S. 2155 & HMDA: Complying with New Partial Exemptions Brought to you by: ABA & BCFP
Welcome Rob Rowe Vice President Center for Regulatory Compliance American Bankers Association
Our Agenda for Today Background What does the 2018 HMDA Rule mean to me? Example Key Takeaways Questions 3
Background On May 24, 2018, the President signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) The Act amended HMDA by adding partial exemptions from HMDA s requirements for certain transactions made by certain insured depository institutions and certain insured credit unions
Interpretive and Procedural Rule On August 31, the Bureau issued an interpretive and procedural rule to implement and clarify changes made to HMDA Among other things, the rule clarifies that only loans and lines of credit that are otherwise HMDA reportable count toward the threshold for the partial exemptions and clarifies which of the data points in Regulation C are covered by partial exemption
Tools for You The 2018 FIG, incorporating the 2018 HMDA rule, was released on August 31, 2018 and can be found on the HMDA Website: https://ffiec.cfpb.gov/ The rule is available at: https://www.consumerfinance.gov/policy- compliance/guidance/implementation-guidance/hmda- implementation Additional tools to assist you in getting your HMDA LAR ready for filing can be found here: https://ffiec.cfpb.gov/tools/ 6
Partial Exemptions Generally, an insured depository institution or insured credit union does not need to collect or report certain data with respect to: Closed-end mortgage loans if it originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years Open-end lines of credit if it originated fewer than 500 open-end lines of credit in each of the two preceding calendar years 7
Operational Approach
Our Operational Approach Remains Unchanged Each year, the Bureau will provide one updated Filing Instructions Guide (FIG) to assist in the filing process Users will submit their data one time, unless resubmission is necessary HMDA Platform Users will compile one LAR file with their HMDA data Users will submit one file through the HMDA Platform 9
Flexibility will be available for the 2018 submission Users can take partial exemptions on any of the eligible data points if they are below the threshold requirements Partial exemptions can be taken at any point in the year and are retroactive to January 1, 2018 Users can exercise partial exemptions on 1 LAR record, some LAR records, or all LAR records. The same goes for data points. Exemption Codes Integer Fields 1111 Alphanumeric Fields Exempt 10
Data fields you can take partial exemptions on and the relevant exemption codes Exemption Code = 1111 Credit Score of Applicant or Borrower Credit Score of Co-Applicant or Co-Borrower Applicant or Borrower, Name and Version of Credit Scoring Model Co-Applicant or Co-Borrower, Name and Version of Credit Scoring Model Reason for Denial: 1 Balloon Payment Interest-Only Payments Negative Amortization Other Non-amortizing features Manufactured Home Secured Property Type Manufactured Home Land Property Interest Submission of Application Initially Payable to Your Institution Automated Underwriting System: 1 Automated Underwriting System Result 1 Reverse Mortgage Open-End Line of Credit Business or Commercial Purpose Exemption Code = Exempt Street Address City Zip Code Rate Spread Total Loan Costs Total Points and Fees Origination Charges Discount Points Lender Credits Interest Rate Prepayment Penalty Term Debt-to-Income Ratio Combined Loan-to-Value Ratio Loan Term Introductory Rate Period Property Value Multifamily Affordable Units Mortgage Loan Originator NMLSR Identifier Exemption Code = Blank Applicant or Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 Co-Applicant or Co-Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 Reason for Denial: 2 Reason for Denial: 3 Reason for Denial: 4 Reason for Denial: Conditional Free Form Text Field for Code 9 Automated Underwriting System: 2 Automated Underwriting System: 3 Automated Underwriting System: 4 Automated Underwriting System: 5 Automated Underwriting System: Conditional Free Form Text Field for Code 5 Automated Underwriting System Result 2 Automated Underwriting System Result 3 Automated Underwriting System Result 4 Automated Underwriting System Result 5 Automated Underwriting System Result: Conditional Free Form Text Field for Code 16 11
Data Point Data Field Example: Credit Score Partial exemptions must be taken at the data point level. Meaning that if a partial exemption is taken for a data point, exemptions must be taken for all data fields that the data point comprises. Below is an example: Credit Score Fields eligible for an exemption: Credit Score of Applicant or Borrower Credit Score of Co-Applicant or Co-Borrower Applicant or Borrower, Name and Version of Credit Scoring Model Applicant or Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 Co-Applicant or Co-Borrower, Name and Version of Credit Scoring Model Co-Applicant or Co-Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 View the updated 2018 FIG here 12
Example
Accessing the HMDA Platform You will access the HMDA Platform the same way you did last year: https://ffiec.cfpb.gov/filing/ Jane Doe 14
LAR Example This example is for illustrative purposes only and includes errors that will trigger a validity edit. Data Point: Credit Score Data Field Data Field Data Field Data Field Data Field Data Field Credit Score of Applicant or Borrower Credit Score of Co- Applicant or Co- Borrower Applicant or Borrower, Name and Version of Credit Scoring Model Applicant or Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 Co-Applicant or Co- Borrower, Name and Version of Credit Scoring Model 1111 9999 2 10 Co-Applicant or Co- Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 810 9999 1111 9 780 1111 1 10 An excerpt from the Loan/Application Register (LAR) Formatting Tool (https://ffiec.cfpb.gov/tools/lar-formatting) is shown above. Filers can use this tool to properly format their HMDA data before filing. 15
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Credit Score of Applicant or Borrower Credit Score of Co- Applicant or Co- Borrower Applicant or Borrower, Name and Version of Credit Scoring Model Applicant or Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 Co-Applicant or Co- Borrower, Name and Version of Credit Scoring Model 1111 9999 2 10 Co-Applicant or Co- Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 810 9999 1111 9 780 1111 1 10 17
LAR Example Updates to the LAR have been made to resolve the validity edits. Data Point: Credit Score Data Field Data Field Data Field Data Field Data Field Data Field Credit Score of Applicant or Borrower Credit Score of Co- Applicant or Co- Borrower Applicant or Borrower, Name and Version of Credit Scoring Model Applicant or Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 Co-Applicant or Co- Borrower, Name and Version of Credit Scoring Model 1111 1111 1111 1111 Co-Applicant or Co- Borrower, Name and Version of Credit Scoring Model: Conditional Free Form Text Field for Code 8 810 9999 2 10 780 730 1 1 An excerpt from the Loan/Application Register (LAR) Formatting Tool (https://ffiec.cfpb.gov/tools/lar-formatting) is shown above. Filers can use this tool to properly format their HMDA data before filing. 18
HMDA Filing Accepted Once all edits have been corrected you will be able to submit your LAR file. 19
Compliance Statement As announced in December 2017, for HMDA data collected in 2018 and reported in 2019, the Bureau does not intend to require data resubmission unless data errors are material. Furthermore, the Bureau does not intend to assess penalties with respect to errors in data collected in 2018 and reported in 2019. Collection and submission of the 2018 HMDA data will provide financial institutions an opportunity to identify any gaps in their implementation of amended Regulation C and make improvements in their HMDA compliance management systems for future years. Any examinations of 2018 HMDA data will be diagnostic to help institutions identify compliance weaknesses, and the Bureau will credit good-faith compliance efforts.
Key Takeaways Filers may take partial exemptions when filing their 2018 data on the 2018 HMDA Platform There is one updated Filing Instructions Guide for one file on one platform to end up with one submission Partial exemption codes are in the form of 1111, Exempt, or Blank depending on the field type Partial exemptions can be taken at any point of the year on one record, some records, or all records and data points Questions can be submitted to: HMDAhelp@cfpb.gov 21
Questions?
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