HMDA Road Trip: Get Directions Before Navigating the Expanded Data Fields, Including the GMI. October 4, 2017

Transcription

1 HMDA Road Trip: Get Directions Before Navigating the Expanded Data Fields, Including the GMI October 4, 2017

2 Wolters Kluwer HMDA Webinar Series 1. June 29, 2017 HMDA: The Ultimate Road Trip - Pre-Trip Checkup for the Basics You Need to Know Now 2. August 22, 2017 HMDA at the Crossroads: Submissions and Scrubs 3. Today, October 4, 2017 HMDA Road Trip: Get Directions Before Navigating the Expanded Data Fields, Including the GMI 4. December 7, 2017 HMDA Final Pit Stop: Fuel Up and Be Ready for 2018 Additional WK Resources (including recordings):

3 Today s Presenters Barbara Boccia CRCM, MBA, JD Senior Director Advisory Services and Regulatory Relations Catherine Brown Senior Attorney, Regulatory Compliance Analysis Compliance Center of Excellence Miral Patel, Product Manager, Fair Lending Wiz HMDA DF Wiz Sentinel Britt Faircloth CRCM, Senior Regulatory Consultant FL and CRA Wiz Trainer

4 HMDA at the Crossroads: Itinerary (1 of 2) Introductions Overview of the New HMDA Changes Submission Changes the New CFPB Platform Fair Lending Data Analytics CRA Wiz Product Update

5 HMDA at the Crossroads: Itinerary (2 of 2) Amendments to Regulation C (HMDA) Amendments to Regulation B (ECOA) - Impacting HMDA Uniform Residential Loan Application (URLA) Update WK s 12 Guidelines for Collecting GMI Resources and Questions

6 Notice The information presented in this webinar summarizes general guidance under HMDA, including Unofficial Verbal Guidance from the Consumer Financial Protection Bureau, Regulation C and other requirements, based on the existing information available at the time of the presentation It is intended only to act as a quick reference and not as a substitute for the law, regulations or official commentary There are continuing, ongoing developments in this area. Therefore, always consult official sources of information, including the regulation text and official commentary, for a complete understanding of the law, including the regulations Portions of this presentation are excerpted from the CFPB Portal and ABA/CFPB New HMDA Submission Tool Overview Webinar, August,

7 Today s Attendees On Preparation 70 % of our respondents say they are prepared to capture the expanded data points On Training 16% of our respondents say they have trained stakeholders on expanded HMDA requirements On FIG Version 4 % of our respondents say they are looking at FIG Version 3.1 August % of our respondents say they are looking at FIG Version 3.1 August % of our respondents expressed uncertainty about what a FIG is 1,300 + individuals registered with over 72% from institutions under $5 Billion in assets 7

8 Overview of the New HMDA changes

9 Why is HMDA Data Important? HMDA and CRA data are used in fair lending and CRA exams and relied upon by regulators. Consequently, data must be accurate, or heavy penalties ensue and cast a negative tone on exams The public uses the data. Errors can cause the public to draw incorrect conclusions about lending performance and regulators to question controls, and can derail expansion plans Institutions need to analyze data routinely for trends, patterns, gaps. In order to make good business decisions, data has to be accurate, reliable and complete Boards of Directors need reports on lending performance to stay abreast of trends, monitor performance and ask for improvements 9

10 The new HMDA rule initially issued in Oct., 2015, updated Aug. 24, 2017, changes just about everything: Unprecedented sweeping HMDA changes are now a reality These changes are the most significant in 35 years 29 to 48 data points; however, 110 possible fields per record Post-implementation analytical possibilities very rich New expanded fields provide regulators, advocacy groups, and the industry with opportunities and challenges Capturing, compiling, reporting, and analyzing the new HMDA report will strain every part of your lending and compliance teams 10

11 HMDA Institutional Coverage - Who Must Report There are several requirements for determining which Financial Institutions (FI) must report. The Bureau has a HMDA Institutional Coverage flowchart (updated ) available on its website to help you resolve any uncertainties. For depository institutions, (such as banks, savings associations or credit unions), requirements include: Location Test, Asset-Size Threshold, Federally Related Test and Loan Activity Test For non-depository institutions, (such as a for-profit mortgage lending institution), as of 2018 there will be alignment on the Loan Volume Test and Location Test Loan Volume Test: As of 2018, did the institution originate at least: 25 Closed-End mortgage loans in each of two preceding calendar years or 500* Open-End lines of credit in each of two preceding calendar years *Increased to 500 for 2018 and 2019 only Location Test: Institutions must have had a home or branch office in a Metropolitan Statistical Area (MSA) on the preceding December 31 11

12 Polling Question #1 Will your institution be subject to the HMDA data collection and reporting requirements in 2018? Yes No Not applicable

13 HMDA-Reportable Covered Loans Identify which LOB will have HMDA-reportable covered loans Generally, for consumer purpose loans, both closed-end and open-end lines of credit that are dwelling-secured are now reportable Business-purpose loans are generally reportable if they are closed-end or open-end lines of credit that are dwelling-secured and have a home purchase, home improvement or refinancing purpose A Financial Institution (FI) may rely on the oral or written statement of an applicant regarding the proposed use of covered loan proceeds. The CFPB s 2018 HMDA Transactional Coverage Chart (updated ) is a handy guide if you still need help to determine whether a transaction is reportable, and will help you navigate through the common buzz words that relate to this area, including : dwelling, covered loans, HELOC, cash-out refinance, preapproval requests, construction loans, agricultural loans, temporary financing, fiduciary capacity, and unimproved land 13

14 2018 Expanded Data Field Changes By now, you likely have systems, policies, procedures and training in place to collect the potential 110 data fields required for applications closing in 2018 relating to: Unique identifiers Universal loan identifier, property address, loan originator identifier, and legal entity identifier for the institution Information about the features of the loan Loan term, interest rate, introductory rate period, non-amortizing features, and type of loan Information about the property securing the loan Construction method, property value, lien priority, # of individual dwelling units, and manufactured and multifamily housing data Information about applicants and borrowers Age, credit score, Debt to Income (DTI) denial reasons, application channel, race, ethnicity, gender Information about the underwriting process and pricing data 14

15 Awaiting More HMDA Changes We will cover a lot of the changes that we know of today, many made within the past few weeks, however the HMDA rule continues to evolve. There also remains some degree of uncertainty relating to the new administration and potential for change at the highest level of the CFPB. As an industry, we must be prepared for what we know today, and check daily for any changes. As of the date of this webinar, we are currently awaiting: Launch of the new CFPB HMDA Platform Launch of the new CFPB Geocoding tool Final Rules on the CFPB s recent proposal on which fields are made available to the public and data that is redacted to protect the privacy of applicants and borrowers 15

16 HMDA Recent Updates Here are some recent updates since our last webinar in August, 2017: Resolution of the CFPB s amendments to HMDA Regulation C, and ECOA (Equal Credit Opportunity Act) Regulation B, which clarifies some of the complicated issues around collecting and reporting demographic data The CFPB s recent amendment raised the loan volume threshold for HELOC from 100 to 500 for 2018 and 2019 CFPB has provided a proposal on how it will redact data to protect the privacy of applicants and borrowers, and still may give additional access to certain stakeholders 16

17 Proposal: Disclosure of Loan-Level HMDA Data The CFPB issued proposed guidance to limit the HMDA data it shares publicly (Issued ) Excluded Fields - Proposed non-disclosure of more than a dozen data and text fields from the HMDA data it publicly discloses Modified Fields - Proposed compromise on other data fields by making them less precise here are some examples: Instead of publishing a borrower s loan amount and property value, it would disclose the midpoint for the $10,000 interval into which the reported value falls Instead of disclosing the borrower s age, it would publish a range (under 25, 25 to 34, 35 to 44, etc.) DTI would be disclosed in Ranges (except DTI between 40% - 50% is reported as is) 17

18 Proposed CFPB HMDA Disclosure Policy Excluded Fields Race or Ethnicity Free Form Text Credit Model Free Form Text Street Address Free Form Denial Reason Unique Loan Identifier Automated Underwriting System Result Application Date Credit Score Action Date NMLS# Modified Fields Age - Disclosed in Ranges Property Value - Rounded to the nearest $10,000 midpoint Loan Amount - Rounded to the nearest $10,000 midpoint DTI - Disclosed in Ranges (except between 40% - 50% reported as is) 18

19 Proposed CFPB HMDA Disclosure Policy (cont d) Public as Reported Race, Ethnicity and Gender Loan Type Reverse Mortgage Method of GMI Collection Loan Purpose Open End Credit Indicator Income Pre-approval Business or Consumer Construction Method Action Credit Score Model Occupancy Lien Status Denial Reasons City, State and Zip Code Loan Term CLTV Census Tract and County Purchaser AUS Total Units Appl Submission Type Prepayment Penalty Term Multi-Family Affordable Units Manufactured Home Property Type Initially Payable to Institution Manufactured Home Land Interest Negative Amortizing Features 19

20 Proposed CFPB HMDA Disclosure Policy (cont d) Public as Reported - Pricing Total Loan Costs Total Points and Fees Origination Charges Discount Points Lender Credits Interest Rate Rate Spread HOEPA Status Introductory Rate Period Balloon Payment Interest Only Payments 20

21 New Posted Notice /Notice Requirements The new rule modifies the content of the required HMDA notices, and refers consumers to the CFPB website to obtain your HMDA data as of January 1, 2018 NOTE: This information may be confusing, since that data will not be available on the Bureau s website on January 1 Informally, the CFPB indicates that they will post a notice on their website explaining that the data will not be available until a later date. That may not be an acceptable response to a disgruntled consumer or consumer advocacy group. If you haven t looked into this yet, consider how your institution will handle these inquiries, and be sure to update your staff training so they are prepared to answer questions from the public. 21

22 Unique Loan Identifier (ULI) CFPB plans to release a check digit tool for use in verifying the Universal Loan Identifier (ULI), a number that an FI assigns to a Covered Loan or Application: The ULI is the Financial Institution s Legal Entity Identifier (LEI) plus a loan/application number plus two-character check digit The LEI is a unique, 20-digit alphanumeric identifier issued by the LEI Regulatory Oversight Committee governed by the Global LEI Foundation Branches cannot use the same ULI to refer to multiple Covered Loans or Applications A new ULI is assigned to a Refinancing or Application for Refinancing (i.e., do not use the ULI from the loan that is being refinanced) For a purchased Covered Loan, use the ULI that was assigned to the Covered Loan by the Financial Institution that previously reported the Covered Loan Obtain an LEI at the Global LEI Foundation website: 22

23 Preparation for 2018 Data Collection Here are some additional tips for preparation Coordinate with the Lines of Business (LOBs), second and third lines of defense to test this data frequently throughout 2018, and timely address any findings Be alert for any nuances in collection, including any updates for TRID tolerance cures occurring after loan closure, and loans started in 2017 that will close, and be reportable, in (Consult the Summary of Reportable Data and Reporting Not Applicable guides on the Bureau s website) The most complicated area to prepare for is the collection and reporting of information for ethnicity, race and gender: In general, report ethnicity, race, and gender as provided, at the time provided (there are nuances for 2017 applications) Report demographic data from the applicant and the listed first coapplicant only, who are individuals (e.g. not corporations) 23

24 Polling Question #2 Do you have the processes in place to collect and report on the 110 data fields required by HMDA for 2018? Yes Somewhat No Not applicable

25 Results from June and August HMDA Webinars Do you have the processes in place to collect and report on the 110 data fields required by HMDA for 2018? June 2017 August 2017 Yes 14% 9% Somewhat 50% 59% No 28% 28% Not applicable 8% 4% 25

26 New Submission Process: March 1, 2018

27 Submission of 2017 data on 3/1/18 The entire submission process will change for submission of 2017 data on March 1, 2018 The new filing requirements for submission on the new CFPB HMDA Platform are set forth in the Filing Instruction Guides (FIG) available on the Bureau s website and recently updated in August, 2017 (See Additional Resources slide) Be prepared for spending time to ensure that your data edits (quality, validity, macro and/or syntactical errors) are resolved, validated and/or explained before you sit down to submit Plan for time for any manual work to enter this information into the portal, and have a signing officer available to submit Any steps you can take to improve data integrity now will help you significantly in the hectic months of January and February 27

28 HMDA Data Collection Current Process 28

29 HMDA Data Collection New Process 29

30 New CFPB HMDA Platform New Online, Web-based HMDA Platform Institutions will need a software solution to create an electronic file that can be submitted on the new CFPB HMDA Platform Institutions will no longer be able to use the following submission methods: diskette, through data entry software (DES), to HMDASUB@FRB.GOV, or paper submission 2017 Filing Instruction Guide (FIG 2.2) (updated 8.17) 30

31 New Browser and Login Credentials What s Changing: Use of an acceptable browser Modern browser is required: Google Chrome or Mozilla Firefox, Internet Explorer 11, Microsoft Edge What s Changing: Register online for login credentials to the HMDA Platform User accounts: Obtain login credentials and establish an account prior to using the HMDA Platform 31

32 CFPB Platform Create an Account 32

33 CFPB Platform Create a Password 33

34 New LAR Format Specifications Institutions will submit data collected in a pipe delimited text file (.txt) The HMDA data entry software currently provided by FFIEC that many institutions relied on for years will no longer be available for data entry or submission CFPB will be publishing a Loan/Application Register (LAR) Formatting Tool that will assist filers with small loan volumes in preparing the HMDA LAR for submission LAR Formatting Tool requires the use of the Microsoft Visual Basic for Applications (VBA) The HMDA Platform will allow filers to select a single LAR from a local or network file system confirm the LAR is properly formatted 34

35 New Edit Verification Process All edit verifications must be made online and fully addressed prior to submission this is a significant change from the current process: Syntactical and Validity Edit Review The HMDA Platform will identify any syntactical or validity edit and the rows in the LAR where each edit is triggered All Syntactical and validity edits must be addressed prior to filing the LAR the Platform will not allow submission without resolution Quality and Macro Quality Edit Review The filer will be required to confirm the accuracy of the data flagged with quality edits and provide explanations for any macro quality edits Edit reports will no longer be sent via but now viewed and downloaded from the HMDA Platform Allow sufficient time to submit this information on the Platform 35

36 Edits Must Be Resolved Prior To Submission 36

37 New Authorized Representative Signature 37

38 Submission Requirements: What's Changing? What s Changing: New geocoder tool The HMDA and CRA regulations require institutions to record and report the geographic location of a property, such as the census tract that the property is located in. For many institutions, geocoding can be a very time consuming task that can take hours, sometimes days, to complete. CFPB Geocoder: CFPB is expected to roll out new online geocoder tool and methodology Institutions will need to decide between the FFIEC s legacy or new CFPB geocoder CRA Wiz users will not be able to maintain geocoding results from both geocoders in the same file 38

39 Are You Ready? Submission Check List: On March 1, 2018, submit 2017 HMDA data to the new regulatory agency (CFPB), on the new HMDA Platform Use a correct browser type: Google Chrome or Mozilla Firefox, Internet Explore 11, Microsoft Edge Make sure you have login credentials for the HMDA Portal Verify the Universal Loan Identifier (ULI) Use a new file type: pipe delimited text file (.txt) Validate edits: ready to explain why Quality and/or Micro edits are true Authorized representative of the bank ready to certify the completeness and accuracy of the LAR Note: There are no changes to CRA, which means that institutions that file both HMDA and CRA (small business, farm, community development) will have two completely different submission methods Meanwhile: In January/February start preparing/collecting the new 2018 expanded HMDA data fields, and taking care of those 2017 applications that close in 2018 (that will require new data fields. There are also important notes regarding GMI in this situation discussed below) 39

40 Polling Question #3 What is your institution s chief concern about the new HMDA rules? New Submission Requirements New Data Fields including GMI Data Integrity Overall HMDA Readiness Other

41 Fair Lending Data Analytics

42 Fair Lending Data Analytics Impact of Expanded HMDA Data What s Changing? And Why?: A whole lot, and ask google! Primary fair lending data was not subject to reporting - but, it is NOW 2017 and Prior Fair Lending Data or HMDA Plus data has been part of data collection by an institution 2018 and Forward Primary fair lending data will be part of collection and reporting One of the primary purpose for CFPB to collect this data is to expand Fair Lending analysis. For example: Preapproval, Property Location, Rate Spread, HOEPA Status, Denial Reasons, Interest Rate, Prepayment Penalty, DTI, CLTV, Total Units, Credit Score 42

43 Fair Lending Data Analytics Data Sources Where do these data points come from: Follow Data Trail Some of the key data primarily comes from following sources: 2014 Dodd Frank Act (DFA) Qualified Mortgage (QM) Data Points 2015 TRID Disclosure Data Points Note timing issues if a TRID Cure is issued after consummation. Underwriting Data Repository Pricing Data Repository Loan Identifier Information Data Points Applicant GMI Data 43

44 Fair Lending Data Analytics: Current Data What s going on now? Current State 3 Primary categories which consisted of 39 data points which could be included in Fair Lending Analysis: Applicant Information Loan Information Property Information Race Loan # Property Type Ethnicity Application Received Date MSA Gender Loan Type State Income Loan Purpose County Lien Status Census Tract Action Taken Action Date HOEPA Status Type of Purchaser Denial Reasons 44

45 Fair Lending Data Analytics Expanded 2018 Data What will be Collected/Reported?: 3X Data 6 main categories which consist of major Fair Lending data points: Loan Identifier Information Loan Information Property Information Applicant Information (GMI) Underwriting Information Pricing Information 45

46 Fair Lending Data Analytics No Escape What does all this data mean? You ve got to review/analyze, No Escaping 46

47 Fair Lending Data Analytics - Expanded GMI Expanded Government Monitoring Information (GMI): Context GMI data collection has always been in place, but expanded data collection is now aligning with how US census has been collecting data 47

48 Fair Lending Data Analytics GMI Values What will be collected/reported : Expanded Race/Eth/Sex Race: 5 values per Applicant Ethnicity: 5 values per Applicant Sex : 3 values are Male, Female, or Male & Female per Applicant Key revision from August FIG 2017 for Race/Ethnicity Others For example, the Free Form Text for race values 1, 27, 44, the lender can either select Other and report the value provided in Free Form Text OR Just report value provided in Free Form Text without selecting Other For Fair Lending, it will be up to the institution how they want to view this data for Fair Lending Analysis. Do they review them separately as Others OR Do they place them in the aggregate category? 48

49 Fair Lending Data Analytics GMI Permutations How to use all of that collected data : Significance of 121,000? GMI combinations represents 1/3 of that count 121,000 (110*110) is the # of combinations one can use reported data to perform a variety of Fair Lending analytics Until now aggregated view was collected and used for Fair Lending analysis. Starting 2018, disaggregated will be collected and used as well for Fair Lending analysis. Every institution is unique in terms of their lending footprint. Especially, National/Regional lenders most likely will serve multiple race/ethnicity communities VS A small community bank might be serving in a predominantly Black or African American neighborhood and very small portion of Asian population Whereas, another community bank might be serving predominantly White and African American population due to the nature of population residing in that communities 49

50 Fair Lending Data Analytics GMI Views Review from both views: Aggregate/Disaggregate Aggregate View (the major category): AIAN, Asian, Black or AA, NHPI, White, Joint, 2+ Minority Hispanic or Latino, Not Hispanic or Latino, Joint, 2 + Ethnicity Male, Female, Joint Disaggregate View (the major and subcategories): AIAN, Asian, Asian Indian, Chinese.., Black or AA, NHPI, Native Hawaiian, Samoan.., White, Joint, 2+ Minority, Other s Hispanic or Latino, Mexican, Puerto Rican.., Not Hispanic or Latino, Joint, 2+ Ethnicity, Other. Male, Female, Male & Female 50

51 Fair Lending Data Analytics Rich Data Considerations So why all this data for Fair Lending : Why not? Analyze them from Aggregate views Analyze them from Disaggregate views Institution can covers different angles of current and new fair lending analysis which includes but not limited to: Redlining REMA (Reasonable Expected Market Area) Disparate Impact Disparate Treatment Peer to Peer review (This will change with Peer Data CFPB will publish) Compare Sub Minority Categories to Other Sub Minority Categories Pricing Procedure Review Underwriting Procedure Review 51

52 Polling Question #4 How ready are you to do fair lending analysis on the expanded HMDA data fields? Pen and paper ready! Where should we start? Alexa, start regression analysis for us. We have built a robust data analytics solution.

53 CRA Wiz Product Update

54 HMDA Product Delivery Timeline 2016 HMDADF database changes LOS integration collaboration 2017 HMDADF Import format and updated edit views Standard Saved 2018 Import Format Edit checks ACS census data update HMDA DF Reports FL Wiz updates for new fields 2017 submission updates pipe delimited.txt format 7.2 SP 1 Q2 7.3 Maintenance release Q4 7.3 SP 1 Q Reports ULI check digit validation CFPB Tools (Edit checks, Geocoding, Submission) 2018 submission updates Fair Lending Regression Module Upgrade to.net CFPB portal and new edit check process 54

55 2017 Product Release Schedule CRA/Fair Lending Wiz Software Updates: 7.2SP1 released May 19 th, 2017 and available for download via Wiz Web Center. Ability to bring in HMDA DF data in a standardized format Review and edit data Run ad-hoc reporting 7.3 release October 31 st, 2017 will include further support of HMDA DF in Wiz which includes but not limited to 2017 Submission updates Single Record View HMDA DF analysis Support of HMDA DF in advanced features (event scheduler, workbook builder, etc.) 7.3 SP1 release in Q4, 2017 will include additional support of advanced HMDA DF features CRA Tables (currently supported for HMDA DF) Fair lending analysis of HMDA DF CFPB HMDA Update: Q CFPB will release File Format Verification Tool.* Q CFPB will release 2017 HMDA Platform Beta Version, Geocoder (For 2018 data), and 2018 HMDA Edit.* Q CFPB will release 2017 HMDA Platform, Check Digit Generator.* *Subject to Change as contingent upon the CFPB release schedule 55

56 Amendments to Reg C (HMDA)

57 HMDA Amendments Reporting Threshold The April, 2017 proposed amendments to Reg C (HMDA) were finalized on Importantly, there was a change to the threshold for Open-End Lines of Credit: 12 CFR Definitions (g) Financial Institution means Meets at least one of the following criteria: (B) [Effective until January 1, 2020] In each of the two preceding calendar years, originated at least 500* openend lines of credit that are not excluded from this part pursuant to (c)(1) through (10) or (13)... *Effective January 1, 2020, the threshold will return to 100 open-end lines of credit without further action by the Bureau 57

58 HMDA Amendments Voluntary Reporting Voluntary Reporting 12 CFR (c) Excluded transactions. The requirements of this part do not apply to... (11) A closed-end mortgage loan, if the financial institution originated fewer than 25 closed-end mortgage loans in either of the two preceding calendar years; a financial institution may collect, record, report, and disclose information, as described in and , for such an excluded closed-end mortgage loan as though it were a covered loan, provided that the financial institution complies with such requirements for all applications for closed-end mortgage loans that it receives, closed-end mortgage loans that it originates, and closed-end mortgage loans that it purchases that otherwise would have been covered loans during the calendar year during which final action is taken on the excluded closed-end mortgage loan. 58

59 HMDA Amendments Collection of GMI Demographic Information Collection Clarifications Considerable amendments to Appendix B to Regulation C Minor Changes to the Model Form Changes to the Filing Instructions Guide to be consistent with amendments to Appendix B to Regulation C See Collecting Demographic Information 59

60 HMDA Amendments Loan Purpose, Originator ID Transitional Rules Loan Purpose and Originator ID The rules for determining the Loan Purpose are new for 2018 and different from previous years. To reduce the burden of determining the Loan Purpose, lenders may report not applicable for purchased loans originated prior to January 1, 2018 For loans subject to Regulation Z, lenders may report not applicable for the originator s NMLSR ID for purchased loans originated before January 1, For loans not subject to Regulation Z, commercial loans for example, originated prior to January 1, 2018, lenders may report not applicable for the originator ID. 60

61 HMDA Amendments: Dwelling for Sale Another Amendment to Reg C relates to loans exclusively for construction of a dwelling for sale: Recall that there is a purpose test for commercial loans; to be a covered loan, a commercial loan must be for the purpose of home purchase, home improvement or refinancing. (See 12 CFR (c)(10)) Staff Commentary now provides A home purchase loan does not include a construction-only loan or line of credit that is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at later time or that is extended to a person exclusively to construct a dwelling for sale... 61

62 HMDA Amendments: CFPB Geocoding Tool Safe Harbor The CFPB is still in the process of developing a geocoding tool. Another amendment to Reg C relates to the Safe Harbor when Lenders use the CFPB s Geocoding Tool CFPB is developing a geocoding tool Effective January 1, 2019, 12 CFR (b)(2) states that An incorrect entry for a census tract number is deemed a bona fide error, and is not a violation of the Act or this part, provided that the financial institution maintains procedures reasonably adapted to avoid such an error. Staff Commentary now provides that when a lender enters the correct address in the CFPB s geocoding tool (yet to be released) and the geocoding tool returns a census tract, it is an example of a procedure reasonably adapted to avoid errors under the above regulation section 62

63 HMDA Amendments Misc. Miscellaneous Amendments More Clarifications? CFPB states that the amendments to the HMDA final rule are to make technical corrections to and to clarify certain requirements of the HMDA final rule In addition to the matters on the slides above, there are numerous other miscellaneous amendments For example regarding the loan to value (LTV) ratio relied upon in making the credit decision, for clarity the staff commentary now states that the loan to value ratio is not limited by the value of the dwelling, but includes (when relied upon in making the credit decision) other real and personal property securing the loan See the staff commentary a discussion of the miscellaneous amendments 63

64 Amendments to Reg B (ECOA) Impacting HMDA

65 Amendments to Reg B (ECOA) Impacting HMDA Intersection of Regulation B and Regulation C (HMDA) prior to Amendment Collect government monitoring information under Regulation B for applications for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling... Collect and report demographic information from the applicant and first co-applicant under Regulation C for applications and originations for closed-end and open-end loans secured by a dwelling (and for commercial loans, meet the purpose test) 65

66 Amendments to Reg B (ECOA) Impacting HMDA (Cont d) Post Amendments to Both Regulations Lenders may use HMDA demographic questions (disaggregated questions) for Regulations B and C; lenders may opt to use the aggregated questions instead of disaggregated questions for Regulation B Lenders must collect and report demographic information using disaggregated questions from applicant and first co-applicant; lenders may collect demographic information using disaggregated questions from the third, fourth, etc. applicants without violating Regulation B; for commercial loans, lenders may collect demographic information when a lender is uncertain that the loan will pass the purpose test without violating Regulation B 66

67 URLA Update Sept Announcements

68 September 2017 Announcements Regarding Uniform Residential Loan Application (URLA) Revised Demographic Information Addendum to conform to model form in Appendix B to Regulation C Set July 1, 2019 as a permissive use date for the revised Uniform Residential Loan Application (URLA) Set February 2020 as a mandatory use date for the revised URLA URLA subject to revision depending on resolution of the borrower language preference question matter Recommendation: Use Wolters Kluwer interim URLA and Demographic Information Addendum (VMP21A Series; VMP1602); See also: 68

69 Collecting Demographic Information the Starting Point Appendix B to Part Form and Instructions for Data Collection on Ethnicity, Race, and Sex [Effective Jan. 1, 2018.] You may list questions regarding the ethnicity, race, and sex of the applicant on your loan application form, or on a separate form that refers to the application... 69

70 Don t forget... Important Source of Information - CFPB S Filing Instructions Guide (FIG) Version FIG.pdf 70

71 Filing Instructions Guide (FIG ) Version 3.2 Contains Revision Log File Specifications Data Specifications Edit Specifications 71

72 WK s 12 Guidelines for Collecting GMI Data

73 WK Guidelines for Collecting GMI: #1 WK Guideline #1 If there is not at least one coapplicant, report that there is no coapplicant in the appropriate fields. Note: Avoid the common error for nonnatural persons do not report NA if there is no co-applicant HMDA Appendix B 5. If there are no co-applicants, you must report that there is no coapplicant. Per FIG 3.2 Field No co-applicant Field No co-applicant Field No co-applicant Field No co-applicant Field No co-applicant Field No co-applicant Field No co-applicant Field No co-applicant Field No co-applicant 73

74 WK GMI Guideline #2a WK GUIDELINE #2a For HMDA, collect and report demographic information on the applicant and first co-applicant only Note: At the lender s discretion, a lender may collect (but not report) demographic information from any other applicant. (Edited per final Regulation B amendments signed September 8, 2017) HMDA Appendix B 1. You must ask the applicant for this information you must provide the ethnicity, race, and sex only for the first coapplicant listed on the collection form. Regulation B (ECOA), Section (a)(4)(vi) A creditor that is collecting information regarding the ethnicity, race, and sex of an applicant or first co-applicant may collect information regarding the ethnicity, race, and sex of a second or additional coapplicant for a covered loan under Regulation C, 12 CFR (e), or for a second or additional co-applicant for a loan described in paragraphs (a)(4)(i) through (v) of this section. 74

75 WK GMI Guideline #2b WK GUIDELINE #2b Similar to above, a lender may collect demographic information on a commercial loan that may ultimately fail the home purchase, improvement or refinance purpose test for commercial loans. Regulation B (ECOA), Section (a)(4)(v) A creditor that is a financial institution under Regulation C, 12 CFR (g), or that submitted HMDA data for any of the preceding five calendar years but is not currently a financial institution under Regulation C, 12 CFR (g), may collect information regarding the ethnicity, race, and sex of an applicant for a loan that would otherwise be a covered loan under Regulation C, 12 CFR (e), if the loan were not excluded by Regulation C, 12 CFR (c)(10). 75

76 WK GMI Guideline #3 WK GUIDELINE #3 3a. 3 b. Report not applicable when an applicant is not a natural person. A lender may choose to report not applicable for purchase loans Appendix B 7. You must report that the requirement to report the applicant's or co-applicant's ethnicity, race, and sex is not applicable when the applicant or co-applicant is not a natural person (for example, a corporation, partnership, or trust). Appendix B 6. When you purchase a covered loan and you choose not to report the applicant's or coapplicant's ethnicity, race, and sex, you must report that the requirement is not applicable. 76

77 WK Guideline 3 Additional Considerations Examples of Not Applicable Applicant is a corporation Applicant is solely signing as the trustee of an inter vivos trust NOTE: report NA based on non-binding, verbal advice from the CFPB Example of an Unresolved Issue Applicant is a co-signer (does not receive a direct benefit from the extension of credit and signs in order for other parties to receive the requested credit) Examples of Collect and Report Applicant is an individual and is signing both individually and as the trustee of an inter vivos trust Applicant is an individual and is doing business as (DBA) a sole proprietorship Collect and report demographic information if the applicant is a natural person under the applicable state law Applicant is an individual and a beneficiary of an inter vivos trust 77

78 WK Guideline 4 WK GUIDELINE #4 Report what the applicant selects and/or writes on the demographic form. Some Exceptions: (1) See discussion of Other and information that an applicant writes on the form in Rule 10 below. (2) Reporting is limited to no more than 5 aggregated and disaggregated categories. See Guideline #8 below. (3) Disregard a check in the I do not wish to provide this information checkbox for an application taken by mail, internet, or telephone if the applicant has also furnished partial or complete information in the applicable section of the form. Appendix B 8. You must report the ethnicity, race, and sex of an applicant as provided by the applicant 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. FIG 3.2: b. Use Code 3 [Information not provided by applicant in mail, internet, or telephone application] if the applicant or borrower, or co-applicant or coborrower does not provide the information in an application taken by mail, internet, or telephone. Leave the remaining Ethnicity of Applicant or Borrower data fields blank. 78

79 WK Guideline 5 WK GUIDELINE #5 When an applicant chooses not to provide information and the application is taken in person (which includes internet with a video component) a lender is required to provide demographic information on the basis of visual observation or surname; and the lender is limited to selecting aggregate categories only for ethnicity and race; and either male or female for sex. Appendix B 8... Only an applicant may self-identify as being of a particular Hispanic or Latino subcategory... or of a particular Asian subcategory... or of a particular Native Hawaiian or Other Pacific Islander subcategory... or of a particular American Indian or Alaska Native enrolled or principal tribe When you collect an applicant's ethnicity, race, and sex on the basis of visual observation or surname, you must select from the following aggregate categories: Ethnicity (Hispanic or Latino; not Hispanic or Latino); race (American Indian or Alaska Native; Asian; Black or African American; Native Hawaiian or Other Pacific Islander; White); sex (male; female). FIG (3.2): Fields 51 and 52 Values: 1. Male, 2. Female; 3.Information not provided by applicant in mail, internet, or telephone application; 4. Not applicable; 5. No co-applicant (for Field 52 only); 6. Applicant selected both male and female. 79

80 WK Guideline 6 WK GUIDELINE #6 An applicant may select one or more subcategories without selecting the category, or stated another way, An applicant may select a disaggregated category without selecting an aggregated category. NOTE: Do not report an aggregated category unless the applicant selects an aggregated category. Example: (1) An applicant may select Mexican without selecting Hispanic or Latino. If an applicant does so, a lender reports Mexican and does not report Hispanic or Latino. Appendix B 8... An applicant may select an ethnicity or race subcategory even if the applicant does not select an aggregate ethnicity or aggregate race category. 80

81 WK Guideline 6 - Example from CFPB Loan Scenarios For field 19 in the above grid, 12 is the selected value which correlates with the selection Puerto Rican. Excerpt from CFPB Loan Scenarios at: research/hmda/static/for-filers/hmda-loan- Scenarios.pdf 81

82 WK Guideline 7 WK GUIDELINE #7 Appendix B 9. You must offer the applicant the option of selecting more than one ethnicity or race. Offer the applicant the opportunity to select more than one ethnicity and race. Source: Fannie/Freddie Demographic Information Addendum Revised 09/2017; notice Check one or more on the form 82

83 WK Guideline 8 WK GUIDELINE #8 Do not report more than 5 aggregated and disaggregated categories. Appendix B 9.i... you must not report more than a total of five aggregate ethnicity categories and ethnicity subcategories combined. Appendix B 9.iii... you must not report more than a total of five aggregate race categories and race subcategories combined. 83

84 WK Guideline 9 WK GUIDELINE #9 If an applicant selects or identifies more than 5 categories, report aggregated categories first and then subcategories to a maximum of 5. Note: A lender may select which subcategories to report when an applicant selects or identifies more than 5 categories/subcategories. Appendix B 9.i... if the applicant selects both aggregate ethnicity categories and also selects all four ethnicity subcategories, you must report Hispanic or Latino, Not Hispanic or Latino, and any three, at your option, of the four ethnicity subcategories selected by the applicant. 9.iii... You must report every aggregate race category selected by the applicant. If the applicant also selects one or more race subcategories, you must report each race subcategory selected by the applicant, except that you must not report more than a total of five aggregate race categories and race subcategories combined... if the applicant selects the White, Asian, and Native Hawaiian or Other Pacific Islander aggregate race categories, and the applicant also selects the Korean, Vietnamese, and Samoan race subcategories, you must report White, Asian, Native Hawaiian or Other Pacific Islander, and any two, at your option, of the three race subcategories selected by the applicant. 84

85 WK Guideline 10 a WK GUIDELINE #10 a 10 a. If an applicant writes in information under an Other subcategory, but does not select Other, a lender may: report the information that the applicant writes in and report Other; or report the information that the applicant writes in without reporting Other. Appendix B 9.ii... An applicant may select the Other Hispanic or Latino ethnicity subcategory, an applicant may provide a particular Hispanic or Latino ethnicity not listed in the standard subcategories, or an applicant may do both. If the applicant provides only a particular Hispanic or Latino ethnicity in the space provided, you are permitted, but are not required, to report Other Hispanic or Latino in addition to reporting the particular Hispanic or Latino ethnicity provided by the applicant. 9.iv... An applicant may select the Other Asian race subcategory or the Other Pacific Islander race subcategory, an applicant may provide a particular Asian race or Pacific Islander race not listed in the standard subcategories, or an applicant may do both. If the applicant provides only a particular Asian race or Pacific Islander race in the space provided, you are permitted, but are not required, to report Other Asian or Other Pacific Islander, as applicable, in addition to reporting the particular Asian race or Pacific Islander race provided by the applicant. 85

86 WK Guideline 10 b WK GUIDELINE #10 b 10 b. For American Indian or Alaska Native race category, which does not have an Other but does have a write in space, if an applicant writes in information, but does not check American Indian or Alaska Native, a lender may: report the information that the applicant writes in and report American Indian or Alaska Native; or report the information that the applicant writes in without reporting American Indian or Alaska Native. Appendix B 9.v... An applicant may select the American Indian or Alaska Native race category, an applicant may provide a particular American Indian or Alaska Native enrolled or principal tribe, or an applicant may do both. If the applicant provides only a particular American Indian or Alaska Native enrolled or principal tribe in the space provided, you are permitted, but are not required, to report American Indian or Alaska Native in addition to reporting the particular American Indian or Alaska Native enrolled or principal tribe provided by the applicant. 86

87 WK Guideline 11 WK GUIDELINE #11 11a. Count Other and the information that an applicant writes in under Other as 1 for purposes of calculating the maximum of 5 reportable categories. 11b. Count American Indian or Alaska Native and any information that an applicant writes in under American Indian or Alaska Native as 1 for purposes of calculating the maximum of 5 reportable categories. Appendix B 9.ii... For purposes of the maximum of five reportable ethnicity categories and ethnicity subcategories combined, as set forth in paragraph 9.i, the Other Hispanic or Latino subcategory and additional information provided by the applicant together constitute only one selection. Appendix B 9.iv... For purposes of the maximum of five reportable race categories and race subcategories combined, as set forth in paragraph 9.iii, the Other race subcategory and additional information provided by the applicant together constitute only one selection. 87

88 WK Guideline 12 WK GUIDELINE #12 For applications taken in person (which includes internet with a video component), report whether demographic information is based on visual observation or surname. Appendix B You must report whether the applicant's ethnicity, race, and sex was collected on the basis of visual observation or surname. Appendix B - Demographic Form Image To Be Completed by Financial Institution (for an application taken in person): Was the ethnicity of the applicant collected on the basis of visual observation or surname? Yes No 88

89 Transition Rule: GMI for 2017 applications closed in 2018 For an origination that is started in 2017, and closed in 2018, the new HMDA fields need to be reported. However, the collection and reporting of GMI will depend on which questions are asked and is nuanced. A lender is not required to ask the 2018 disaggregated GMI questions for an application begun prior to However, a lender may ask the disaggregated questions before Here is the transition rule from Staff Commentary: 2. Transition rule for applicant data collected prior to January 1, If a financial institution receives an application prior to January 1, 2018, but final action is taken on or after January 1, 2018, the financial institution complies with (a)(10)(i) and (b) if it collects the information in accordance with the requirements in effect at the time the information was collected. For example, if a financial institution receives an application on November 15, 2017, collects the applicant's ethnicity, race, and sex in accordance with the instructions in effect on that date, and takes final action on the application on January 5, 2018, the financial institution has complied with the requirements of (a)(10)(i) and (b), even though those instructions changed after the information was collected but before the date of final action. However, if, in this example, the financial institution collected the applicant's ethnicity, race, and sex on or after January 1, 2018, (a)(10)(i) and (b) requires the financial institution to collect the information in accordance with the amended instructions. 89

90 Transition Rule: GMI for 2017 applications closed in 2018 (cont d) Layer onto that a rule from Appendix B that will require the lender to re-ask the questions in 2018 when: (1) the application is begun via mail, internet, or telephone in 2017; (2) the applicant does nothing with the demographic section of the application; and (3) the lender meets in person with the applicant on or after 1/1/18, and prior to closing. Here is that rule: 12. 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 example, at closing or account opening, you are not required to obtain the applicant's ethnicity, race, and sex. 90

91 Resources and Questions

92 Additional Resources CFPB Implementation Page Guidance/HMDA-Implementation/ CFPB 2017 HMDA Institutional Coverage Chart (updated ) CFPB2018 HMDA Transactional Coverage Chart (updated ) Filing Instruction Guide (FIG 2.2) (updated 8.17) Data Filing Instruction Guide (FIG 3.2) (updated 8.17) CFPB HMDA Small Entity Compliance Guide: 92

93 Additional Resources (cont d) CFPB Key Dates Timeline (updated ) CFPB Disclosure of Loan Level HMDA Data (Proposal issued ) Amendments to Equal Credit Opportunity Act (Regulation B) Ethnicity and Race Information Collection (issued ) The Regulation C (HMDA) Final Rule (Oct., 2015, updated ) The Global LEI Foundation website to obtain an LEI: 93

94 Additional Resources (cont d) Sample Data Collection Form URLA - Demographic Information Addendum (dated 9/2017 for use with current URLA) New URLA (Not for Current Use) Data Submission Resources for HMDA Filers Loan Application Register (LAR) Formatting Tool CFPB Loan Scenarios (August, 2017) 94

95 Register at 95

96 Resources from Wolters Kluwer Consulting Services Staff and Board Training HMDA Submission Services HMDA Data Scrubs HMDA Risk Assessment Fair Lending Risk Assessment with Expanded HMDA Data Compliance Management System ( CMS ) Review Fair Lending Analysis Risk Assessments Compliance Program Diagnostic Services/Gap Analysis Data integrity Review CFPB and Bank Regulatory Exam Preparation and Remediation Regulatory training Business Process Outsourcing (BSP) for HMDA, CRA, and Fair Lending reporting and analytics Technology Solutions CRA Wiz for data management, analysis and submission HMDA Wiz for data management, analysis and submission Fair Lending Wiz for analysis Browser Based Editing (BBE) for mortgage and community development data management CRA and Fair Lending Wiz Dashboards of compliance goal management OneSumX for Compliance Program Management Additional Information visit our website or call Visit our HMDA Resource Center 96

97 Polling Question #5 Would you like a representative from Wolters Kluwer to reach out to you to discuss consulting services or technology solutions for managing HMDA? Yes, to discuss consulting services Yes, to discuss technology solutions Yes, to discuss BOTH consulting & technology Not right now, but perhaps after Thanksgiving We plan to keep the WK resources in mind for HMDA preparation, submission and future analysis

98 Wolters Kluwer HMDA Webinar Series #4: Coming December 7, 2017 HMDA Final Pit Stop: Fuel Up and Be Ready for 2018 Chances are your institution is ready to submit to the new CFPB HMDA portal by March 1, 2018 and start collecting the expanded HMDA data fields on January 1, But there might be some last-minute surprises! Our team will give you any last-minute tips and updates to get you ready for the new HMDA requirements. Now is the time to validate detailed HMDA data collection and validation procedures, and ensure you are prepared for the transition to Institutions will also want to demonstrate that your HMDA Compliance Management System (CMS) is solid. Prepare now and be ready to take a holistic view of the new HMDA regulation. This webinar will cover: Last Minute Surprises Checks, Balances & Controls How to update your CMS for the new HMDA regulations

99 Questions 99