Is your Quality Control (“QC”) Vendor Meeting Deadlines?

One of the questions posed in the recently published Quality Insider by Fannie Mae (https://singlefamily.fanniemae.com/media/28786/display­) was “Is your QC vendor completing the file reviews in a timely manner?  Are you holding the QC vendor accountable to the timeline?”   This is a question you should be asking and if the answer is NO, maybe you should be looking at other options.

Fannie Mae requires that mortgage loan post-closing quality control reviews be completed within 120 days from the month of the loan closing and if your post-closing quality control cycle is in arrears more than one 30-day cycle then the lender must self-report in Loan Quality Connect.

Regulatory Solutions provides timely pre-funding, post-closing and servicing quality control reviews.  Contact Regulatory Solutions today to discuss how we can get you back on track with your mortgage loan quality control needs.

HMDA: Getting it Right! 2021

The Federal Financial Institutions Examination Council (FFIEC) has issued the 2021 edition of A Guide to HMDA Reporting Getting it Right!, it can be found at ffiec.gov/hmda/guide.htmThis guide should be used for HMDA data collected in 2021 for submission by March 1, 2022.  Do not wait until 2022 to start your 2021 HMDA data scrubs – contact Regulatory Solutions today and let us assist you in scrubbing your 2021 HMDA data utilizing our proprietary HMDA software.  Regulatory Solutions will scrub your data to source documents and provide an exception report for your use with all data points that need to be corrected prior to submission.  For additional information contact us rhonda.wannemuehler@regulatorysol.com.

Regulatory Solutions – HMDA 2020 and HMDA 2021

The filing of the 2020 HMDA LAR is in the books and I think everyone is thankful to have that behind them.  The past year brought on new challenges for all of us, especially the mortgage industry with the sheer volume of new purchases and refinances – all while working remotely.  This increase of mortgage file volume of course increased the amount of HMDA data to be reported for the year.  Financial Institutions, as defined under Regulation C, that meet certain loan-volume thresholds for closed-end mortgage loans and for certain open-end lines of credit are required to submit their HMDA data annually and are required to submit that data correctly.

Last year, Regulatory Solutions reviewed over 21,000 HMDA files for financial institutions to ensure the data reported on their HMDA LAR was supported in their file and was recorded correctly.  That is over 2.2 million actual data points reviewed and the results required over 50,000 data points to be corrected prior to submission.  An analysis of the corrections needed in 2020 yielded the following top ten findings:

    • Rate Spread
    • Loan Amount (notably on non-originated files)
    • Data points for certain loans subject to Regulation Z (i.e., origination fees, lender credits)
    • Debt-to-income ratio
    • Type of purchaser
    • Visual Observation of applicants
    • Income
    • Submission of application
    • Action Taken Date (notably on non-originated files)
    • Automatic Underwriting System

Why is it important to scrub your HMDA data and make corrections prior to submission?  The data on the HMDA LAR is used to help determine if the financial institution is serving its community housing need; to assist public officials in distributing public investment to attract private investment; and to assist in identifying any potential discriminatory lender patterns in order to enforce antidiscrimination statues and for this to be relevant data it must be correct.  The Consumer Financial Protection Bureau, as well as the other regulatory agencies, will conduct transaction testing prior to starting a HMDA review to ensure the data is correct.  If 10 percent or more of the HMDA LAR sample entries contain errors for a reporter with fewer than 100,000 entries the financial institution may be required to correct and resubmit the HMDA data; for reporters with greater than 100,000 entries correction and resubmission may be required with four percent or more of the sample entries containing errors.

To avoid having to resubmit, make sure you have the HMDA LAR correct at time of submission and the best time to start that HMDA scrub is now for the 2021 HMDA data.  Regulatory Solutions can assist you with this by scrubbing your data on a monthly or quarterly basis and providing you with an exception report detailing each data point needing correction.  Contact us today at 205-736-7717 to discuss how we can help you Get it Right.

HMDA 2021

Now that you have filed your 2020 HMDA LAR, it is time to get started scrubbing your 2021 HMDA Data.  Let Regulatory Solutions help by scrubbing your 2021 HMDA LAR to source data using our proprietary HMDA Software.  The data from a financial institution’s HMDA LAR is used to help determine if lenders are servicing the housing needs of its communities and provides public officials information to develop and allocate housing and community development investments – so it is important that you Get It Right!  Contact us today to begin your 2021 HMDA LAR Data Scrub.

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.