Applicant Data Point – Age, Ethnicity, Race and Sex
GMI Update – Latest Information
On August 24, the CFPB issued several clarifications to the HMDA regulation that will take effect in 2018. One of the major areas clarified is in regards to the GMI and certain situations that can occur.
One area that has been specifically addressed is when an applicant selects an ethnicity or race subcategory, but not the main aggregate category. When reporting this on your HMDA LAR, only the selected subcategories should be entered. The CFPB has clarified that an institution should not report an aggregate category that the applicant did not select.
The other situation addressed is when the borrower selects the option of “Other” when identifying their ethnicity or race. The CFPB states that the applicant may complete the “Other” subcategory even though they did not specifically select the subcategory of “Other”. If this occurs, the institution may, but is not required to, select the Other category. The institution would then report this accordingly.
There is also a clarification as to how the Other” race or ethnicity subcategory (when selected) should be reported. The 2018 HMDA regulation allows the institution to report up to five selections for each section of the GMI. When an applicant selects “Other” and also provides a specific ethnicity or race, it is only counted as one selection on your HMDA LAR.
Probably some of the biggest changes that will come with the 2018 HMDA regulation has to do with the collection of what is commonly referred to as Government Monitoring Information (GMI). Starting in 2018, an institution must now report the borrower’s age along with their ethnicity, race and sex. While the majority of what must be reported is nothing new to institutions, the ethnicity and race data points have been altered so as to give the borrower the option of being more detailed. This information will now be more expansive so as to provide financial institutions and those who monitor their activities, a better idea of who their consumers are. As it was under the old regulation, the borrower can decide whether or not they wish to provide their ethnicity, race or sex.
When it comes to reporting ethnicity, the borrower first has two options. They can either indicate that they are Not Hispanic or Latino or that they are Hispanic or Latino. If the borrower indicates that they are Hispanic or Latino, then the borrower has the option to select up to four subcategories. These are: Mexican, Puerto Rican, Cuban, and Other. If Other is selected, the borrower can provide the specific ethnicity that was not listed as a subcategory. The financial institution should then report both the selection of Other and the additional information that the borrower has provided.
The borrower’s race is another data point that will be expanded in 2018. Along with the usual aggregate categories that financial institutions have been collecting, there are now subcategories that correspond with those choices. The options that the borrower has to identify their race are: American Indian or Alaska Native; Asian (Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese, or Other Asian); Black or African American; Native Hawaiian or Other Pacific Islander (Native Hawaiian, Guamanian or Chamorro, Samoan, or Other Pacific Islander); White; Information not provided by applicant in mail, internet or telephone application; and Not Applicable.
Each race category that is selected must be reported by the financial institution as the borrower is able to select more than one. As it was when reporting the borrowers’ ethnicity, if Other has been selected and additional information is given, both must be reported. The regulation does limit how many selected categories may be reported. The 2018 HMDA regulation states that only five aggregate race categories and race subcategories combined can be reported. If the borrower selects all five of the race categories and also some of the subcategories, then the financial institution would report just the five aggregate categories. Just remember, there is no limit as to how many boxes that a borrower can report.
The last data point that must be collected for the GMI is the borrower’s sex. Here, the borrower has the option to indicate whether they are male or female. If the borrower selects both, then the financial institution should report it as such.
As it was under the old HMDA rule, if during a face-to-face interview a borrower chooses not to provide any of the GMI, the loan officer should indicate this and then collect the information themselves based on visual observation. If this occurs, the loan officer should not choose any of the subcategories when reporting the borrowers’ ethnicity or race.
The borrowers age is a new data point that must be collected in 2018. The borrower/co-borrowers age should be reported as it was on the day the institution received the application. If the loan in question was purchased from another institution, then there is the option to report the borrower’s age as being Not Applicable. The only other situation in which Not Applicable may be reported for the age is when the borrower is not a natural person (i.e. a trust, corporation, or a partnership). The one caveat to this rule is that the age of the borrower must be reported if they are the beneficiary of a trust.
While these additions are not required to be collected until 2018, the CFPB has stated that they are allowing institutions to use the new GMI form for any application that is taken in 2017, in order to help loan officers become accustomed to the new form and to hopefully diminish the amount of reporting mistakes come 2018. If you would like to see what the new GMI addendum will look like, both the CFPB ( Consumerfinance.gov/HMDA) and Fannie Mae (Fanniemae.com/1003) have published examples.
For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.
Property Address, State, County, and Census Tract HMDA Reporting
Under the new regulation, the property address along with the state, county, and census tract data must be reported as part of your HMDA information. These data points must be reported if the property is located in an MSA or metropolitan division where the institution has a home or branch office. They should also be reported if the institution is a bank or savings association and they are required to report HMDA data on small businesses, small farms, and community development lending under the Community Reinvestment Act. The census tract has an additional reporting requirement as it is only reported if the property is located in a county with a population of 30,000 or more.
In order to determine which property data to report, the institution must look at which property is securing (or was proposed to secure) the loan. In the case where more than one property secures the loan, the institution should report the information for only one of the properties. If the property securing the loan is a single multifamily dwelling that has more than address, then just one of the addresses should be reported by the institution. In the instance where the property securing the loan is not known or the location for a manufactured home has not been identified, then the data point for the property address should be entered as being not applicable.
The majority of these data points can be determined by looking at the loan application; however, the county and census tract must be reported in numerical form. In order to determine what these values should be, the institution can enter the property address at: https://geomap.ffiec.gov
For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.
The Correct Loan Amount for the HMDA Data Points in 2018
When a financial institution reported the loan amount under the old HMDA rule, the amount had to be rounded to the nearest thousandths. This will all change in 2018. The new rule modifies this data point and now requires that the lender report the entire loan amount and it should be rounded to the nearest whole number.
This data point should still be reported even if the loan does not end in origination. If the loan was denied, the amount that the applicant applied for is reported. If a counteroffer was made and it was accepted, then the amount of the counteroffer would be reported. However, if the said counteroffer was denied, then the financial institution should report the amount that the applicant initially applied for.
For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.
HMDA 2018 Action Taken and Action Taken Date
When reporting information regarding the action taken for a loan, there will not be any substantial changes under the new HMDA regulation. The type of action taken must be reported as being one of the following: originated or purchased; approved but not accepted; withdrawn; denied; or closed for incompleteness. In addition to these familiar data points, there will be values that specifically address the action taken for preapprovals come 2018.
An institution reports a loan as being originated if it was approved before closing and if there was an extension of credit. The loan is also reported as being originated if the loan began as a request for a preapproval but resulted in the loan being originated. The Action Taken Date that is reported for originated loans is either the closing date or the account opening date.
Another possible action taken is if the loan was purchased. These are loans that were purchased by the financial institution after closing and where no credit decision was made by the institution prior to closing. The date that the loan was purchased is reported as the Action Taken Date on your HMDA LAR.
If the loan was approved before closing but the applicant either failed to respond or the loan was not otherwise closed, then the action taken would be reported as approved but not accepted. The regulation allows some flexibility as to the date that is reported. The institution can choose to report: the approval date; the deadline for accepting the offer; or the date that the file was closed as the Action Taken Date. It is up to the lender to choose which date to report, but it should remain consistent.
An application is reported as being denied under certain circumstances. A loan is considered to be denied if the financial institution decided to deny the application after a credit decision was made. The other circumstance is when a counteroffer was made and it was not accepted. The Action Taken Date that is reported is either the date that the action was taken on the application or the date that the Adverse Action Notice was sent to the borrower.
For withdrawals, an application is reported as such when the it was expressly withdrawn by the borrower before a credit decision has been made. The date that the borrower contacted the lender to withdraw the application is reported as the Action Taken Date.
A loan file is reported as being closed for incompleteness when the financial institution sent the borrower a notice of incompleteness and the borrower failed to respond with the additional information that was requested. The lender may have reporting options regarding this type of Action Taken but it depends on if the lender provided an Adverse Action Notice to the borrower with the reason for denial being incompleteness. If this occurs, then the loan file can either be reported as being denied or being closed for incompleteness. Like with denied loans, the lender can use the date that the action was taken or the date of the Adverse Action Notice is reported as the Action Taken Date.
For an application that is a preapproval request that was approved but not accepted, any reasonable date can be reported as the Action Taken Date. This is up to the institution and such dates could be the approval date, deadline for accepting the offer, or the date that the file was closed. When the application is a preapproval request that was denied, the date of the denial or the date of the Adverse Action Notice sent to the applicant is reported as the Action Taken Date.
The CFPB has recently issued a proposed correction in regards to this data point. This concerns how to report the action taken when a counteroffer was made and the institution provided a conditional approval but the applicant does not respond. The correction states that this would be reported as either: a denial, file closed for incompleteness, approved but not accepted, or as application withdrawn. It all would depend upon the particular circumstances.
For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.
HMDA 2018 Data Points And Occupancy Type
This data point will not change much when reporting your HMDA data in 2018. A financial institution must report whether the property will be used by the applicant as a principal residence, a secondary residence, or as an investment property.
Principal residences are fairly straightforward. This is an applicant’s primary home and they can only have one principal residence at a time. The dwelling does not necessarily have to be built at the time of the application in order for it to be considered the borrower’s primary residence. If they intend to build a new dwelling that will become their principal residence within one year or when it is completed, then this would be considered as their principal residence.
A property is reported as a second residence when it will be occupied by the borrower for only a portion of the year and it is not considered by the borrower as being their primary residence. Second homes can include properties that the borrower rents out for a portion of the year and houses that are only lived in during the week due to its proximity to their workplace.
An investment property for HMDA purposes is a dwelling that the borrower does not occupy at any time. It can be rented out by the borrower in order to generate income but that is not the only way for it to be considered an investment property. When a property is not lived in by the borrower and is not rented to others for income, it is still considered to be an investment property if it is the borrowers intention to make money by selling the property itself. When the property is owned by a corporation but it is used by their employees as long-term residences, then this would be considered as an investment property for the corporation. There is one distinction however when it comes to corporate owned properties. If the property is purely for the transitory use by their employees, then it would not be considered as a dwelling and would not be HMDA reportable.
For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.