Pub. 3 2015 Issue 3

Issue 3. 2015 15 COMPLIANCE CORNER HMDA Amendments T he CFPB issued the final amendments to HMDA on October 13, 2015 which were scheduled to be released last summer. The amendments will begin to incorporate chang- es to the regulation beginning in 2017 and stretching through 2020. Accordingly, it will be imperative to anticipate changes to your bank’s HMDA process through the next several years. So, what’s actually changing and when? The changes begin in 2017 when the scope of which institutions are required to report will narrow. A bank will no longer be subject to Regulation C if it does not meet the asset-size, location and loan activity tests under current Reg C and it does not originate at least 25 home purchase loans and refinances in both 2015 and 2016. The big changes, however, come about in 2018. Beginning on January 1, 2018, the uniform loan volume threshold test for all institutions will be effective. An institution will be subject to HMDA if in the last two years, it originated 25 covered closed-end mort- gage loans or at least 100 covered open-end lines of credit (in addition to other coverage requirements). It’s important to note that this differs from the proposal which set the threshold at 25 closed-end loans and did not discuss open-end lines of credit. Furthermore, beginning on May 20, 2020, lenders who report a total of 60,000 applications and originations in the preceeding year will be required to report on a quarterly basis. However, purchased loans will not be included in that calculation. The types of loans that need to be reported will also change. Covered loans under the HMDA will generally include loans secured by a dwelling. However, the final rule only requires that institutions that originated at least 100 covered open- end lines of credit in the last two years to report on open-end lines of credit and lenders who have originated more than 25 closed-end mortgages are the only reporters who need to report closed-end information. Thus, the only reporters who will be required to report on both open and closed-end loans are those that origination more than 25 closed-end covered loans and 100 open-end lines of credit. While reporting will continue to include business-purpose loans, it will not include agricultur- al-purpose loans (or any other specifically excluded transaction) even if those loans are secured by a dwelling. This means that unsecured home improvement loans will no longer be reported. Remember that business-purpose loans will only be required reporting if the purpose of the loan is a purchase, home im- provement or refinance. Moreover, approved but unaccepted preapproval requests, which are currently optionally reported, will be required data. Preapproval requests for multi-family dwellings, open-end lines of credit and reverse mortgages will be excluded from the requirement, however. The final rule also adds new data points which can be split up into the following categories: 1) Information about applicants, borrowers, and the underwriting process, such as age, credit score, debt-to-income ratio, automated underwriting system results; 2) Information about the property securing the loan, such as construction method, property value, and additional information about manufactured and multifamily housing; 3) Information about the features of the loan, such as additional pricing information, loan term, interest rate, introductory rate period, non-amortizing features and the type of loan; and 4) Certain unique identifiers, such as a universal loan identifier, property address, loan originator identifier and a legal entity identifier for finance institution. In addition to the data points, reporting will be modified. The CFPB is developing a new online submission tool for reporting which will be lauched in 2018. This will amend Appendix A and those amendments and procedures will be available starting in 2018 to support the transition. 2017 data will be reported in 2018 using the current process and then, on January 1, 2019, Appendix A will be removed from the regulation and institu- tions will follow the revised procedures for reporting the data collected in the 2018 calendar year. As you may have heard, lenders will be required to collect GMI but they’ll also be required to report how it collected the information - whether it was based on visual observation or a surname when the appli- cant opts out of self-reporting. On top of that change, various ethnic and racial subcategories will be added to allow the bor- rower to more specifically self-identify. One item that will likely be good news to lenders is that in 2018 the requirement to provide a disclosure statement or modified LAR will be eliminated. Instead, a notice of where to find the disclsoure statement and modified LAR on the CFPB’s website will be required. The disclosure requirement will apply to data collected after January 1, 2017 and reported from 2018, onward. With all these changes and different effective dates, it will be vital to have a plan in place for these changes even though they are not immediately imminent. As always, we’ll be here to answer any questions and provide assistance in getting ready for the next phase of HMDA compliance. n