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)|
*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.
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.
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.
The FFIEC has released the 2019 edition of the “Guide to HMDA Reporting: Getting it Right!” which is available at https://www.ffiec.gov/hmda/. The new edition contains information regarding the amendments made to HMDA by the Economic Growth, Regulatory Relief, and Consumer Protection Act and updated HMDA interpretive and procedural rules issued by the Consumer Financial Protection Bureau. 2019 is the year to Get it Right! Regulatory Solutions has developed proprietary HMDA scrub software and has the expertise to scrub your HMDA data on a monthly or quarterly basis. Our HMDA scrubs compare your HMDA LAR to source documents. An exception report is issued to enable you to make corrections and a summary of exceptions is provided to assist you in addressing any systemic issues. Contact Regulatory Solutions today to begin your HMDA Scrubs.
Now that you have filed your 2018 Home Mortgage Disclosure Act (HMDA) data, it is time to focus on 2019. The CFPB has issued the new Filing Instructions Guide (FIG) for submissions and data collection which can be found on the FFIEC website. The only major change to the new HMDA FIG 2019 is that it now includes the new values for the data points that were exempted under the Economic Growth, Regulatory Relief, and Consumer Protection Act that went into effect in May 2018. The HMDA FIG 2019 can be found here: https://ffiec.cfpb.gov/
While there are no substantial changes as to how you compile and submit your data, it is important to point out that 2019 is the first year that the CFPB will assess penalties under the revised HMDA regulation. If you struggled with compiling and scrubbing last year’s HMDA data, Regulatory Solutions is here to help. Using our proprietary HMDA scrub software, we compare your source documents in the loan file to the data points recorded on the HMDA LAR and provide you with an exception report detailing data points needing correction. Contact us today to being your 2019 HMDA LAR Data Scrub.
The Consumer Financial Protection Bureau announced the adjusted asset-size exemption threshold for depository institutions for HMDA (Regulation C). The exemption threshold has been increased from $45 million to $46 million. Based on this adjustment, banks, savings associations, and credit unions with assets of $46 million or less as of December 31, 2018 are exempt from collecting data in 2019. Remember, 2018 HMDA data is reportable by March 1, 2019. If you need assistance with scrubbing your HMDA data for 2018, contact Regulation Solutions today!
The Bureau of Consumer Financial Protection issued an interpretive and procedural rule on August 31, 2018, to implement and clarify section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which amended certain provisions of the Home Mortgage Disclosure Act (HMDA). The rule allows certain insured depository institutions and insured credit unions (based on thresholds for the number of closed-end and/or open-end loans originated during a given year) to be partially exempt for certain data point reporting. Below is a chart detailing the data points covered by the partial exemptions and the correct code to use on the HMDA LAR to signify exemption.
Regulatory Solutions has developed proprietary software to complete your HMDA Scrubs. Please contact us today to discuss how we can help you ensure your HMDA data is correct
Data Points Covered by Partial Exemptions
|Data Points Covered by Partial Exemptions||Correct Code for Exemption|
|§ 1003.4(a)(1)(i) – Universal Loan Identifier||Unique, within the insured depository institution, loan or application identifier that can be up to 22 characters|
|§ 1003.4(a)(9)(i) – Property Address (street address, city, zip code)||Exempt|
|§ 1003.4(a)(12) – Rate Spread||Exempt|
|§ 1003.4(a)(15) – Credit Score||1111|
|§ 1003.4(a)(15) – Name and Version of Credit Scoring Model||1111|
|§ 1003.4(a)(16) – Reasons for Denial||1111 (Leave the remaining Reason for denial data fields blank)|
|§ 1003.4(a)(17) – Total Loan Costs or Total Points and Fees||Exempt|
|§ 1003.4(a)(18) – Origination Charges||Exempt|
|§ 1003.4(a)(19) – Discount Points||Exempt|
|§ 1003.4(a)(20) – Lender Credits||Exempt|
|§ 1003.4(a)(21) – Interest Rate||Exempt|
|§ 1003.4(a)(22) – Prepayment Penalty Term||Exempt|
|§ 1003.4(a)(23) – Debt-to-Income Ratio||Exempt|
|§ 1003.4(a)(24) – Combined-Loan-to-Value Ratio||Exempt|
|§ 1003.4(a)(25) – Loan Term||Exempt|
|§ 1003.4(a)(26) – Introductory Rate Period||Exempt|
|§ 1003.4(a)(27) – Non-Amortizing Features|
Other Non-Amortizing Features
|1111 (enter code for each one)|
|§ 1003.4(a)(28) – Property Value||Exempt|
|§ 1003.4(a)(29) – Manufactured Home Secured Property Type||1111|
|§ 1003.4(a)(30) – Manufactured Home Land Property Interest||1111|
|§ 1003.4(a)(32) – Multifamily Affordable Units||Exempt|
|§ 1003.4(a)(33) – Submission of Application||1111|
|§ 1003.4(a)(33) – Initially Payable to Your Institution||1111|
|§ 1003.4(a)(34) – Mortgage Loan Originator Identifier||Exempt|
|§ 1003.4(a)(35) – Automated Underwriting System (AUS)||1111 (Leave the remaining AUS blank)|
|§ 1003.4(a)(35) – Automated Underwriting System Result||1111 (Leave the remaining AUS results blank)|
|§ 1003.4(a)(36) – Reverse Mortgage Flag||1111|
|§ 1003.4(a)(37) – Open-End Line of Credit Flag||1111|
|§ 1003.4(a)(38) – Business or Commercial Purpose Flag||1111|
We are just over half way through the new year under the new Regulation C rules which changed the Home Mortgage Disclosure Act (“HMDA”) reporting requirements. Have you scrubbed your HMDA data in accordance with the new rules? If not, let Regulatory Solutions help! We have developed proprietary HMDA Scrub software to assist in the data integrity review of your HMDA data. Our software produces exception-based reports so that you know exactly what corrections need to be made by loan number. The report also provides you with a total number of exceptions and percentages based on data points.
Now that the first quarter of HMDA reporting under the news rules is complete – one consistent question we receive is regarding whether a particular commercial/business purpose loan is HMDA reportable?
Under Regulation C if a closed-end mortgage loan or an open-end line of credit is for commercial/business purpose and is secured by a dwelling and is for a home purchase, refinance (dwelling secured loan replacing dwelling secured loan) or home improvement then it is HMDA reportable. Remember that on home improvement it must also be secured by a dwelling. Non-dwelling secured loans for the purpose of home improvement are no longer reportable. Also, remember a dwelling is not limited to just a 1-4 family structure but includes multifamily dwellings that contain five or more dwelling units and includes a manufactured home community.
You must look both at purpose and security to determine if the commercial/business loan is reportable. For example, if the purpose of the loan is for cash flow and it is secured by the owner’s primary dwelling, then the loan would not be HMDA reportable because the purpose is not home purchase, refinance or home improvement. However, if the borrower asks to refinance a loan secured by their dwelling for cash flow purposes for their business, the loan would be HMDA reportable because the purpose is refinance as a dwelling secured loan which replaces a dwelling secured loan.
Regulation C Section 1003.3(c)(10) and the official interpretations set forth the rules regarding closed-end mortgage loan or an open-end line of credit that is or will be made primarily for a commercial or business purpose.
Using our proprietary HMDA Scrub software, Regulatory Solutions is your source for HMDA Scrubs. Please call us at 855-734-7655 for details.
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.