Property Value Must Be Reported Under 2018 HMDA Regulation

Under the 2018 HMDA regulation, the value of the property that is (or will be used) to secure the loan must be reported. This data point depends upon which value the institution uses to determine the loan-to-value ratio. If the institution relies on the appraisal for this determination, then the appraised value is reported. The other option that an institution can rely on is the purchase price of the property. When entering the property value, the institution should enter the full amount with rounded to the nearest dollar. It is important to note that the method that is chosen should remain consistent throughout the HMDA LAR.

If the file was closed for incompleteness or withdrawn before a credit decision was made, then this data point should be reported as “not applicable”. This remains true even if the institution determined a value for the property before final action was taken.  When an institution makes a credit decision without relying on the property value, then “not applicable” should also be entered on the HMDA LAR.

 

For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.

Credit Score Information New 2018 HMDA Requirement

The 2018 HMDA regulation will require an institution to report an applicant’s credit score information. While this is a new data point, it is relatively straight-forward. An institution must report both the credit score and the name and version of the scoring model that was used when making the credit decision. If multiple scores were relied upon, then the institution should report only one of those scores. When this occurs, deciding which score to report is up to the institution but the method should remain consistent throughout the HMDA LAR. On the other hand, if the loan had more than one applicant and the institution relied on only a single credit score then that score should be reported for either the applicant or the co-applicant.

 If a credit scoring model was used that was not an option provided by the HMDA regulation, then the institution should report this data point as “other”. If this is selected, the specific credit scoring model that was used must be entered.

Reporting this data point as “not applicable” is an option. This can occur when the loan was: a purchased loan, the institution did not rely on a credit score, closed for incompleteness, withdrawn before a credit decision was made, or if the applicant is not a natural person.

For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.

HOEPA Status Will Not Change Under New HMDA 2018 Changes

Under the new HMDA regulation that will take effect in 2018, the HOEPA status is one of the data points that will not change. As it was under the old HMDA rule, an institution must report whether or not the loan is considered to be a high-cost mortgage under Regulation Z.  Section 1026.32 (a) states that these are consumer loans that are secured by the borrower’s principal dwelling and must surpass either the APR trigger, the total points/fees trigger or the prepayment penalty trigger.

Once it is determined that the mortgage is secured by a principal dwelling, the specific trigger requirements must be met. The APR trigger is where the APR exceeds the APOR for a comparable transaction by more than either 6.5% for first-lien transactions; 8.5% for first-lien transaction if the dwelling is personal property and the loan amount is less than $50,000; or by 8.5% for subordinate-lien transactions.

The total points/fees trigger is reached when the points and fees will exceed 5% of the total loan amount for a transaction that is at least $20,000. This can also be triggered when the points/fees total amount is less than either 8% of the total loan amount or less than $1,000 for a transaction with a loan amount of less than $20,000.

The prepayment penalty trigger can occur in two situations. The first is where the creditor has charged a prepayment penalty that can occur more than 36 months after consummation. The other situation is where the penalties exceed more than 2% of the amount that was prepaid.

If the loan is not subject to HOEPA status, then this data point should be reported as not applicable on the HMDA LAR. The only other time that this data point is reported as not applicable is when the loan did not end in origination. 

For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655. 

New HMDA Regulation Will Bring Big Change To Rate Spread Data Point

The rate spread is a familiar data point that many institutions are used to reporting, however, the new HMDA regulation that will take effect in 2018 will bring a big change. The old regulation did not require an institution to report the rate spread if the annual percentage rate (APR) did not exceed the average prime offer rate (APOR) by a certain percentage. Under the new HMDA regulation, the rate spread is now required to be reported in most cases. In order to determine the rate spread, you must take the difference between the loan’s APR and a comparable transaction’s APOR.

The rate spread can be determined manually or by using the FFIEC’s Rate Spread Calculator which can be found here: https://www.ffiec.gov/ratespread. The FFIEC website also provides the Average Prime Offer Rates tables and a batch rate spread calculator for multiple loan calculations.

If the institution decides to manually find the APOR, they must first determine the comparable transaction. In order to do this, the institution must look at the loan’s amortization type and loan term. For fixed-rate loans the transaction’s maturity (or the period until the last payment will be due) is used. If the loan is an open-end line of credit but has no definitive length of time, then an institution may use a 30-year fixed-rate loan as the comparable transaction. For variable-rate loans, the initial fixed-rate period is used. When the maturity term is not in whole years, the term should be rounded to the nearest whole year. For example, if the loan matures at 10 years and 3 months, then the term for a comparable transaction will be 10 years.

The next step in determining the APOR is to establish the rate set date. This should be the date that the institution set the loan’s interest rate for the final time before closing. For instance, if the rate was set according to a lock agreement, then the date of that agreement is used. The last step in determining the APOR is to determine the most recent APOR as of the rate set date. These rates can be found on the applicable tables on the FFIEC’s website.

When entering the rate spread on your HMDA LAR, you should round it to at least three decimal places. If the APR exceeds the APOR, then a positive number should be reported. However, if the APR is less than the APOR, a negative number should be reported as the rate spread.

There are some circumstances in which the rate spread is not reported. An institution should report this data point as being “Not Applicable” if the loan: does not end in origination, is a purchased loan, an assumption, a reverse mortgage, or if it is not subject to Regulation Z. The only instance where the rate spread should be reported for a loan that was not originated is when the application was approved but not accepted. In this case, the difference between the APR of the loan that would have resulted if it was accepted and a comparable transaction’s APOR as of the date that the interest rate was set is reported on the HMDA LAR.

For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.

 

2018 HMDA Regulation Brings Additional Value Added To Type of Purchaser

Under the HMDA regulation that will take effect in 2018, an institution must report the type of purchaser for each HMDA reportable loan. This data point remains relatively the same, however an additional value has been included in the new HMDA regulation. It must be reported whether the loan was purchased by: Fannie Mae; Ginnie Mae; Freddie Mac; Farmer Mac; a private securitizer; a commercial bank, savings bank, or savings association; credit union, mortgage company, or finance company; life insurance company; affiliate institution; other type of purchaser; or if the loan was not sold during the calendar year. While this data point is fairly straight-forward, there are some reporting requirements that should be noted.

If the institution knows or reasonably believes that the loan will be securitized by the entity purchasing the loan, it should be reported as being purchased by a private securitizer. A private securitizer is an institution other than the already listed government-sponsored enterprises (Fannie Mae, Ginnie Mae, Freddie Mac, and Farmer Mac). If the institution is not reasonably certain that the purchaser will securitize the loan, then it should be reported as being purchased by the appropriate institution. Another caveat in regards to private securitizers is if the purchaser fits into one of the other reportable types and is also a private securitizer. In this case, the loan should be reported as being purchased by a private securitizer.

An affiliate institution is a company that controls or is controlled by the financial institution. If the purchaser of the loan is an affiliate institution but also fits into one of the other reportable types, then the purchaser should be reported on your HMDA LAR as being an affiliate.

The purchaser should be reported as being Not Applicable if the application was denied, withdrawn, closed for incompleteness, or approved but not accepted. Another situation in which Not Applicable should be reported is if the institution sells some interest in the loan but retains the majority interest. However, if the institution sells all or the majority interest to more than one entity, then the entity that purchased the greater interest should be reported on your HMDA LAR.

For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.

 

Property Address, State, County, and Census Tract HMDA Reporting

Under the new regulation, the property address along with the state, county, and census tract data must be reported as part of your HMDA information. These data points must be reported if the property is located in an MSA or metropolitan division where the institution has a home or branch office. They should also be reported if the institution is a bank or savings association and they are required to report HMDA data on small businesses, small farms, and community development lending under the Community Reinvestment Act. The census tract has an additional reporting requirement as it is only reported if the property is located in a county with a population of 30,000 or more.

In order to determine which property data to report, the institution must look at which property is securing (or was proposed to secure) the loan. In the case where more than one property secures the loan, the institution should report the information for only one of the properties. If the property securing the loan is a single multifamily dwelling that has more than address, then just one of the addresses should be reported by the institution.  In the instance where the property securing the loan is not known or the location for a manufactured home has not been identified, then the data point for the property address should be entered as being not applicable.

The majority of these data points can be determined by looking at the loan application; however, the county and census tract must be reported in numerical form. In order to determine what these values should be, the institution can enter the property address at: https://geomap.ffiec.gov

For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.

HMDA 2018 Action Taken and Action Taken Date

When reporting information regarding the action taken for a loan, there will not be any substantial changes under the new HMDA regulation.  The type of action taken must be reported as being one of the following: originated or purchased; approved but not accepted; withdrawn; denied; or closed for incompleteness. In addition to these familiar data points, there will be values that specifically address the action taken for preapprovals come 2018.

An institution reports a loan as being originated if it was approved before closing and if there was an extension of credit. The loan is also reported as being originated if the loan began as a request for a preapproval but resulted in the loan being originated. The Action Taken Date that is reported for originated loans is either the closing date or the account opening date.

Another possible action taken is if the loan was purchased. These are loans that were purchased by the financial institution after closing and where no credit decision was made by the institution prior to closing. The date that the loan was purchased is reported as the Action Taken Date on your HMDA LAR.

If the loan was approved before closing but the applicant either failed to respond or the loan was not otherwise closed, then the action taken would be reported as approved but not accepted. The regulation allows some flexibility as to the date that is reported. The institution can choose to report: the approval date; the deadline for accepting the offer; or the date that the file was closed as the Action Taken Date. It is up to the lender to choose which date to report, but it should remain consistent.

An application is reported as being denied under certain circumstances. A loan is considered to be denied if the financial institution decided to deny the application after a credit decision was made.  The other circumstance is when a counteroffer was made and it was not accepted. The Action Taken Date that is reported is either the date that the action was taken on the application or the date that the Adverse Action Notice was sent to the borrower.

For withdrawals, an application is reported as such when the it was expressly withdrawn by the borrower before a credit decision has been made. The date that the borrower contacted the lender to withdraw the application is reported as the Action Taken Date.

A loan file is reported as being closed for incompleteness when the financial institution sent the borrower a notice of incompleteness and the borrower failed to respond with the additional information that was requested. The lender may have reporting options regarding this type of Action Taken but it depends on if the lender provided an Adverse Action Notice to the borrower with the reason for denial being incompleteness. If this occurs, then the loan file can either be reported as being denied or being closed for incompleteness. Like with denied loans, the lender can use the date that the action was taken or the date of the Adverse Action Notice is reported as the Action Taken Date.

For an application that is a preapproval request that was approved but not accepted, any reasonable date can be reported as the Action Taken Date. This is up to the institution and such dates could be the approval date, deadline for accepting the offer, or the date that the file was closed. When the application is a preapproval request that was denied, the date of the denial or the date of the Adverse Action Notice sent to the applicant is reported as the Action Taken Date.

The CFPB has recently issued a proposed correction in regards to this data point. This concerns how to report the action taken when a counteroffer was made and the institution provided a conditional approval but the applicant does not respond. The correction states that this would be reported as either: a denial, file closed for incompleteness, approved but not accepted, or as application withdrawn. It all would depend upon the particular circumstances.

For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.

One HMDA Data Point That Won’t Change Is The Loan Type

The loan type is one of the data points that will not undergo any changes under the new HMDA regulation. This information can be found on the application and the reporting process is very straightforward. If the loan is not insured by anyone, then it would be considered a Conventional loan and Code 1 would be reported. An institution reports Code 2 if the application is insured by the Federal Housing Administration (FHA). Also, if the Veterans Administration (VA) is guaranteeing the loan, then Code 3 is reported on the LAR. Finally, an institution reports the Loan Type as being Code 4 if the USDA Rural Housing Service (RHS) or the Farm Service Agency (FSA) is guaranteeing the application.