 2017 under the existing rule. Effective January 1, 2017, a new exemption from HMDA reporting for certain low volume depository institutions will be added, but except for that one change, HMDA reporters will submit 2016 data and collect 2017 data for reporting in 2018 under the existing rule. The big changes take place beginning January 1, 2018, when the rules concerning covered institutions, covered transactions, and required collection of new and modified data points will begin for 2018 loan data to be reported in early 2019. Additional changes affecting reporting and enforcement provisions become effective January 1, 2019, and quarterly reporting begins for large reporters effective January 1, 2020.

Covered Institutions. The final rule adds a new exemption for certain low volume depository institutions. Effective January 1, 2017, a bank, savings association or credit union that would otherwise be covered under the current rule will be exempt if the institution originated fewer than 25 home purchase or refinance of purchase loans in each of 2015 and 2016.

The coverage rules for federally insured depository institutions will change effective January 1, 2018. A depository institution will be covered by Reg. C if it meets the following tests:

  • Asset size threshold – the institution's total assets as of December 31 of the preceding year exceed the threshold set in the rule ($44 Million for 2016, adjusted annually for inflation).
  • Location test – the institution has a home or branch office in a MSA.
  • Loan activity test – the institution originated at least one first lien home purchase or refinance loan secured by a one to four family dwelling during the preceding year.
  • Loan volume threshold – the institution originated at least 25 closed-end mortgages or at least 100 open-end lines of credit secured by a dwelling in each of the two preceding calendar years.

Coverage for non-depository institutions will change as well. Effective January 1, 2018, for-profit, non-depository financial institutions are covered if they meet the following tests:

  • Location test – the institution has a home or branch office in a MSA or it took applications for, originated, or purchased at least five home purchase, refinancing, or home improvement loans on property in the same MSA or Metropolitan Division (MD) in the preceding calendar year.
  • Loan volume threshold – the institution originated at least 25 closed-end mortgages or at least 100 open-end lines of credit secured by a dwelling in each of the two preceding calendar years.

Covered Loans. Effective January 1, 2018, all closed-end mortgage loans and all open-end lines of credit secured by a lien on a dwelling will be reportable, including some business purpose loans secured by a dwelling. The term "dwelling" includes a principal residence, second or vacation home, investment property, condo, manufactured home, or single or multi-family dwellings, but excludes RVs (including campers, trailers and motor homes), houseboats and other floating residences, transitory residences (such as hotels and college dorms), and structures originally built as a dwelling but used exclusively for commercial purposes (such as a house converted to professional office space). Excluded from coverage are loans originated or purchased in a fiduciary capacity (such as a loan made by a trust where the bank is trustee), a loan secured by vacant or unimproved land, and temporary financing (such as a construction or bridge loan) which is intended to be replaced by permanent financing later. Also excluded are partial interests in a pool of loans, the purchase of mortgage servicing rights, loans acquired in a merger or acquisition, loans for less than $500, a participation or partial interest in a loan, and loans secured by property used primarily for agricultural purposes which includes a dwelling. Business purpose loans are excluded only if the loan is not a home purchase, refinancing, or home improvement loan.

Reportable Activity. Similar to the existing rule, applications which are denied, approved but not accepted, or withdrawn will be reported along with originations and purchases of covered loans. Also similar to the existing rule, pre-qualifications will not be reportable but pre-approvals under a formal pre-approval program will be reported if the request is denied or approved but not accepted. A pre-approval which results in a closed loan will be reported as an originated loan as in other cases. The purchase of a covered loan includes a repurchase of a loan originated by the lender such as a repurchase required by a secondary market investor.

Data Collection and Reporting. A covered institution must collect, record and report all of the new and modified data points beginning with applications for covered loans on which final action is taken on or after the effective date of January 1, 2018. As a result, the new requirements may apply to a loan application taken in 2017 but decided in 2018. There are 48 different data points under the new rule including 12 which are modified from the existing rule and 25 which are entirely new. The CFPB has not yet released the coding of the various data points, so it may be premature to start planning on exactly how the information will reported in the LAR. However, a list and description of the various data points can be found on the CFPB website at http://files.consumerfinance.gov/f/201510_CFPB_HMDA-summary-of-reportable-data.pdf.

Data will be required to be collected and recorded in the institution's LAR within 30 calendar days after the end of each calendar quarter and be made available to examiners if requested. An institution may maintain multiple LARs for different markets or locations or for different types of loans during the year and compile the data into a single LAR for reporting purposes at year-end. Annual reporting in electronic format by March 1 of each year will be required. Beginning January 1, 2020, large covered institutions that report at least 60,000 covered loans and applications for the preceding calendar year will be required to report data quarterly within 60 days after the end of the first three calendar quarters followed by reporting of full year data after year-end.

Data Disclosure. Beginning January 1, 2018, HMDA disclosure statement requirements will also change, and the changes will apply to data collected in 2017 and later years. Each year when the FFIEC provides the institution with notice that the financial institution's disclosure statement is available, the institution must, no later than three business days after receiving the FFIEC notice, make available to the public, upon request, a written notice stating that the institution's disclosure statement may be obtained on the CFPB's website. A model form is provided for that notice. At its discretion, the institution may also provide its disclosure statement directly to the person making the request and impose a reasonable fee for costs incurred in reproducing or providing the statement, but, in any event, the institution must comply with the notice requirement.

A financial institution's obligations with respect to disclosing its modified LAR will also change effective January 1, 2018. The new requirements will apply to data collected in 2017 and later years. Beginning in 2018, the institution must provide upon request from a member of the public a written notice regarding the availability of its modified LAR. The written notice must state that the LAR, as modified by the CFPB to protect applicant privacy, may be obtained on the Bureau's website. A model form is provided for that notice. At its discretion, a financial institution may also provide its modified LAR and impose a reasonable fee for any costs incurred to reproduce or provide the data, but, in any event, the institution must comply with the notice requirement. So, an institution will be able to direct inquirers to the CFPB website rather than having to provide the disclosure statement or modified LAR directly.

Also beginning January 1, 2018, the form of the lobby notice will change. An institution must post in the lobby of its home office and in each branch office that is physically located in a MSA or MD, a general notice about the availability of its HMDA data on the bureau's website. A sample notice is provided for that in the rule as well.

Compliance Considerations. Fortunately, institutions should have plenty of time to consider and plan for these changes. For many banks and other mortgage lenders, the best place to start is consideration of whether or not your institution will be covered by the revised rule. Note that very low volume depository institutions will be exempt beginning in 2017 even if they meet the other coverage tests. Also, the coverage criteria for all institutions changes effective January 1, 2018.

If your institution is covered, or is likely to be, the next step may be consideration of what loan products, lending areas and staff will be affected by the changes. Note that not all reporting institutions will necessarily be required to report open-end lines of credit. The loan volume threshold tests are separate, and an institution is not required to report open-end lines of credit if it originated fewer than 100 dwelling secured, open-end lines of credit in each of the preceding two calendar years. So, it is possible that an institution might be required to report either closed-end mortgage loans, or open-end lines of credit, or both, under the revised rule.

Once an institution determines which of its products may be reportable, then the institution can begin to assess what information must be reported and how the institution will collect all of the applicable data points required under the rule. Data to be collected and reported will vary some with different types of products. For example, the institution may not be required to collect and report the same information for a purchased covered loan as for an originated covered loan. The data elements might also vary for a business purpose loan as compared to a consumer purpose loan. The CFPB has published a list of data elements that will be reported as "not applicable" in certain instances on its website at: http://files.consumerfinance.gov/f/201511_cfpb_hmda-reporting-not-applicable.pdf.

The rule will also require changes to each reporting institution's procedures, processes, policies, and, possibly, loan origination systems and software. Working with third party providers to be sure systems are compliant will be critical. One thing to keep in mind is that beginning in 2018, institutions will no longer be able to use paper based submissions of HMDA data. Submission in electronic form will be required, and the Bureau is creating a web-based tool to be used for that purpose.

The final and, perhaps, most important element of implementation will be training of affected staff. It may be wise to consider beginning a written implementation plan. That plan might start with identifying those products, lending areas, staff, policies, procedures and systems that will be affected, and list the stakeholders in each area to be involved in the process. The plan can then be enhanced and updated as particular implementation steps and compliance activities are identified.

There are still a couple of things that are not final such as the codes for the various data elements. Also, the Bureau is seeking comment on establishing error rates that would trigger the need to scrub and resubmit loan data, so we will save discussion of those items and the enforcement provisions for a later date. No doubt, we will be talking a great deal more about the changes in future quarterly meetings as the compliance dates draw nearer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions