Less than two weeks after the effective date for the TILA-RESPA Integrated Disclosures, the Consumer Financial Protection Bureau (CFPB) has unleashed another major rulemaking on the mortgage industry: its long-awaited final rule amending and expanding reporting requirements under Regulation C and the Home Mortgage Disclosure Act (HMDA). The 797-page final rule, released on October 15, 2015, revises and in many ways expands the breadth and scope of HMDA data collection requirements—which includes the addition of roughly 25 new data fields and the modification of an additional 12 data fields.
HMDA and Regulation C require many lenders to report information about the home loans that they originate or purchase, or home loans for which the lenders receive applications. The Dodd-Frank Act instructed the CFPB to expand the HMDA data fields to include additional information about applicants, as well as the loans themselves.
The final rule adopted many of the changes proposed in the July 2014 proposal. Still, the industry will need to comb through the new rule to identify changes relevant to their businesses.
Starting with data collection obligations in 2018, an institution will be subject to the HMDA/Regulation C requirements if it originated at least 25 covered closed-end mortgage loans in each of the preceding calendar years. An institution will also be covered if it originated at least 100 covered open-end lines of credit in each of the preceding years.
- Banks, savings associations, and credit unions must also meet the current Regulation C asset-size, location, federally related, and loan activity tests.
- For-profit lenders must also meet the existing location test.
Covered transactions include most closed-end mortgage loans and open-end lines of credit that are secured by a dwelling. Through this revision, the final rule changes the previous purpose-based test to a more mechanical metric. However, dwelling-secured business-purpose loans and lines of credit will be covered only if they are home purchase loans, home improvement loans, or refinancings. The final rule also exempts agriculture-purpose transactions generally, as well as other types of transactions.
The final rule also revises HMDA/Regulation C coverage of preapproval requests. Under the final rule, preapproval requests that are approved but not accepted will not be included in an institution's collection and reporting obligations.
New & Modified Data Fields
The final rule greatly expands the information required to be collected and reported pursuant to HMDA/Regulation C. The CFPB states that the expanded data fields will enable the public, the Bureau, and other financial institution regulators to "identify emerging risks and potential discriminatory lending practices," as well as "screen for possible fair lending problems." The new data points include, among others: applicant or borrower age, credit score, automated underwriting system information, unique loan identifier, property value, application channel, points and fees, borrower-paid origination charges, discount points, lender credits, loan term, prepayment penalty, non-amortizing loan features, interest rate, and loan originator identifier.
The final rule also modifies existing data fields. For example, the final rule requires lenders to report how they collect information on an applicant's race, ethnicity, or sex (i.e., through visual observation or surname), in addition to the collection of this information.
New Reporting Procedures, Disclosure, and Privacy
The CFPB is developing a web-based submission tool for reporting HMDA data. The CFPB indicates that it will use a "balancing test" to weigh public disclosure against the need to protect applicant and borrower privacy. However, the exact nature of this balancing test remains to be determined—the CFPB states that it will "provide a process for the public to provide input regarding the application of this balancing test to determine the HMDA data to be publicly disclosed."
The final rule introduces a quarterly filing requirement for covered institutions reporting at least 60,000 applications and covered loans (combined) in the preceding calendar year. The metric excludes, however, covered loans purchased in the preceding year. The new quarterly reporting requirements will become effective on January 1, 2020, with the first quarterly report due by May 30, 2020.
Most provisions of the final rule become effective on January 1, 2018. Accordingly, covered institutions will be required to begin collecting information under the new requirements throughout 2018, for submission on or before March 1, 2019.
- Submissions due by March 1, 2016 and 2017 will use the current collection requirements and submission process.
- Submissions due by March 1, 2018 will use the current collection requirements, but must be submitted using the new CFPB tool.
- Submission due by March 1, 2019 will use the new collection requirements and must be submitted using the new CFPB tool.
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The final HMDA rule is extensive and complex, so industry members and observers will need to carefully review and analyze the additional collection and reporting requirements it imposes.