Consumer Financial Protection Bureau Updates HMDA Guide

The Consumer Financial Protection Bureau (“CFPB”) has published an updated HMDA Small Entity Compliance Guide. You can access the updated guide at https://www.consumerfinance.gov/policy-compliance/guidance/hmda-implementation/.

Regulatory Solutions specializes in helping you scrub your HMDA data to ensure the data you are submitting on your HMDA LAR is correct. Contact us to discuss how we can assist you in this process. Read more here >

HMDA Scrub Sample Size

What percentage of loans or applications on the HMDA LAR should I scrub?

This is a question we get asked quite often and my response is that you should look to the percentage examiners scrub. The Federal Financial Institutions Examination Council’s (FFIEC) HMDA Examiner Transaction Testing Guidelines (Guidelines) describe the validation process which examiners use and the circumstances in which examiners may direct institutions to correct and resubmit HMDA data.  The examiners select a random sample of loans/applications to test using the following sample sizes and thresholds as indicated in the Guidelines at https://files.consumerfinance.gov/f/documents/201708_cfpb_ffiec-hmda-examiner-transaction-testing-guidelines.pdf:

 Total Sample Size (A) Initial Sample Size (B) Initial Sample Threshold (C) Resubmission Threshold (D)
# %
25-50  30* 15 2 3  10.0*
51-100 30 20 2 3 10.0
101-130 47 29 2 3 6.4
131-190 56 29 2 3 5.4
191-500 59 30 2 3 5.1
501-100,000 79 35 2 4 5.1
100,001+ 159 61 2 4 2.5

*If less than 30 LAR lines, the institution should use the full sample size and the resubmission threshold remains at 3.

Let us scrub your HMDA data against source documents and provide you with an exception-based report indicating the percentage of errors by data point. You select your sample size either using the Guidelines or a certain percentage of HMDA loans/applications.  Contact us today to discuss your HMDA scrub.

 

CFPB Issues HMDA Consent Order

The CFPB recently issued a consent order against Freedom Mortgage Corporation for HMDA violations. These violations mainly revolved around the collection and reporting of applicant’s demographic information and spanned four years of HMDA reporting. Specifically, the Corporation was found to have violated Regulation C by:

  • Selecting non-Hispanic white for the applicant’s race and ethnicity if the applicant did not provide the information for applications taken over the phone, regardless of the accuracy of the information.
  • For applications taken over the phone, they misreported the applicant’s ethnicity and race as non-Hispanic white even when the applicants provided different information.
  • Rather than addressing an internal system issue that would eliminate certain information if the applicant’s sex was not provided, the Corporation selected a sex for the applicant regardless of the accuracy.

None of the errors made by the Corporation were considered to be bona fide errors as allowed by Reg C. 1003.6(b)(1) which states that a bona fide error is an error in compiling or recording data that was unintentional and occurred despite procedures in place to avoid such an error. Among other orders, the Corporation was ordered to develop and maintain new policies and procedures to ensure accurate collection and reporting of their HMDA data. They also must pay a $1.75 million civil money penalty for these violations.

Regulatory Solutions has developed proprietary software to scrub and verify the data in your HMDA LAR. Please contact us today to discuss how we can help you to ensure that your HMDA data is correct.

Construction Loans FAQ

Construction loans and their compliance with Regulation Z can be a struggle. The CFPB has recently published their first set of Frequently Asked Questions specifically addressing common compliance issues for construction loans that are subject to TRID. The Frequently Asked Questions can be found at https://www.consumerfinance.gov/policy-compliance/guidance/tila-respa-disclosure-rule/tila-respa-integrated-disclosure-faqs/#construction-loans.

Regulatory Solutions provides comprehensive TRID reviews to ensure compliance with TILA-RESPA requirements. Contact us today to find out how we can assist you with your TRID and other lending compliance reviews.

CFPB Proposed Rule for HMDA Reporting Requirements

The CFPB issued a proposed rule on May 2, 2019 that would change the HMDA reporting requirements and could have a significant impact on smaller financial institutions. The proposed rule would increase the closed-end coverage threshold from 25 to 100 loans originated in the previous two years. Additionally, it proposes to extend the current open-end threshold of 500 lines of credit until January 1, 2022. The proposed rule would also incorporate new interpretations and procedures into Regulation C. If this were to become part of the HMDA regulation, it would not take effect until January 1, 2020.

https://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development

 

Regulatory Solutions Top 5 TRID Exceptions Noted During Our Loan Reviews

Last year, Regulatory Solutions completed TRID reviews on traditional mortgage loans, lot loans, constructions loans and construction/perm loans as well as home equity loans for lenders. While the number of exceptions varied per loan review, there were common TRID exceptions that occurred. Here are the top 5 TRID exceptions that Regulatory Solutions noted during our loan reviews:

 

        1. Disclosure issues in Block H of the Closing Costs Details table on page 2 of the Closing Disclosure. For example, the Real Estate Commissions fees are not always disclosed in Block H. These fees are required to be disclosed in Block H per 1026.38(g)(4) comment 4.

        2. Disclosure issues in Block B of the Closing Costs Details table showing the services that the borrower did not shop for on page 2 of the Closing Disclosure. For example, sometimes one or more of the Title fees are being placed in Block B when the borrower did not choose a service provider from the Settlement Service Provider List. Only fees that the borrower did not shop for should be placed in Block B per 1026.38(f)(2).

        3. The Amount Financed section of the Loan Calculations table on page 5 of the Closing Disclosure was not calculated correctly. Non-prepaid finance charges are being included in the calculation.

        4. The contact information for the participants in the transaction was not correct in the Contact Information table on page 5 of the Closing Disclosure. Lenders are still leaving out email addresses and contact information.

        5. The breakdown and other disclosure issues of the amount for taxes and other government fees listed in Block E of the Closing Costs Details table on page 2 of the Closing Disclosure. For example, the Transfer Taxes listed in Block E do not list the name of the government entity that is assessing the tax, which is required by 1026.38(g)(1)(ii).

While the portfolio loans we reviewed have similar TRID exceptions, they will occasionally have different reporting problems than loans sold in the secondary market. One of the most common exceptions for portfolio loans is the incorrect loan purpose being listed on the Loan Estimate and the Closing Disclosure. Whether the loan should be listed as a refinance or as construction are the two most confused loan purposes for portfolio loans.

Regulatory Solutions provides comprehensive TRID reviews to ensure compliance with TILA-RESPA requirements. Contact us today to find out how we can assist you with your TRID and other lending compliance reviews.

Factsheet: Are Loan Estimates and Closing Disclosures Required for Assumptions?

On May 1, 2019 the Consumer Financial Protection Bureau posted a factsheet regarding whether Loan Estimates (LE) and Closing Disclosures (CD) were required for assumption transactions. The factsheet consists of a flowchart and a narrative discussion to assist lenders in making the determination of whether a loan would require the TILA-RESPA Integrated Disclosures. The factsheet can be found at https://files.consumerfinance.gov/f/documents/cfpb_tila-respa-factsheet.pdf.

Regulatory Solutions specializes in TRID loan reviews, please contact us to schedule your review today.

Home Mortgage Disclosure Act (FHA Requirements)

Have you revised your Quality Control Program yet to meet the new reporting requirements for HMDA? If not, it could play a part in your ability to sell loans to certain government agencies. FHA in particular requires that a lender’s Quality Control Program be compliant with the Home Mortgage Disclosure Act’s reporting requirements. The Quality Control Program should ensure that the information you are reporting is accurate and that the report itself is not only correct but is made timely. With the passing of the new HMDA regulation which became effective at the beginning of 2018, and for those lenders that became exempt from reporting the expanded data fields with the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act, you should ensure that your current Quality Control Program has been revised to meet the applicable HMDA reporting requirements.

At Regulatory Solutions, we provide services to meet all of your HMDA needs. We are capable of not only ensuring that your Quality Control Program meets the reporting requirements for federal agencies and federal regulations, but can also perform full HMDA scrubs.

Quality Control HMDA Requirements

Did you know that your HMDA data plays an important role when you are selling your loans to various agencies?

Most agencies require the lender to submit various HMDA data points as part of the purchasing process. With the new HMDA regulation that just took effect in January 2018, this means that the expanded GMI will play a key role in the purchasing process for most agencies.  Freddie Mac in particular specifically requires the lender report the GMI, Rate Spread, and HOEPA information for each loan that Freddie Mac purchases.

Fannie Mae, FHA, and Rural Housing require more than just the reporting of HMDA data points. Before these agencies will consider purchasing loans from your institution, you must show that you have procedures in place and are complying with the current HMDA regulation as part of your Quality Control Program. FHA has an additional requirement that the HMDA information that is being reported be accurate.

At Regulatory Solutions we are here to help. We provide in-depth Quality Control reviews, HMDA Scrubs and other regulatory services to help you with your compliance needs.

Pre-funding/Pre-closing Quality Control Review VA and USDA

A pre-funding / pre-closing quality control loan review must include 10% of all VA-guaranteed mortgages each month. As with other quality control policies, there must be procedures in place to notify senior management of any deficiencies found in the course of the review. Also, the quality control plan must establish an effective method for senior management to address and correct these deficiencies. If a pattern emerges from the deficiencies found, then there should be corrective instructions provided to the applicable employee.

The pre-funding (pre-closing) quality control loan plan must also provide a procedure for promptly reporting any violation of a regulation or false statements to the VA. It must also contain procedures for the Lender to remain up to date with any future VA pre-funding (pre-closing) requirements. Like with FHA, the Lender must check that no one involved in the origination or underwriting process is debarred or suspended.

USDA/RHS

USDA/RHS has not established any specifics for a pre-funding quality control loan review process when dealing with RHS loans. Merely that a Lender must have an effective pre-funding review process.

Regulatory Solutions is available to assist you. Just visit our pre-funding/pre-closing quality control reviews page.  Regulatory Solutions will provide you with the independent solution you need to ensure your pre-funding files are reviewed in accordance with agency guidelines.