Pub. 6 2016-2017 Issue 4

10 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S BRACING FOR HMDA – 6 QUESTIONS TO CAPTURE THE MOOD FOR 2017 & 2018 BY LAUREN SPARKS, PRESIDENT, 3PR INC Background Most bankers know that the Home Mortgage Disclosure Act (HMDA), or Regulation C, was passed by Congress to provide a consistent format for collecting and disclosing home purchase loan related information. In 2016, the CFPB, the new agency responsible for Regulation C, issued changed rules and forms for mortgage related loans. While additional HMDA Rule changes are effective in the 2017 data collection, most are effective for 2018 data reporting. Even bankers not handling HMDA every day need to know a few things about this major “sea change” that will impact the bank. Much like TRID mortgage changes, these HMDA changes may require major process overhauls, regardless of the size of your institution. The rule changes who is required to report, expands types of customers and loan products that will be included and what type of information the reporter is required to provide. Here is a quick study with 6 questions to help you get into a HMDA state of mind. 1. Are you still a Covered Institution in 2017? How about 2018? The rule amends the current regulation in two steps. A Bank could be exempt from reporting in 2017 and then become a reporter in 2018. In 2017, institutions are subject to the HMDA Rule if they originated at least 25 home purchase loans including refinancing of home purchase loans in both 2015 and 2016. The other current Regulation C tests remain for 2017. Beginning in 2018, any institution that originates 25 cov- ered closed end mortgage loans or 100 covered open end lines of credit secured by a dwelling in each of the two previous years (2016 and 2017) must gather the HMDA data in 2018 for reporting in 2019. Note # 2 below. 2. Will you now have to report HELOCS or other lines? Closed end and open end credits are included. HELOC reporting is based on volumes. A closed end business purpose loan secured by any dwelling is included in the required 2018 reporting population (a new requirement). A business purpose line of credit is excluded unless it is secured by a dwelling and is a home improvement or for refinancing. An agricultural pur - pose exception is provided and expanded over the 2016 rule. 3. Have you thought about your Preapproval Requests? The 2018 requirements include home purchase preapprov- als requests approved by the institution but not accepted by the home buyer. The 2018 rule covers a broader population than the previous rule. Exclusions include open-end lines of credit, reverse mortgages, and home purchase loans to be secured by multifamily dwellings. 4. Have you considered that there are Numerous New Data Elements? The 2018 data collected at application and closing is ex- panded, increasing by 25 new data fields and 28 new data ele - ments. The list includes data such as age, credit score, unique loan identifiers, property value, application channel, points/ fees, borrower-paid origination charges, discount points, lender credits, loan term, prepayment penalty, non-amortiz- ing loan features, interest rate, and loan originator identifier/ license number. The interest rate spread will be reported for a broader range of loans (business and HELOC). Under eth - nicity, applicants will have the option to self-identify using numerous ethnicity/race subcategories. The rule will now require institutions to collect information about an applicant’s/ borrower’s ethnicity, race, and sex based on visual observation or surname. 5. Do you have a HMDA Implementation Team? It is never too late to forma team to guide the bank through implementation. Even for 2017, the Bank will have to manage an updated filing process, andwill have to work with its vendor to get the data feed correct and timely. 2018 changes require a whole new attitude, approach, and stronger controls to “Get It Right”. If there is not already a team in place, start now to get the right people into the room to roll out the changes. 6. Your HMDA team will need resources Your institution must evaluate the rule changes as they apply to your product offerings. It will take time and resources. HMDA rule implementation should be a project with key play- ers involved. Additional training for lenders, loan operations, compliance officers, and senior management is a must. As HMDA deadlines loom, document your team’s efforts at compliance. It may pay off at the next compliance exam. n