Ready, Set, Report! | Wolters Kluwer
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  • Ready, Set, Report!

    by Barbara Boccia, Senior Director, U.S. Advisory Services at Wolters Kluwer

    Published October 13, 2017

     

    HMDA Readiness on Speed Dial  

     

    As you are frantically preparing for all of the new HMDA changes that are upon us, don’t you wish that you had a source on speed dial to quickly call to get an answer for every question you have?  Well, this article may be the next best thing – a handy source to quickly reference, update you for all of the recent changes, and help direct you to exactly where you can find the answer! 

    Since the new Home Mortgage Disclosure Act (HMDA) rule was finalized by the Consumer Financial Protection Bureau (CFPB) in 2015, much has been discussed, planned, negotiated and fretted over within our industry. In the interim, we have reviewed the 2015 final rule, comments, the CFPB’s Small Entity Compliance Guide, and the FIGS (CFPB Filing Instruction Guides) for 2017 and for 2018; read numerous articles; attended countless seminars; and yet, questions remain about the changes to coverage, submission, data collection, reporting and notices.

    Indeed, as of the date this article was written, we are checking daily for any signs of the new CFPB HMDA platform and geocoding tool.  The CFPB has just finalized the recent proposed amendments to HMDA Regulation C (on 8.24.17), and ECOA (Equal Credit Opportunity Act) Regulation B (on 9.20.17), which include some degree of clarification of the complicated issues around collecting and reporting demographic data. We just received updated information relating to the new Uniform Residential Loan Application (URLA), and have also just received a CFPB proposal (on 9.20.17) providing information on how the CFPB may redact data to protect the privacy of applicants and borrowers for some fields of data, including credit score.

    Regardless of some degree of uncertainty as the year 2018 is fast approaching, we still need to review what we have in our compliance shopping cart and consider what other “big-ticket” compliance items we can toss in to our HMDA implementation plan to maximize our readiness.  Here’s a list of the top issues in HMDA readiness to help you navigate the aisles, and handy references that may be available to quickly grab off the shelf.

    Is your Institution In or Out?

    By now, you should have made a determination as to whether you are a “covered” institution for purposes of reporting data in 2017, and separately for 2018, and analyzed threshold considerations.  If you are still undecided, the CFPB has a HMDA Institutional Coverage flowchart (updated 9.28.17) available on its website to help you resolve any uncertainties.

    What Lines of Business Must Report?

    You likely have been working with your key stakeholders across all lines of businesses (LOB) to analyze transactions and threshold considerations to know which LOB will have HMDA-reportable “covered loans.”  

    Generally, for consumer purpose loans, both closed-end and open-end lines of credit that are “dwelling-secured” are now reportable.  There are also a lot of changes for business-purpose loans, which are generally reportable if they are closed-end or open-end lines of credit that are “dwelling-secured” and have a home purchase, home improvement or refinancing purpose. Your institution may rely on the oral or written statement of an applicant regarding the proposed use of covered loan proceeds. 

    The CFPB’s 2018 HMDA Transactional Coverage Chart (updated 9.28.17) is a handy guide if you still need help to determine whether a transaction is reportable, and will help you navigate through the common buzz words that relate to this area, including: dwelling, covered loans, HELOC, cash-out refinance, preapproval requests, construction loans, agricultural loans, temporary financing, fiduciary capacity, and unimproved land. 

    New Posted Notice /Notice Requirements – 1/1/18

    Hopefully, your HMDA readiness plan did not overlook the new requirements about posting and notices for the public.  The 2015 rule modifies the content of the notices, and refers consumers to the CFPB website to obtain your HMDA data as of 1/1/18.  Be sure to update your notices and training of personnel to respond to consumer inquiries for your data.

    Submission of 2017 data on 3/1/18

    The entire submission process will change for the submission of 2017 data on March 1, 2018.  The new filing requirements for submission on the new CFPB HMDA Platform are set forth in the FIG guides available on the CFPB website.  (Note:  There are two FIG guides, one for 2017, one for 2018, and both were updated in August, 2017.  In fact, 2018 was updated twice in August, so be sure to pull the most current FIG and provide it to your HMDA implementation team to double check your processes.) 

    When the time to submit rolls around in February, be prepared for spending time to ensure that your data edits (quality, validity, macro and/or syntactical errors) are resolved, validated and/or explained before you sit down to submit.  Plan time for any manual work to enter this information into the new CFPB Platform, anticipate a learning curve there, and have a signing officer available to submit.  Any steps you can take to improve data integrity now will help you significantly in the hectic months of January and February.  

    Expanded Collection of Data in 2018

    By now, you likely have systems, policies, procedures and training underway to start collecting the 110 data points for loans closing in 2018. This would include data relating to applicants, borrowers and the underwriting process; the property securing the loan; features of the loan; and certain unique identifiers.  You have coordinated with the LOBs, second and third lines of defense to test the data frequently throughout 2018; and are alert for any nuances in collection, including any updates for TRID tolerance cures occurring after loan closure, and loans started in 2017 that will close and be reportable, in 2018.   Consult the Summary of Reportable Data and Reporting “Not Applicable” guides on the CFPB’s website for more detailed information on the expanded data set.  The HMDA Loan Scenarios (August, 2017) will provide you with hypothetical transactions to help you test for HMDA reporting.

     

    Government Monitoring Information (GMI)

    The most complicated area to prepare for is the collection and reporting of information for ethnicity, race and gender.  Suffice it to say there is a lot evolving here.

    In general, report ethnicity, race, and gender as provided, at the time provided (there are nuances for 2017 applications that close in 2018.) Collect demographic data from the applicant and the listed first co-applicant only, who are individuals (e.g. not corporations), although Reg B was amended to allow collection of GMI from all co-applicants. Consult the Collection and Reporting of HMDA Information about Ethnicity and Race reference tool, (although at the time this article was written it has not yet been updated with the recent Regulation B changes on 9.20.17.)  The Executive Summaries on the Bureau’s website will help you understand some of the recent changes with Reg B and Reg C (HMDA).  Another good reference is Appendix B to Part 1003– Form and Instructions for Data Collection on Ethnicity, Race, and Sex.

    Here are a few handy tips to consider as you start to update yourself on collection and reporting.  Initially, pay attention to the channel, as in-person is treated differently than by mail or alternate channel applicants.  You must ask the applicant for this information (but you cannot require the applicant to provide it) whether the application is taken in person, by mail or telephone, or on the internet.

    Inform the applicant that Federal law requires this information to be collected.   If the information is not provided where the application is taken in-person, you are required to note the information on the basis of visual observation or surname.

     If you accept an application through electronic media with a video component, you must treat the application as taken in-person. If you accept an application through electronic media without a video component (for example, facsimile), you must treat the application as accepted by mail or alternate channel.

    Report “not applicable” when an applicant is not a natural person.  If there is not at least one co-applicant, report that there is “no co-applicant” in the appropriate fields.  Be sure to avoid the common error for non-natural persons – do not report “NA” if there is no co-applicant.  Also, when you purchase a covered loan and you choose not to report the applicant's or co-applicant's ethnicity, race, and sex, you must report NA.  Reference the CFPB tool for Reporting “Not Applicable” to guide you. 

    There are a lot of nuances around what to report around the aggregated (major) categories and disaggregated (major and subcategories), that are complicated by write-in and “other” options.  In general, offer the applicant the opportunity to select more than one ethnicity and race, and report what the applicant selects and/or writes on the demographic form. However, there are quite a few exceptions that you should be wary of, (many more than are discussed here), including a reporting limit of 5 aggregated and disaggregated categories combined.  In general, do not report an aggregated category unless the applicant selects an aggregated category.

     

    Transition Rules

    Generally, for an origination that is started in 2017, and closed in 2018, the new HMDA fields need to be reported.  However, the collection and reporting of GMI are nuanced, just as you might expect.

    In general, collect the GMI information in accordance with the requirements in effect at the time the information is collected.  A lender is not required to ask the 2018 disaggregated GMI questions for an application begun prior to 2018.  However, a lender may ask the disaggregated questions before 2018.  The lender is also required to re-ask the questions in 2018 when: 

    (1) the application is begun via mail, internet, or telephone in 2017;

    (2) the applicant does nothing with the demographic section of the application; and

    (3) the lender meets in-person with the applicant on or after 1/1/18, and prior to closing. 

    Privacy

    The CFPB issued proposed guidance on 9.20.17, to limit the HMDA data it shares publicly.  The Bureau would eliminate more than a dozen data and text fields—including the applicant or borrower’s property address, credit score, and race and ethnicity—from the HMDA data it publicly discloses.

    It is proposing a compromise on other data fields by making them less precise. For example, rather than publishing a borrower’s loan amount and property value, it would disclose the midpoint for the $10,000 interval into which the reported value falls. And rather than disclosing the borrower’s age, the Bureau would publish a range (under 25, 25 to 34, 35 to 44…). Debt to Income (DTI) would also be disclosed in ranges, except DTI between 40% - 50% is reported as is.  The CFPB may have left the door open to potentially sharing some data differently for particular reasons or groups, so we should monitor this proposal for more information as it is further discussed.

    Time to Call a Friend

    By now, you should have all of the information and guidance you need to further develop your institution’s HMDA Readiness.  Look to the CFPB website for resources (many of which have been referenced here) and updates on evolving regulatory activity.  And you can use your time saved to call a friend - to talk about something other than work!


    Disclaimer:

    The information presented in this article summarizes general guidance under HMDA, including Unofficial Verbal Guidance from the Consumer Financial Protection Bureau (CFPB), Regulation C and other requirements, based on the existing information available at the time of writing.  It is intended only to act as a quick reference and not as a substitute for the law, regulations or official commentary.  There are continuing, ongoing developments in this area. Therefore, always consult official sources of information, including the regulation text and official commentary, for a complete understanding of the law, including the regulations.



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