CFPB HMDA Webinar Q&A May 24 and June 2, 2016 Sessions

Transcription

1 CFPB HMDA Webinar Q&A May 24 and June 2, 2016 Sessions DISCLAIMER: The following questions are from our webinars of May 24, 2016 and June 2, 2016 featuring Kathleen Ryan from the law firm BuckleySandler LLP, and Leonard Ryan, president of QuestSoft. These answers should not be construed as legal advice and are merely provided for informational purposes. Attendees and others reading this Q&A should read the CFPB issued rules or engage an attorney for direct legal advice to answer specific questions. Even though Kathleen Ryan is counsel for her firm, her answers are not provided specifically for any company, including any company that has not provided sufficient information to allow Kathleen to render advice on the matters presented. All answers are based on information available to each of the speakers at the time of the presentation and are subject to change or revision. Questions About the LEI or ULI Q: Should we be getting our Legal Entity Identifier (LEI) as soon as possible? Can we get an LEI before we have to start using it, or do we have to use it as soon as we have it? A: We recommend you obtain your LEI by the first or second quarter of There are no reasons to delay. We don t anticipate the price to change. However, you must have an LEI for all loans submitted for HMDA on or after January 1, Q: Do you anticipate the Uniform Loan Identifier (ULI) to be calculated by Loan Origination Systems? A: We do anticipate that most LO systems will provide this number. However, it is very possible that they may leave this to QuestSoft as such a number is not required until a Final Action is taken. We will just have to see how this particular process evolves over the coming months. Some concern has been raised as to if commercial/consumer systems will need such a feature and QuestSoft is evaluating when we might need to calculate/verify a ULI and ensure it has not been previously used. 1

2 Q: Where would we find the LEI and ULI numbers you spoke of? The National Registry or some other website? Is there an annual charge for an LEI or is it a one-time fee? A: The (LEI) is available at The ULI will be determined by you, possibly in conjunction with your loan origination system. Compliance RELIEF may also offer a solution. This is an area we are currently evaluating need before devoting our resources. Here is a standard response our support department gives to inquiring customers: Not all financial institutions have an LEI already. If your financial institution seems to need an LEI, the GMEI Utility is endorsed by the Global LEI Foundation and also has a search function. There are some frequently asked questions on their website and here are a few highlights derived from those FAQs. Who can register the financial institution? You must currently be an employee of the financial institution you are registering, and be authorized by the financial institution to register for an LEI. Alternatively, financial institutions may use a third party through an assisted registration process. The person registering the financial institution will need a user account, which created here. What information is needed to register: The basic information listed in the ISO such as the financial institution s legal name, registered address, headquarters address, legal form, etc. How much does the registration cost: GMEI Utility charges $200 for a registration request, with a $19 surcharge. To maintain the LEI moving forward, the fee is $100 with a $19 surcharge. For more information, here are the FAQs specific to payment. How long does this process take: Once payment is processed, the GMEI will validate the financial institution using public sources. Once this process is complete, it takes about three business days for an LEI to be issued in the GMEI database. Overall, GMEI Utility s FAQs say most requests are cleared within three to five business days. Q: What about assigning an LEI to commercial reportable loans that are not processed through our LOS/AUS? A: QuestSoft is evaluating what to do in these situations. Some commercial/consumer loan origination products may add this functionality. However, for banks that may board certain loans with document programs and Excel spreadsheets, we are considering whether we could add this ability. The CFPB has indicated they will be offering an integration tool so we will also look at that before we decide. This is not needed until January 1, 2018 so it is not yet a high priority. 2

3 Q: If you purchase loans which LEI is reported? The new entity or the one for the company you purchased the loan from? A: The institution that is selling the loan to you has the responsibility to provide the ULI for all loans sold/purchased after 1/1/2018. However, that company may not have originated the loan. There may be situations in the early part of this process where your institution may have to assign a ULI to a loan funded prior to January 1, However, for loans originally funded after 1/1/18 you should insist on a valid ULI from the entity selling the loan. Q: When we purchase loans from other banks, do we have put in their LEI number when doing HMDA that quarter? A: You must use the Universal Loan Identifier (ULI) assigned to the loan the other bank or lender who originated it. The ULI will contain the other bank s LEI. In some cases, you may be buying loans from entities that did not originate the loans (e.g., you may buy a loan from an entity who bought the loan from another entity who originated it). It is anticipated that some loans may end up with Action Code 6 as many as 20 times during the life cycle of a particular loan. Others may only be sold once and portfolio loans may not be sold at all. Q: Can a bank register for an LEI for each business unit and submit a LAR for each? We have separate business lines that use very different underwriting guidelines. A: For each LAR you will need an LEI. The LEI is issued to a financial institution and that financial institution should use that LEI for its LAR submission. It is merely replacing the Respondent ID you use today. Q: Will we need to obtain an LEI for each of our DBAs? Or will it be the parent company's LEI that all DBAs under us will use? A: You will need to provide one LEI for each legal entity involved in the origination of loans or that is subject to HMDA reporting (i.e. a financial institution as defined in the new rule). However, your question is confusing. It says DBA s on one hand and then says Parent Company. Are the DBA s part of a single company? Are there other subsidiaries that already have different Respondent ID s? The answers to these questions matter. We might recommend you start with any company that today has a NMLS ID. Then you might expand to any company that purchases loans. Please consult your compliance officer for more detailed direction. 3

4 Q: If a financial institution originates a loan in 2017, sells it in February 2018, and then repurchases it in June 2018, how would reporting for that particular loan work? The origination would be reported on the 2017 LAR (by March 1, 2018). Then would both the sale and the repurchase be reported on the 2018 LAR (by March 1, 2019)? A: Thank you for writing such a detailed question. For 2017 HMDA (due March 1, 2018) a loan with an action date in 2017 would be submitted with Action Code 1. You would most likely not assign a ULI because the rule would not be in place. When sold, the new buyer would need a ULI assigned by you in February, 2018 with no reporting done by you because it the loan was not purchased in the year it was originated. The purchase in June, 2018 would be indicated as an Action Code 6 with the ULI you originally assigned the loan when you sold it in February, Let s complicate this scenario further by presuming that the reason you had to buy the loan in June, 2018 was because it violated reps. and warrants for an agency loan and now you need to portfolio it or find a nice scratch and dent operation to unload it to. So let s say in August, 2018 you sell the loan again. Then, in December, 2018 the market changes and the CFPB restates some TRID rule and you think you want that loan back because now your original investor wants to purchase it again. Your institution sells it in January, 2019 at an amazing profit that causes companywide parties and celebration and they unload the dreaded HMDA details on your lap. In this scenario, your 2018 reporting would look something like this: - 1 st purchase June, 2018 Reported as Action Code 6 with original ULI and Purchaser Type most likely a Code 5 Private Securitization. - 2 nd purchase December, 2018 Reported as Action Code 6 a second time with original ULI but Purchaser Type is listed as Not Originated or Sold in the Current Year (since it was sold in 2019). This brings up a unique scenario that shows why your LOS or our Compliance RELIEF product will need to not lock in ULI numbers as the sole key field never to be duplicated. You have two separate transactions with the purchases that need two unique loan numbers internally but use the same ULI that by regulation can t be reused because it is already assigned to the loan. We may end up creating a Quality Error rather than a Validity Error for these specific situations. We will continue to analyze these hypothetical scenarios as we prepare to offer you the best solution on the market. 4

5 Reporting Eligibility Questions Q: If we originate more than 25 closed-end dwelling secured loans, but fewer than 100 open-end dwelling secured loans, will we report only the closed-end loans -- or will we have to report both closed- and open-end loans? A: Only the loans that meet the threshold test should be reported. In your example, that would only be the closed end loans. Q: Just to clarify, if we do not make 100 Home Equity Lines of Credit in either of the last 2 years, then we do not have to report them... or do we? Do we only report them if we made over 100 loans? A: I assume you are only asking about what you have to report and that you have already determined that you are covered by HMDA and must report something. If you originated at least 100 open end loans in one (or both) of the two preceding calendar years, then you will have to report lines of credit in the year in question. If you did not originate at least 100 lines of credit in at least one of the prior two years, then you would not have to report lines of credit in the current year. For example, in 2019 you would not report open end lines of credit if you made 90 lines of credit in 2018, and 99 in Using the same example, if you had made 100 lines of credit in 2017, you would report lines of credit in Q: The presenter indicated that there was an error in the rule regarding when a bank must report transactions. What I heard was that the rule is written indicating a bank would need to report transactions if they originated 25 or more closed-end dwelling secured loans in each of the last two years however the presenter indicated the CFPB had verbally told them that it was 25 or more in either of the last two years. The slides appear to match the rule as it is written. Did I misunderstand the presenter? A: The rule currently indicates each (translated as both). The comment was that the CFPB intended either and will make this change in an upcoming version well before the rule goes into effect. CFPB officials have said several times in public forums that they intended to use either and will issue a rule change at a future date. The slides for our presentations will be updated when the CFPB announces the clarifying change. Q: Clarification on the 100 open-end requirement. If we do not have 100 in 2016 and 2017, then we do not have to report in 2018? If so, then we would only start reporting after we have the 2 year history of 100+ open-end lines? A: First, I assume you have determined that you are a financial institution as defined under the new rule and you are asking, what is it that I have to report? Currently, for what you have to report, the rule indicates that you must meet that 100 threshold in each of the two prior years, but Ms. Ryan indicated that the CFPB intended it to read either and will be clarifying that in the near future. 5

6 That said, in your case, if you have two years where you are under 100 reportable loans then you would not have to report in the current (3 rd ) year. If in the third year you exceeded 100 open end loans, you would then have to report your covered open end lines of credit in the 4 th year. Q: On the "What Loans Must Be Reported" slide: Open-end dwelling secured lines/applications. If FI made at least 100 such lines in either of the last two calendar years, does this include Ag. and Commercial Lines of Credit too? A: Ag loans are no longer reported beginning in 2018 so they would not be counted towards the 100. Commercial purpose lines would be counted, but only if they meet the requirements for reporting a commercial loan in 2018 that is, the line is secured by a lien on a dwelling, it must be for home purchase, home improvement, or refinancing, and it cannot be otherwise carved out in (for example, the line is only for construction). Q: For lines of credit, is it a combination of residential and commercial lines totaling 100 loans or more? A: It is the total of HMDA Reportable loans in any combination per the category of 100 open end loans (LOC). Whether your combination produces that is unknown from the way the question was asked. Q: Please provide clarification on having a physical location in every MSA. A: The HMDA rules are not changing in this regard. The HMDA rules exempt rural banks and mortgage companies from HMDA reporting. That is, the bank or lender must have a home or branch office in at least one MSA to be covered by HMDA. If you do not have a home or branch office in at least one MSA, then you do not have to consider how many loans or lines you made in previous years, you are exempt from HMDA. If you do have a home or branch office in at least one MSA, that advances you to the next Yes/No combination. If you are covered by HMDA today, you will probably have a HMDA filing requirement in The largest factor for exclusion will be the loan volume threshold test for 25 closed end loans and 100 open end loans. Q: What if for open end loans we have over 100 apps, but only 50 were purchases, refi's or home improvements? A: If the open end lines are dwelling secured and for consumer purposes, they count even if they do not meet the tests of home purchase, home improvement, or refinancing. If they are commercial purpose lines that are dwelling secured and that are for home purchase, home improvement or refinancing, then you must count them towards the 100. Do not count any lines for agricultural purpose. 6

7 Q: Do you still collect ALL information on a HELOC even though you have done <100 in the case that you do go over? In the past, you did not collect if you did not report. A: This is a question of risk tolerance. We would. How do you know you aren t going to have a great quarter and go over? Ultimately though, it is up to you and how much risk you want to assume for not having the information. Examiners are going to expect you to meet the criteria. Government Monitoring Information (GMI) and Age Questions Q: In a telephone application, how does a lender collect the new GMI (e.g. subcategories, other)? A: The same way you collect it today. You will have to read the categories and subcategories, including other to the applicant. If they chose any subcategories, you will report these but there is an overall limit of five choices. See Appendix B. Q: If the application is taken online, will there be a requirement to determine sex based on borrower's name? A: No, the rules for sex are exactly the same as they are today in that you are required to ask but they are not obligated to answer. If the application is taken by phone or online, you do not have to determine sex by name. If you take an application in person, and they choose not to answer, you must identify sex by visual observation or surname. The only change is that the CFPB has added fields to separate out Race, Sex and Ethnicity as GMI that you might have determined separately. That said, in a fair lending analysis, you or a regulator might try to identify sex by using surname algorithms, just as you might today in auto or other non-mortgage lending to conduct a fair lending analysis. The regulators are doing instant fair lending analysis based on what borrowers provide and you should defend whatever you can ascertain; but HMDA does not allow you to identify the borrower s sex based on name when the application is taken online or over the phone. Q: Is there an updated GMI form reflecting these changes? A: We re not exactly sure what you re asking, but let us explain what is being changed. The Uniform Residential Loan Application (URLA or Form 1003 used by Fannie and Freddie) is being amended and will go into effect on January 1, 2018 concurrent with the new HMDA regulations. All HMDA Management systems will collect these changes. All loan origination systems will need to collect these changes. If you are talking about other reportable loans not taken on a URLA, we do not yet know if some entity will create a data sheet to incorporate into the process. Here is the example that is provided on page 682 of the HMDA rule that may represent the new changes in the URLA: 7

8 Q: What about applications that are telephone applications, and then the borrower comes in to sign the paper? Is this now considered face-to-face and we are required to collect based on visual observation and surname if the borrower doesn't wish to provide? Is this then changed to a face-toface interview instead of a telephone interview? A: The rule in this case has not changed. But here is what page 681 of the final rule states: If the applicant begins an application by mail, internet, or telephone, and does not provide the requested information on the application but does not check or select the I do not wish to provide this information box on the application, and the applicant meets in person with you to complete the application, you must request the applicant s ethnicity, race, and sex. If the applicant does not provide the requested information during the in-person meeting, you must collect the information on the basis of visual observation or surname. If the meeting occurs after the application process is complete, for 8

9 example, at closing or account opening, you are not required to obtain the applicant s ethnicity, race, and sex. Q: If an applicant submits an application over the phone and chooses not to provide GMI, but later stops in the office to drop off loan documents, does this mean that we have to report GMI based on visual observation? A: See answer above. Q: We also saw on another webinar that the GMI information does not need to be filled out if the member does not choose any options -- including "I do not wish to supply information"? Are we supposed to choose any boxes in this section, or leave blank if an applicant does not fill in this section? A: See Final HMDA Rule pages There are 13 different combinations of scenarios where guidance is provided. Q: Is there any space for the borrower to state they don't want to share the ethnicity or race information? A: Yes, on the URLA just like they do today. Q: If a borrower says they do not want to provide information at the time of initial application, but then they complete the GMI information on the 1003 at closing, what information is reported on HMDA? The updated information or the original information provided by the applicant? A: You report the data that provides the most accurate information the borrower provided, which in this case would be their complete updated GMI information on the URLA. Here is a similar commentary on page 681 of the final rule. When an applicant provides the requested information for some but not all fields, you report the information that was provided by the applicant, whether partial or complete. If an applicant provides partial or complete information on ethnicity, race, and sex and also checks the I do not wish to provide this information box on an application that is taken by mail or on the internet, or makes that selection when applying by telephone, you must report the information on ethnicity, race, and sex that was provided by the applicant. 9

10 Pre-Approvals, Pre-Qualifications, and Applications Q: Did the TRID final rule affect the HMDA application definition? A: No. The bureau elected not to change the current HMDA definition. However, from what we can see, there is no restriction on your using the TRID definition as long as it is applied to all loans, is part of a written compliance procedure and is applied evenly and consistently. We also can see many in the industry begin to program their automation systems to the TRID definition so it is possible that by the time this regulation hits the one year mark that the TRID definition could become the de facto standard. Q: Regarding the pre-approvals: If we pre-approve a borrower, but they are still looking for a home, does that count as accepted? Our borrowers get pre-approvals but it takes a while to find a home. Where do these fall under for HMDA? A: Yes, it would be coded as approved but not accepted until they found a home, then it would be an application that had a preapproval. This assumes that your preapproval program meets the definition in Regulation C, which the Bureau did not change in the new rule. Q: If an institution does not have a valid Pre-Approval program, will Pre-qualifications still be exempt from HMDA reporting? A: Yes. But the moment a pre-qualification becomes an application it needs to be reported and it is up to your institution to establish that line in a written and enforced policy and then use it consistently. Q: Does the definition of Pre-Approval change from the current definition? A: No. It still requires a written letter and needs to be an established program within your company. However, if your institution has a program that meets the preapproval definition, the Bureau did make reporting of preapprovals that are approved but not accepted, mandatory. Q: Are pre-approval requests -- approved not accepted without a property identified -- required to be reported? A: Yes see above. 10

11 Other Compliance Questions Q: What are the ramifications or penalties starting in 2018? A: This is a CFPB rule! That means warnings, fines, and possibly more! (And that s before the states or other regulators get to you!) We are sure they will look at intent and attention to detail but we recommend you do everything possible to create and maintain a robust HMDA compliance management program. Institutions examined by the CFPB have their own standards for data accuracy and HMDA resubmission that are slightly different than the other regulators. Note that if you are examined by the FDIC, OCC or Federal Reserve Board, they have their own standards for accuracy and when resubmission will be required; and will determine your penalty if you are found to have HMDA violations. Q: Submitting LAR clean... Does this include Quality errors? A: The CFPB has indicated they are going to change the process for quality errors but we fully expect they will exist and you will still have the requirement to ensure their accuracy. That said, errors such as Q027 where the current process forces you to onerously verify every FHA Streamline, will likely and hopefully be much easier to maintain. Q: We are a Credit Union, and membership is required to obtain a mortgage loan. What action would we use if a potential applicant does not qualify for membership -- and therefore we cannot grant a loan? A: Action Type is Denied and this would be one of those Other categories in the Reason for Denial which we would assume might be worded as Not qualified for CU membership or something similar. You probably use Code 9 Other, today. Under the new rules, you will do the same and enter the reason. Q: How are down payment assistance loans that close simultaneously with lenders 1st mortgage and is a 2nd mortgage (but credit decision is not made by lender), is the lender ultimately responsible for reporting the 2nd mortgage DPA loan? A: If you do not make the credit decision on the second mortgage, you would not report it. This is the rule today, and it will be the rule in The entity that makes the credit decision would report it if that entity is not covered by HMDA, the second mortgage is not going to be reported in HMDA at all, unless a covered institution purchases it. Deciding who makes the credit decision is very fact-specific. See the commentary to (a) in the new rule, and the commentary in (c) in the current rule. 11

12 Q: How is "affordable housing" defined? Do we look at the county's FMR and compare against a client's provided rent roll? A: See page 776 and 777 of the final rule that provides a number of examples of qualified affordable housing sources. Q: Property Value: What would you use for a loan that is declined and no appraisal was obtained? A: NA if you did not rely on a property value. If you have a reason for denial that includes anything about the property, we highly recommend you provide a property value. Q: If we are currently reporting business loans secured by 1-4 family investment properties, will we have to report them under the new rules in 2018? A: Most likely, but we recommend you examine the final rule from page 776 to 790. If you are still unclear you may wish to consult legal counsel. Q: What if NMLS is not required for a business-purpose loan (e.g. investment purchase)? A: Enter NA. Q: We underwrite all the loans that come through our business. So our Correspondents are reported as a "1" because we made the credit decision. In this case... would this be coded as a wholesale? A: It would be BOTH an Action Code 1 as well as indicating the application was received by a third party and not directly. Q: If you have a loan that has an interest-only feature for part of the term (e.g. construction-to-perm), do you report non-amortizing feature? A: Yes. But remember construction loans by themselves are not reportable since they are temporary financing. Only construction to perm are reported. Q: For Property information -- property value -- what if we have a streamline refinance with no value? A: Report NA since you did not rely on the property value for your credit decision. 12

13 Q: Are all construction loans exempt? A: Yes, if they do not contain a permanent financing phase, they are considered temporary financing. Q: What about property tax loans where a lender assumes the lien position of the state or county? A: The rule does not address this specifically but it seems this would be an assumption of a current obligation much like a CEMA. So unless new debt is added or refinanced, this would likely not be reportable under HMDA. Q: Do correspondent channel loans have to be reported for HMDA purposes? We buy closed loans from other lenders. A: Yes. Including those Mini-C loans. You report them as Action Code 6 if you did not make the credit decision, e.g., you delegated underwriting to the other lender. The originator should report them separately as Action Code 1 and assign a ULI to the loan for your reporting purpose. Q: With regard to the loan features slide "non-amortizing features"-- do you have to report these for commercial loans? A: Most commercial loans are no longer going to be reported for HMDA, but these types of loans might be different. Check with your legal counsel as we get closer to the launch for guidance in this area since we do not know the nature of the loans you are discussing. Q: Do any of these changes really affect small mortgage brokers in terms of reporting requirements, or is that mostly limited to NMLS? A: We anticipate that the NMLS Mortgage Call Report will be adjusted for this new HMDA information by the 2018 reporting year. Q: Freddie and Fannie have different definitions for CLTV, and they also have a TLTV. Which one does a FI report for the rule's CLTV requirements? A: You report what you relied on to make the credit decision. Q: We do many Agricultural loans, and under the current rule Ag. loans are HMDA-reportable for HI or Refi. Under the new rule are all Ag loans exempt? A: Yes, all Agricultural loans are exempt under the new rules. 13

14 Q: For total Units, how do you determine the number of units for a mixed use property -- i.e. storefront with two residential apartments above? A: You would use residential units since the purpose of HMDA is residential property. Q: What if an AUS system isn't used? A: Then it isn t used to evaluate the application, which is the regulatory language. Report NA. Q: Is manufactured housing considered a "dwelling" for HMDA purposes? A: Yes. Q: Need clarification regarding the quarterly filing: In the event that an error or two surfaced after filing in any given quarter, how should that be handled? Or what if at the end of the year (with the final scrubbing process) an error was detected, how should that be handled? A: Think of the quarterly filing requirement as nothing more than a quarterly prepayment on taxes for self-employed borrowers. You can have inaccuracies but the CFPB wants you to have them cleaned up by the time the annual report is submitted. You must also have policies and procedures to avoid inaccuracies. If you have those, and you fix any mistakes by annual filing, there is a safe harbor. Q: If an application has all 6 TRID elements, but the final underwrite has not been completed, would this be considered a "Pre-qualification" for HMDA reporting purposes? A: The Bureau did not change the rules regarding pre-qualifications. It depends on your internal written and enforced definition of a loan application. Under the TRID definition, it would not be an application. Under another definition, it could be. If you are using final underwriting as the point you consider something an application and all else as a pre-qualification, then you are probably underreporting HMDA loans. You might seek some legal advice if you are waiting until final underwriting to report HMDA loans. Q: As far as the census tract and county filed combo codes, has the FFIEC stated a time that they will be ready for this change? Will their online geocoding system be ready by mid-to-late 2017? A: It won t be the FFIEC, it will be the CFPB and no, they have not given any timelines. We hope the online system will be available in advance. 14

15 Q: Is the tolerable Error Ratio remaining 5%? Do we have any insights into how the regulators will calculate the Error Ratio given the new data fields that may or may not apply on a line-by-line basis? A: The error ratios for the new CFPB HMDA have not been determined. The CFPB has sought commentary on that very question. The other regulators (OCC, FRB, and FDIC) are expected to coordinate with them as far as changes to the tolerances and what triggers resubmission. The MBA HMDA sub-committee which both Kitty and Leonard are on, has recommended the question be withdrawn until the industry has experience with the new data. If it remains 5%, that will put significant pressure on lenders, depending on how many of the 110 reportable fields the CFPB considers key and subject to the tolerance. Some regulators only consider key fields but the CFPB, currently considers all fields. However, the regulators feel that technology is better today so we don t anticipate a significant increase in the ratio. We expect this question to be asked again in late 2017 or shortly after the new rule goes into effect. Q: DTI for commercial loans: Our underwriters state that they don't specifically use a "debt-toincome" ratio, although they use many other ratios that include debt and income separately. I think I heard Kitty state that the CFPB is not requiring us to add a new ratio for consideration. Would we report all loans as N/A for DTI even though we underwrite after looking at debt and income figures separately? A: This would be NA for commercial purpose loans. Always remember, it is what you relied on to make the credit decision. Q: Quarterly submissions: Would the 60,000 include 3rd party lending? Example: lender purchases contract from home improvement company. A: The final rule sets the 60,000 threshold as covered HMDA transactions, but not purchased loans. So basically take Action Codes 1-5, 7 & 8 and if the total of that calculation is 60,000 or more, you have a quarterly reporting requirement in Q: You mentioned a Bank would be allowed to point requestor to a website for the public LAR. Does this imply a change to current requirements for Public HMDA file in full, or just a tweak to this element? A: When the new HMDA comes out in January 2019 (for 2018) filing, you will no longer have a requirement to provide the public file upon request. You will only have an obligation to direct the person to the website where they can get the public file. But remember, this won t be in place until the CFPB assumes responsibility for HMDA reporting in 2018 so you will be required to provide a Public LAR until then. 15

16 Q: What will the MLO identifier be for commercial loans? It was stated this should never be N/A. A: It will be NA. It should never be NA for a loan subject to the SAFE Act where a NMLS ID is required. See pages of the final rule, Section 2 Mortgage loan originator without NMLSR ID. Q: Would a HELOC with interest-only payments during the draw period be a non-amortizing feature? A: The answer appears to be yes. There is nothing in the regulation or commentary that says open end lines of credit are exempt from this requirement. Q: Are you to include cents when reporting loan amount and income? A: No, round to whole dollar amounts. Income rounds to thousands as it does now. Q: Is the separate confirmation requirement just for apps started in 2018 (like sub-categories), or will this apply for loans started in 2017 and final action 2018? A: You are legally not to collect the new GMI information until January 1, Q: Does a closed end 2nd now need to be reported if it isn't used to purchase, refi, or do home improvement? A: Yes. Unless it is temporary financing or one of the other exclusions. Q: What rate, if any, should a FI report on HELOCs that do not close since an interest rate on HELOCs do not lock until closing? A: The rate that was used at the time a credit decision was made or NA. Q: You mentioned that an unsecured loan will not be HMDA reportable anymore. What about those that are secured by autos and the proceeds are used for home improvements? A: Not reportable. No lien on the house = not reportable. 16

17 Q: Will loans that are not for purchase, refinance or home improvement now be reportable? (i.e. no mortgage on property and paying off credit cards.) A: Yes, if they are dwelling-secured, consumer purpose loans. If you are taking out a loan on a home that has no existing mortgage on it, and the purpose of the loan is to pay off credit cards that will be reportable. Q: When do you think the URLA will be updated and revised? A: There is no official date. Many people on MBA and ABA working groups have been viewing the recommended form and making comments. The MISMO organization has been coding the document into its 3.4 data specifications. Whether it will be available to the entire mortgage profession before it is finalized is a guess. It will need to be finalized no later than the end of 2017 to allow loan origination software and loan document systems to incorporate the form into their systems. HMDA RELIEF, Compliance RELIEF, and other QuestSoft Questions Q: Will QuestSoft give us guidance on what fields in our core system are used by QuestSoft to collect the HMDA data? A: When we can. We have some imports that we create using a LOS vendor s developer kit. But most are exports from LOS systems. Therefore, your LOS provider may be the one to provide you with information on how they cross referenced their fields to our required import format. Q: Will you automatically send us a proposal for Compliance RELIEF if we are on HMDA RELIEF or do we need to request one? A: No, you need to request one. We offered these webinars for informational purposes and so you knew our plans. We know some customers will want to be more aggressive in their preparation and others just need confidence that we are on top of these issues. Q: Will HMDA RELIEF allow for early testing, or will it only be Compliance RELIEF? A: Only Compliance RELIEF s HMDA module and our Instant HMDA products will be available for per loan testing. The legacy version of HMDA RELIEF will be sunset by

18 Q: I'm understanding that HMDA Relief will be discontinued 12/31/17. Please clarify if that is not the case. A: We are transitioning the legacy HMDA RELIEF brand into Compliance RELIEF with our 2018 versions. Compliance RELIEF has more features than HMDA RELIEF but maintains the same look, feel and functionality within the product. It should be a seamless transition and we are certain you will enjoy all of the new features and functionality. The SQL architecture of Compliance RELIEF allows us to develop more useful features with a faster interface. It truly is the future of HMDA. Q: Since HMDA RELIEF will be expiring, will the new software automatically take place of HMDA RELIEF, or will we be required to re-purchase the new software at a new rate? A: Yes, and most likely yes. QuestSoft plans to automatically migrate the current HMDA RELIEF product into Compliance RELIEF beginning with the 2018 submission year. In the meantime, you can elect to use Compliance RELIEF which already has more features and reports or you can continue to use the legacy version of HMDA RELIEF until the end of As of today, Compliance RELIEF is offered in only one version which has every feature. It is comparable to our top of the line HMDA RELIEF Pro version. Existing HMDA RELIEF pricing begins at $395 and Compliance RELIEF starts at $995 and rises based on LAR count and asset size. Our plan is to continue to add features and build out Compliance RELIEF. This year the focus is adding the 2018 fields, new error codes and getting the LOS vendors on board with exports and interfaces so our customers that wish to test loans in advance can do so. Starting in 2017, we are looking to expand Compliance RELIEF with new dashboards and reports while adding the new CFPB required pipe delimited submission format to HMDA RELIEF. All Compliance RELIEF customers during 2017 will receive these advanced features through regular updates. At the end of that process, we will evaluate breaking Compliance RELIEF into modules much like HMDA RELIEF so that we can accommodate institutions that need a lower price point due to their volume. However, in all cases, there are massive changes required by the new rule. We have consistently been the lowest priced, most efficient non-government solution in the industry because we have a market share orientation that looks to spread the millions of dollars we spend on the product over 2,000+ lenders. We have maintained a low price point for our smallest volume customers for over 20 years. Whether we will be able to maintain such a low price is doubtful given the analytics and customer support that will be necessary to keep our customers efficient and in compliance under a significantly expanded rule. But we promise to do our best. Q: Is QuestSoft using the standardized address like Fannie and Freddie? A: To date we have performed geocoding functions in Instant Geocoder and have only displayed addresses in the USPS format for comparison. Our customers have never wanted us to change their addresses so our products have not contained those features. With the new guidelines calling for the address to be forwarded to the CFPB, we do not know if this will be a useful feature. 18

19 We are very familiar with CASS Certification and now there is a USPS product called AEC II that performs a more advanced function. We will monitor whether either of these would be useful and bring more value to our customers above their cost of license. Q: Is Encompass one of the LOS systems that is currently testing? A: No, and we won t be testing any systems for a while until the new specifications are finalized by the CFPB which is expected sometime in the summer of That said, Encompass is one of the systems where we are a preferred vendor for the purposes of HMDA and we do plan on having a number of vendors, including the Ellie Mae Encompass product, operational for testing with most of the 2018 fields by January, Q: With the changes, will multi-race/ethnicity options be taken into consideration? Example: My kids are Asian (Japanese), Hispanic and White. Will all boxes be read by QuestSoft and transmitted in the data set without error? A: Just like today, the new CFPB HMDA codes will only report up to 5 races or sub-race codes. So we will take the first 5. Q: If we have HMDA RELIEF will be able to complete testing as well? A: No. HMDA RELIEF will only have the Federal Reserve/FFIEC formats and will cover all rules in effect for both 2016 and If you wish to test in advance using the CFPB rules, you will need to transition to Compliance RELIEF. Q: If we have HMDA RELIEF and want to complete testing, I assume we should complete the conversion to Compliance RELIEF? Are there additional charges for the changeover to Compliance RELIEF? A: Yes. There is a different price structure for Compliance RELIEF though for most of our customers it is either equal or nominal. We will prorate any outstanding balance from your current HMDA RELIEF subscription into Compliance RELIEF. However, if you need to match the pricing of our basic stripped down basic module, you will need to wait until late 2017 when we consider breaking up the current versions into modules. 19

20 Q: When you mentioned that geocoding information changes, are you suggesting that lenders "regeocode" with each QuestSoft update in case a previously geocoded loan record changes as a result? A: We always recommend that QuestSoft Instant Geocoder customers use the latest release and do an automated pass at the end of the year to take advantage of the most up to date geocoding. There are typically over 1 million address additions and changes in a year, so re-geocoding just makes things a little more accurate at submission time. The staff at QuestSoft would like to again express our sincere and deepest appreciation to Kathleen Kitty Ryan of BuckleySandler LLP for her participation in this important webinar series and the additional time that she personally took to answer the high number of questions submitted with these webinars. If you wish to engage in her outstanding professional services, she can be reached at Leonard Ryan, QuestSoft president, and Carey Aimone, QuestSoft s Vice President of Support and Training also coordinated to complete this document. Finally, to inquire about how you can use QuestSoft products to test the new CFPB regulations, please contact your QuestSoft account manager at sales@questsoft.com or (HMDA) option