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From Banking and Finance Law Daily, September 4, 2018

CFPB rule explains implementation of recent HMDA amendments

By Richard A. Roth, J.D.

The Consumer Financial Protection Bureau has adopted an interpretive and procedural rule to tell home mortgage lenders how it plans to implement Home Mortgage Disclosure Act amendments that were made by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The Bureau also issued an executive summary of the new rule and a filing instruction guide for HMDA data collected in 2018.

The EGRRCPA included HMDA amendments that are intended to decrease the reporting burden on smaller depository institutions. To qualify for the less detailed itemization requirements, an institution must meet two tests.

Qualification criteria. First, the institution must have received acceptable Community Reinvestment Act ratings. An institution that was rated "substantial noncompliance" after its last CRA exam, or that was rated "needs to improve" after its last two exams, will not qualify for the relief offered by the EGRRCPA.

Second, the institution must not have reached a 500-loan threshold in either of the two previous years. Open-end and closed-end loans have separate thresholds. As a result, an institution that originated fewer than 500 closed-end loans in both of the two prior years, but more than 500 open-end loans in either or both of those years, could comply with the easier reporting requirements for the first category but not the second.

Lower reporting requirements. EGRRCPA exempts covered institutions from the 12 U.S.C. §2803(b)(5) requirement that they itemize the number and dollar amount of loans grouped by:

  1. total points and fees;
  2. the difference between the loan’s annual percentage rate and a benchmark; and
  3. specified prepayment penalty information.

Covered institutions also are exempt from the 12 U.S.C. §2803(b)(6) requirement that they itemize the number and dollar amount of loans and applications grouped by:

  1. the value of the collateral real estate;
  2. the length of any introductory APR term;
  3. the inclusion of contract terms that permit payments that are not fully amortizing;
  4. the loan length;
  5. the channel through which the application was received;
  6. the loan originator’s unique identifier;
  7. a universal loan identifier;
  8. a parcel number that corresponds to the collateral property; and
  9. loan applicants’ and mortgagors’ credit scores.

CFPB implementation explanation. According to the executive summary, the rule clarifies five issues about which some financial institutions have expressed confusion. As a starting point, it notes that Reg. C—Home Mortgage Disclosure (12 CFR Part 1003) specifies 48 data points that are to be collected and reported, but EGRRCPA gives qualifying institutions an exemption that covers 26 of them.

First, the rule makes clear that only loans defined in Reg. C as closed-end mortgage loans and open-end lines of credit count toward the 500-loan threshold. Loans that are excluded by Reg. C are not to be counted.

Second, in deciding whether an institution has met the CRA rating criterion, the ratings received before December 31 of the prior calendar years are the relevant ratings.

Third, an institution that decides not to report a universal loan identifier must include a non-universal loan identifier that is adequate to make the loan identifiable.

Fourth, a financial institution may choose not to take advantage of the reduced compliance requirements. However, an institution that chooses to report an exempt data point must report all data fields the data point includes.

Fifth, the rule applies to data collected or to be reported on or after May 24, 2018. An institution that is eligible for the exemption does not need to collect exempt data after that date, and is not required to report in 2019 data that were collected earlier in 2018.

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