By Barbara Boccia, CRCMDo you remember the Supermarket Sweep game show, where the contestants would anxiously stand ready with their empty shopping carts, waiting to hear “Go!”? In a timed race, that word would trigger their excited run around the store, frantically filling their cart with as many big-ticket items as possible, while manic music added to the frenzy. The contestant who maximized the value of goods thrown into one cart won. Preparing for the new Home Mortgage Disclosure Act changes coming in 2017, 2018 and beyond has been a lot like that—just without the music.
Since the new HMDA rule was finalized by the Consumer Financial Protection Bureau in 2015, banks have had much to discuss, plan, negotiate and fret over. Despite guidance from the bureau and countless seminars and articles, 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 portal and geocoding tool, release of the new Uniform Residential Loan Application and resolution of the CFPB’s recent proposed amendments to Regulations B and C, which should include clarification of the complicated issues around collecting and reporting demographic data. We are also awaiting information on how the CFPB will redact data to protect the privacy of applicants and borrowers.
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 grab off the shelf quickly.
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 HMDA institutional coverage flowcharts 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 to analyze transactions and threshold considerations to know which lines will have HMDA-reportable “covered loans.”
Generally, for consumer 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 is a handy guide if you still need help to determine whether a transaction is reportable, and it will help you navigate through the common buzz words that relate to this area, including dwelling, covered loans, HELOC, cash-out refinance, preapproval request, construction loan, agricultural loan, temporary financing, fiduciary capacity and unimproved land.
New posted notice requirements
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 Jan. 1, 2018. The issue here relates to the fact that this information may be misleading, since that data will not be available on the CFPB’s website on Jan. 1.
Informally, the CFPB indicates that it will post a notice on its website explaining that the data will not be available until “a later date.” That may not be an acceptable response to a disgruntled consumer or consumer advocacy group. If you haven’t looked into this yet, consider how your institution will handle these inquiries. Also be sure to update your staff training so they are prepared to answer questions from the public.
Submission of 2017 data
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 filing instruction guides available on the bureau’s website. Be prepared for spending time to ensure that your data edits (quality, validity, macro and/or syntactical errors) are resolved, validated and explained before you sit down to submit. Plan time for any manual work to enter this information into the portal, 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 business lines and the second and third lines of defense to test the data frequently throughout 2018, and you’re 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 CFPB’s “Summary of Reportable Data” and “Reporting ‘Not Applicable’” guides for more.
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). Consult the HMDA ethnicity and race collection and reporting reference tool, Appendix B, and stay alert for the April 2017 proposed amendments being finalized.
By now, your cart should be overflowing with information and guidance. Look to the CFPB website for resources (many of which have been referenced here) and updates on evolving regulatory activity. And as the game begins, let us hope we will all be winners!
Barbara Boccia, CRCM, is senior director of U.S. advisory services and regulatory relations at Wolters Kluwer. This article is intended only to act as a quick reference and not as a substitute for the law, regulations or official commentary.