HMDA: Haven or Havoc Cindy Prince, Presenter December 5, 6 & 7, 2017 Assisted by Rachelle Dekker and Matt Goble
Recap Day One 2 1. Annual expectations 2. Two proposals and a new final rule 3. Key definitions 4. Reportable and Excluded Transactions 5. Categories of data 54 Data Elements o o How we organized the data Explanation of each data element
Agenda Day Two 3 1. Reporting requirements 2. Institutional coverage 3. What these changes mean to you 4. Data collection requirements 5. Action plan 6. Ethnicity, Race & Sex o o Rules for collecting and reporting Transition rules
2017: Reporting Requirements 4 Beginning January 1, 2018, all HMDA data collected in or after 2017 will be filed with CFPB Data must be formatted in pipe delimited text file (.txt) FFIEC free software no longer available for inputting CFPB s loan/application register formatting tool Filers with small volumes of reported loans that do not use vendor or other software may use to prepare HMDA data for submission Beginning with 2017 data, filers will submit HMDA data using CFPB s HMDA Platform Need latest version of Google Chrome browser or Mozilla Firefox, Internet Explorer 11, Microsoft Edge, or other modern browser
2017: Reporting Requirements 5 Edits must now be addressed prior to filing HMDA data with CFPB in order to complete submission process The edit report will be web-based: Edit reports will NOT be e-mailed to filers in PDF format Viewed and downloaded from HMDA Platform Responses to edits will not be faxed or e-mailed to CFPB. HMDA Platform will guide filers through process of addressing edits As part of submission process, an authorized representative of institution with knowledge of data submitted shall certify to accuracy and completeness of data submitted. Filers will not fax or e-mail signed certification Technical questions about reporting HMDA data collected in or after 2017 should be directed to hmdahelp@cfpb.gov.
2017: Institutional Coverage 6 Depository institution $44 million in assets (adjusted annually) Home or branch in MSA Federally insured or regulated Originated at least (25) home purchase loans in each of prior two calendar years (2015/2016) NEW! Including refinancing's of home purchase loans Includes consumer and commercial
2017: Excluded Transactions 7 Excluded data. A financial institution shall not report: (1) Loans originated or purchased by the financial institution acting in a fiduciary capacity (such as trustee); (2) Loans on unimproved land; (3) Temporary financing (such as bridge or construction loans); (4) The purchase of an interest in a pool of loans (such as mortgage-participation certificates, mortgage-backed securities, or real estate mortgage investment conduits); (5) The purchase solely of the right to service loans; or (6) Loans acquired as part of a merger or acquisition, or as part of the acquisition of all of the assets and liabilities of a branch office as defined in Sec. 1003.2.
2018: Institutional Coverage 8 All Financial Institutions Originated at least (25) closed-end mortgage loans in each of the two preceding calendar years - OR - Originated at least 500 covered open-end lines of credit in each of the two preceding calendar years Non-Depository Home or branch office in MSA Depository Institution $44 million in assets (adjusted annually) Home or branch in MSA Originated at least (1) home purchase or refinance secured by a first lien on a 1-4 dwelling Federally insured or regulated
What These Changes Mean To You 9 Costs Changes to your software systems Changes to policy and procedures Training Time Data collection Data verification/scrub
Data Collection 10 Create a HMDA DataSource Worksheet What are your actual source documents for each data element that must be captured for HMDA reporting? For example: Residential mortgage loan, you use the 1003; GMI information is located on page 4 of 5 Next, add a column to indicate what source documents have the correct (and consistent) information Complete this for each type of application Residential Mortgage Loans: 1003, GMI, Page 4 of 5 Commercial loans: separate GMI form
11 HMDA DataSource Worksheet
Data Collection 12 Create a HMDA Worksheet* List each data field required to be collected Record the information to be inputted in the exact form it is to be inputted (e.g. Purpose of Loan 1; Action Taken 3; Reasons for Denial 3) Attach any copies from FFIEC Calculator or FFIEC Geocoding (or other vendor) *For those of you who are customers of Temenos Compliance Advisory Services, we have a HMDA Worksheet Quick Compliance Guide available on the website.
13 Data Collection: HMDA Worksheet
Data Collection 14 Benefits Inputting Accountability Minimize errors Time (Less time digging in files) Consistency Examiners Training
Data Collection 15 Key factors to address in procedures Who collects the data? When is it collected? Who inputs the data? Is there a cross check/dual control? Where is it stored? How will it be captured electronically?
Action Plan It is never too late! 16 Identify all lines of business that will be impacted Determine whether you have sufficient staff Establish a HMDA Implementation Committee Include members from each line of business, including upper management, and IT Look at what you still need to do to be ready to comply by January 1, 2018, and develop a plan to get you there Assign responsibility for each remaining step in the process Meet regularly to discuss progress Check the status of your operating systems Are they ready? If not, what are they missing? Ask specifics, such as deadline dates Will there be an additional cost to your institution?
Action Plan 17 TRAINING! One session is NOT enough Identify who still needs to be trained Don t forget the Board of Directors Develop training materials specific for each position (i.e., collection, input, etc.) Test staff to identify any areas of confusion and/or weaknesses. Do not wait until January 1 to find out someone is not clear on the new rules Update policy and procedures Nail down any procedures that affect how you will collect and report certain elements Update your overall Compliance Risk Assessment Re-evaluate risk rating as changes are extensive and errors could cause not only HMDA violations but potential fair-lending violations
Action Plan 18 Once data collection begins, conduct self-testing Verify accuracy of data collected BEFORE reporting Audit data collected and data input at least quarterly to test processes for any weaknesses Remember all institutions must maintain internal LAR with complete and accurate HMDA data within 30 days of each calendar quarter close Conduct assessment of lending practices Know what the data shows Fair Lending UDAAP How will you address any problems indicated?
Action Plan 19 For those who are customers of Temenos Advisory Services, we have an Action Plan Checklist Quick Compliance Guide as well as an Action Plan Example Quick Compliance Guide available on the website.
Demographics 20 The new rules for collecting Ethnicity, Race and Sex
Ethnicity, Race and Sex What Is new? 21 New requirement to report how institution collected applicant s or borrower s ethnicity, race and sex Whether or not it collected on basis of visual observation or surname Must permit applicants to self-identify their ethnicity and race using disaggregated ethnic and racial subcategories Institutions not permitted to use disaggregated subcategories when identifying applicant s ethnicity and race based on visual observation or surname New Appendix B Form and Instructions
22 Appendix B: Collection Form
What Are Disaggregated Categories? 23 Ethnicity Hispanic or Latino Mexican Puerto Rican Cuban Other Hispanic or Latino
What Are Disaggregated SubCategories? 24 Race American Indian or Alaska Native Enrolled or principal tribe Asian Asian Indian Chinese Filipino Japanese Korean Vietnamese Other Asian
What Are Disaggregated SubCategories? 25 Native Hawaiian or Other Pacific Islander Native Hawaiian Guamanian or Chamorro Samoan Other Pacific Islander Black or African American and White are NOT Disaggregated Subcategories
Applicant Information: Ethnicity 26
Applicant Information: Ethnicity 27 Must offer option of selecting more than one ethnicity and must permit applicant to self-identify using both aggregate categories (Hispanic or Not Hispanic) and disaggregated subcategories (Mexican, Puerto Rican, Cuban, Other Hispanic or Latino) Applicant may select a subcategory without selecting its aggregate Must offer option of selecting more than one ethnicity and must report every category selected. If more than five selected, institution reports only up to five. If Hispanic or Latino selected, all four subcategories may be selected: Mexican Puerto Rican Cuban Other Hispanic or Latino
Applicant Information: Ethnicity 28 If Other Hispanic or Latino selected, ethnicity not listed in standard subcategories may be provided Report both Other Hispanic or Latino and additional information provided by applicant Applicant is permitted to complete the free form Other field without specifically selecting Other Hispanic or Latino. Institution may, but is not required to, report Other Hispanic or Latino Institution cannot use the subcategories when identifying ethnicity based on visual observation or surname Must only use Hispanic or Latino or Not Hispanic or Latino
Applicant Information: Ethnicity (EXAMPLES) 29 Example 1: Applicant selects both Hispanic or Latino and Not Hispanic or Latino as well as all four subcategories (Mexican, Puerto Rican, Cuban and Other Hispanic or Latino). This is a total of six and Institution can only report five. Institution would report Hispanic or Latino, Not Hispanic or Latino, and Institution s choice of three of the remaining four subaggregate categories (for example, Mexican, Puerto Rican and Cuban) Example 2: Applicant writes in Dominican. Institution should report Dominican and may also (but are not required to) report Other Hispanic or Latino. If Institution does so, this would count as one selection Example 3: Applicant selects only Mexican. Institution should report only Mexican and should not also report Hispanic or Latino Example 4: Applicant selects Other Hispanic or Latino and writes in Colombian. Institution must report both Other Hispanic or Latino and Colombian. Keep in mind that these two are combined and counted as one selection.
Applicant Information: Race 30
Applicant Information: Race 31 Must offer option of selecting more than one race and must permit applicant to self-identify using both aggregate categories (American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander or White) and disaggregated subcategories (Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese, Other Asian, Native Hawaiian, Guamanian or Chamorro, Samoan, or Other Pacific Islander) Must report every aggregate category and subcategory selected, up to total of five. Must start with aggregate categories selected first (American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander or White) and then report subcategories selected until a total of five is reached Applicant may select a subcategory without selecting its aggregate category If Other Asian or Other Pacific Islander is selected, applicant must be permitted to provide race subcategory not provided on collection form Report both Other Asian or Other Pacific Islander and additional information provided by applicant.
Applicant Information: Race 32 Institution may report American Indian or Alaska Native if the applicant provides only a particular American Indian or Alaska Native enrolled or principal tribe in the free-form field Applicant is permitted to complete the free form Other field without specifically selecting Other Asian or Other Pacific Islander. Institution may, but is not required to, report Other Asian or Other Pacific Islander in addition to reporting the particular Asian race or Pacific Islander race provided by the applicant. Cannot use the subcategories when identifying race based on visual observation or surname Must use only the five aggregate categories
Applicant Information: Race (Examples) 33 Example 1: Applicant only selects Asian. Institution would report Asian for the race and nothing else because only the applicant may self-identify as being of a particular subcategory (Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese, Other Asian, Native Hawaiian, Guamanian or Chamorro, Samoan, and Other Pacific islander or American Indian or Alaska Native enrolled or principal tribe) Example 2: Applicant selects all five aggregate race categories (American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander and White) as well as three subcategories (Chinese, Korean, and Samoan). This is a total of eight and Institution can only report 5. Institution would only report the five aggregate race Example 3: Applicant selects three aggregate race categories (Asian, Native Hawaiian or Other Pacific Islander and White) as well as three subcategories (Chinese, Korean, and Samoan). Institution would report the three aggregate race categories and Institution s choice of two of the three subcategories (for example, Chinese and Samoan) for a total of five
Applicant Information: Race (Examples) 34 Example 4: Applicant writes in Hmong. Institution should report Hmong and may also (but are not required to) report Other Asian. If Institution does so, this would count as one selection Example 5: Applicant selects Other Asian and writes in Japanese. Institution must report both Other Asian and Japanese. Keep in mind that these two are combined and counted as one selection Example 6: Applicant writes in Navajo. Institution must report Navajo and may (but is not required) report American Indian or Alaska Native. Example 7: Applicant selects American Indian or Alaska Native and writes in Cherokee. Institution must report both American Indian or Alaska Native and Cherokee. Keep in mind that these two are combined and counted as one selection
Applicant Information: Sex 35
Applicant Information: Sex 36 Applicant can now choose both genders Differences from Regulation B in collection practices
Applicant Information: Ethnicity, Race and Sex 37 Must ask for ethnicity, race and gender information regardless of how application is taken Cannot require applicant to provide If application taken in person and ethnicity, race and gender not provided by applicant, must indicate such and then collect on the basis of visual observation or surname Must inform applicant that they are doing so Electronic application with video component must be treated as in person Without video, treated as accepted by mail Report non-natural persons as "Not Applicable (i.e. a corporation, partnership or trust) For example, for a transaction involving a trust, where the trust is the applicant, you report Not Applicable for the applicant s ethnicity, race and gender. On the other hand, if the applicant is a natural person and is the beneficiary of the trust, you must report the ethnicity, race and gender.
Applicant Information: Ethnicity, Race and Sex 38 May request ethnicity, race and gender when meeting with applicant in person if applicant begins application by mail, internet, or telephone, but does not provide the requested information and does not select I do not wish to provide this information If applicant does not provide requested information during in-person meeting, information must be collected on basis of visual observation or surname If meeting occurs after application process is complete (e.g., at loan closing or account opening), there is no requirement to obtain applicant s ethnicity, race and gender and institution may report as "Not Applicable" If a loan or application includes a guarantor, ethnicity, race and gender are not reported for the guarantor If no co-applicants, report that there are no co-applicants. If more than one co-applicant, provide ethnicity, race and sex only for the first co-applicant listed on collection form. A co-applicant may provide ethnicity, race and sex on behalf of an absent co-applicant. If information not provided for absent co-applicant, must report information not provided by applicant in mail, internet or telephone applicant for that absent co-applicant Optional reporting for purchased loans If choosing not to collect, report "Not Applicable"
Consider 39 Fair Lending Risk Ethnicity, Race and Sex
Regulation B Amendments 40 Allows non-hmda reporters subject to Reg. B to adopt voluntarily new practices for collecting applicant information Collect information about ethnicity, race, and sex in certain instances when the creditor is not required to report that information Submitted HMDA data in any of the past 5 years, but is not currently a "financial institution" under HMDA would be permitted to collect information for HMDA covered loans Transition to the 2016 version of the URLA Collect applicant s information using either aggregate ethnicity and race categories or disaggregated ethnicity and race categories and subcategories on an application-byapplication basis Clarifies that a creditor is permitted, but not required, to collect applicant demographic information from a second or additional co-applicant
Regulation B Amendments 41 Removes the 2004 version of the URLA as a model form Provides two alternative data collection model forms for the purpose of collecting data regarding race and ethnicity Form for collecting aggregate applicant race and ethnicity information Cross-reference to Regulation C appendix model form for collecting disaggregated applicant race and ethnicity information
Transition Rule 42 Based on when application is received; NOT when final action is taken If application is received prior to January 1, 2018: May collect based on current rules (GMI) using the current categories for ethnicity, race, and sec and not allowing the applicant to self-identify using disaggregate categories; OR May collect based on new rules (Demographics) using the aggregate and disaggregate ethnicity and race categories and subcategories and allowing the applicant to self-identify If application is received on or after January 1, 2018, must collect based on new rules using disaggregate ethnicity and race categories and subcategories Report based on ethnicity, race and sex collected; whether under current or new rule
Questions? 43
Thank you!