HMDA Frequently Asked Questions (FAQs) | Wolters Kluwer
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  • HMDA Frequently Asked Questions (FAQs)

    The information presented here summarizes general guidance under HMDA, Regulation C, Unofficial Verbal Guidance from the CFPB (which the CFPB provides with the proviso that it may not be relied upon), and other sources, based on the existing information available at the time of the presentation. 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.


    Applications

    Commercial/Business Loans

    Data Points

    Demographic Information

    Purchased Loans

    Posters



    Applications

    Q: When does a Financial Institution report an application?

    A: A Financial Institution reports an application in the calendar year in which it takes final action on the application. See 12 CFR §1003.4(a)(8); Supplement I to Part 1003 – Staff Commentary §1003.4(a)(8)(i) at Paragraph 14. WK Example: If an application is approved by the Financial Institution on December 1, 2018, accepted by the applicant on December 2, 2018, and closed on January 15, 2019, the Financial Institution does not report the application in calendar year 2018. Rather, the Financial Institution reports the application as an origination in the 2019 report.


    Commercial/Business Loans

    Q: If a Financial Institution chooses to prepare a Closing Disclosure for a business/commercial (“business”) loan because an investor requires the same, does that change the reporting requirements for Total Loan Costs, Origination Charges, Discount Points and Lender Credits?

    A: For covered loans subject to the disclosure requirements of Regulation Z, a Financial Institution is required to report amounts shown on the Closing Disclosure for Total Loan Costs, Origination Charges, Discount Points, and Lender Credits. See 12 CFR 1003.4(a)(17)-(20). Business loans are not subject to the disclosure requirements of Regulation Z.  Since determining whether a loan is for a business purpose is sometimes subjective, however, some investors will not purchase a business loan unless there is a Closing Disclosure. The theory is that having a Closing Disclosure will avoid compliance issues should a business loan be deemed a consumer loan post-closing. The existence of a Closing Disclosure raises a question of whether a Financial Institution is required to report the amounts shown on the Closing Disclosure for a business loan. Per Unofficial Verbal Guidance, the existence of a voluntarily prepared Closing Disclosure does not change the analysis. A Financial Institution reports not applicable for Total Loan Costs, Origination Charges, Discount Points and Lender Credits if the loan is not subject to the disclosure requirements of Regulation Z.  


    Data Points

    Q: What are the final actions that can be taken?

    A: There are eight possible final actions that can be taken. They are (1) Loan originated; (2) Application approved but not accepted; (3) Application denied; (4) Application withdrawn by applicant; (5) File closed for incompleteness; (6) Purchased loan; (7) Preapproval request denied; and (8) Preapproval request approved but not accepted. See January 2017 Filing instructions guide for HMDA data collected in 2018, p. 16.

     

    Q: Is a Financial Institution only required to report discount points paid by the borrower?

    A: Section 1003.4(a)(19) of Regulation C requires a Financial Institution to report discount points paid to reduce the interest rate on covered loans subject to the disclosure requirements of Regulation Z, 12 CFR 1026.19(f). In the Section-by-Section Analysis included in the publication of the final HMDA rule, the CFPB stated that the discount points that a Financial Institution would report are those listed on Line A.01 of the Closing Cost Details page of the Closing Disclosure. Note that Line A.01 lists the amount of the discount points paid and is not limited to discount points paid by the borrower. Despite that fact, other statements in the Section-by-Section Analysis refer to “discount points paid by the borrower.” Upon contacting the CFPB regarding the matter, the Unofficial Verbal Guidance from the CFPB is that a Financial Institution would report the total discount points entered on Line A.01 regardless of who paid the discount points.

     

    Q: When does a Financial Institution report not applicable (more precisely, “NA”) for Total Loan Costs, Total Points and Fees, Origination Charges, Discount Points and Lender Credits?

    A: The list of those times when a Financial Institution reports not applicable (more precisely, “NA”) for Total Loan Costs, Total Points and Fees, Origination Charges, Discount Points and Lender Credits is lengthy. Financial Institutions report not applicable for (a) applications; (b) open-end lines of credit, (c) reverse mortgages; (d) loans or lines of credit made primarily for business or commercial purposes; and (e) for purchased loans originated prior to the effective date of Regulation Z, 12 CFR 1026.19(f) (October 3, 2015). Also note that that per Unofficial Verbal Guidance if the Action Taken is 2 Application approved but not accepted; 3 Application denied; 4 Application withdrawn by applicant; 5 File closed for incompleteness; 7 Preapproval request denied; and 8 Preapproval request approved but not accepted, the Financial Institution should also be reporting not applicable for those items. See also 12 CFR §1003.4(a)(17)-(20) and Supplement I to Part 1003 – Staff Commentary §1003.4(a)(17)-(20).


    Demographic Information

    Q: How does the Consumer Financial Protection Bureau’s April 2017 proposal to make further changes to Regulation C affect the collection of demographic information?

    A: The CFPB intends for the proposal to clarify the instructions for collecting demographic information. The proposed clarifications make it clear that an applicant is free to select what may appear to be inconsistent categories at first blush—such as Hispanic or Latino, and Not Hispanic or Latino. The proposed clarifications would make it clear that an applicant can select a subcategory without first selecting a category. Please see the proposed clarifications to Appendix B of Regulation C at the CFPB website for the full text of the Appendix B proposal.

     

    Q: What do aggregated categories and disaggregated categories mean?

    A: Aggregated categories and disaggregated categories refer to the categories and subcategories on the demographic information collection form. The aggregated categories for Ethnicity are Hispanic or Latino and Not Hispanic or Latino. The disaggregated categories for Ethnicity are the subcategories and additional information section below Hispanic or Latino. The aggregated categories for Race are American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White. The disaggregated categories for Race are the subcategories and additional information sections below the applicable Race categories.

     


    Purchased Loans

    Q: If a Financial Institution originates a loan, sells it, and then repurchases it in the same calendar year, does the Financial Institution report both the origination and repurchase?

    A: Section 1003.4(8)(i)(A) of Regulation C requires Financial Institutions to report whether a loan is “originated or purchased.” In addition to reporting the origination, Staff Commentary for Section 1003.4(a) at Paragraph 5 states that “a purchase includes a repurchase of a covered loan, regardless of whether the institution chose to repurchase the covered loan or was required to repurchase the covered loan because of a contractual obligation and regardless of whether the repurchase occurs within the same calendar year that the covered loan was originated or in a different calendar year.” Therefore, a repurchase is reported as a purchase. Note, however, that a repurchase does not include a temporary transfer. See Staff Comment for Section 1003.4(a) at Paragraph 5(ii) for temporary transfer details.


    Posters

    Q: What are the requirements for displaying posters?

    A: Effective January 1, 2018, Regulation C provides that a “financial institution shall post a general notice about the availability of its HMDA data in the lobby of its home office and of each branch office physically located in each MSA and each MD.” See 12 CFR 1003.5. There is safe harbor content for the poster within Regulation C.