Lien Status Reporting Still Required Under New HMDA Regulation
Under the HMDA regulation that will take effect in 2018, an institution is still required to report the lien status. This data point must be reported for loans that were originated, purchased loans, and those that did not result in origination. This includes preapprovals, denials and withdrawals.
How to determine the lien status is really up to the institution. The HMDA regulation allows the institution to use the best information that is available to them at the time final action was taken. While there is no specific method listed in the regulation, an institution can use such documents as the title search or the applicant’s credit report to determine the lien status.
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.
HOEPA Status Will Not Change Under New HMDA 2018 Changes
Under the new HMDA regulation that will take effect in 2018, the HOEPA status is one of the data points that will not change. As it was under the old HMDA rule, an institution must report whether or not the loan is considered to be a high-cost mortgage under Regulation Z. Section 1026.32 (a) states that these are consumer loans that are secured by the borrower’s principal dwelling and must surpass either the APR trigger, the total points/fees trigger or the prepayment penalty trigger.
Once it is determined that the mortgage is secured by a principal dwelling, the specific trigger requirements must be met. The APR trigger is where the APR exceeds the APOR for a comparable transaction by more than either 6.5% for first-lien transactions; 8.5% for first-lien transaction if the dwelling is personal property and the loan amount is less than $50,000; or by 8.5% for subordinate-lien transactions.
The total points/fees trigger is reached when the points and fees will exceed 5% of the total loan amount for a transaction that is at least $20,000. This can also be triggered when the points/fees total amount is less than either 8% of the total loan amount or less than $1,000 for a transaction with a loan amount of less than $20,000.
The prepayment penalty trigger can occur in two situations. The first is where the creditor has charged a prepayment penalty that can occur more than 36 months after consummation. The other situation is where the penalties exceed more than 2% of the amount that was prepaid.
If the loan is not subject to HOEPA status, then this data point should be reported as not applicable on the HMDA LAR. The only other time that this data point is reported as not applicable is when the loan did not end in origination.
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.
New HMDA Regulation Will Bring Big Change To Rate Spread Data Point
The rate spread is a familiar data point that many institutions are used to reporting, however, the new HMDA regulation that will take effect in 2018 will bring a big change. The old regulation did not require an institution to report the rate spread if the annual percentage rate (APR) did not exceed the average prime offer rate (APOR) by a certain percentage. Under the new HMDA regulation, the rate spread is now required to be reported in most cases. In order to determine the rate spread, you must take the difference between the loan’s APR and a comparable transaction’s APOR.
The rate spread can be determined manually or by using the FFIEC’s Rate Spread Calculator which can be found here: https://www.ffiec.gov/ratespread. The FFIEC website also provides the Average Prime Offer Rates tables and a batch rate spread calculator for multiple loan calculations.
If the institution decides to manually find the APOR, they must first determine the comparable transaction. In order to do this, the institution must look at the loan’s amortization type and loan term. For fixed-rate loans the transaction’s maturity (or the period until the last payment will be due) is used. If the loan is an open-end line of credit but has no definitive length of time, then an institution may use a 30-year fixed-rate loan as the comparable transaction. For variable-rate loans, the initial fixed-rate period is used. When the maturity term is not in whole years, the term should be rounded to the nearest whole year. For example, if the loan matures at 10 years and 3 months, then the term for a comparable transaction will be 10 years.
The next step in determining the APOR is to establish the rate set date. This should be the date that the institution set the loan’s interest rate for the final time before closing. For instance, if the rate was set according to a lock agreement, then the date of that agreement is used. The last step in determining the APOR is to determine the most recent APOR as of the rate set date. These rates can be found on the applicable tables on the FFIEC’s website.
When entering the rate spread on your HMDA LAR, you should round it to at least three decimal places. If the APR exceeds the APOR, then a positive number should be reported. However, if the APR is less than the APOR, a negative number should be reported as the rate spread.
There are some circumstances in which the rate spread is not reported. An institution should report this data point as being “Not Applicable” if the loan: does not end in origination, is a purchased loan, an assumption, a reverse mortgage, or if it is not subject to Regulation Z. The only instance where the rate spread should be reported for a loan that was not originated is when the application was approved but not accepted. In this case, the difference between the APR of the loan that would have resulted if it was accepted and a comparable transaction’s APOR as of the date that the interest rate was set is reported on the HMDA LAR.
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.
2018 HMDA Regulation Brings Additional Value Added To Type of Purchaser
Under the HMDA regulation that will take effect in 2018, an institution must report the type of purchaser for each HMDA reportable loan. This data point remains relatively the same, however an additional value has been included in the new HMDA regulation. It must be reported whether the loan was purchased by: Fannie Mae; Ginnie Mae; Freddie Mac; Farmer Mac; a private securitizer; a commercial bank, savings bank, or savings association; credit union, mortgage company, or finance company; life insurance company; affiliate institution; other type of purchaser; or if the loan was not sold during the calendar year. While this data point is fairly straight-forward, there are some reporting requirements that should be noted.
If the institution knows or reasonably believes that the loan will be securitized by the entity purchasing the loan, it should be reported as being purchased by a private securitizer. A private securitizer is an institution other than the already listed government-sponsored enterprises (Fannie Mae, Ginnie Mae, Freddie Mac, and Farmer Mac). If the institution is not reasonably certain that the purchaser will securitize the loan, then it should be reported as being purchased by the appropriate institution. Another caveat in regards to private securitizers is if the purchaser fits into one of the other reportable types and is also a private securitizer. In this case, the loan should be reported as being purchased by a private securitizer.
An affiliate institution is a company that controls or is controlled by the financial institution. If the purchaser of the loan is an affiliate institution but also fits into one of the other reportable types, then the purchaser should be reported on your HMDA LAR as being an affiliate.
The purchaser should be reported as being Not Applicable if the application was denied, withdrawn, closed for incompleteness, or approved but not accepted. Another situation in which Not Applicable should be reported is if the institution sells some interest in the loan but retains the majority interest. However, if the institution sells all or the majority interest to more than one entity, then the entity that purchased the greater interest should be reported on your HMDA LAR.
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 Income Data Point Will Not Change Under 2018 HMDA Regulation
Income is one of the data points that will not change under the new HMDA regulation that will take effect in 2018. This data point is simple, the institution must report the income that they relied upon when making their credit decision. If the institution did not consider the borrower’s gross income when making their credit decision, then they should only report the portion that was relied upon. If there is a co-applicant and their income is also considered, then the co-applicant’s income (or what portion was relied upon) is included in the reportable income. If, however, the co-applicant is only secondarily liable, their income cannot be included.
When it comes to reporting income for applications that were withdrawn or closed for incompleteness, the institution should report the income that was provided on the application. There are instances where “Not Applicable” should be reported. These circumstances are: if the applicant is an employee, if it is secured by a multifamily dwelling, if the applicant is not a natural person, or if the institution did not consider income when making the credit decision. The HMDA regulation also gives an institution the option of reporting the income as not applicable for loans that they purchased.
There is one major exception when it comes to reporting the income on the HMDA LAR. The reportable income cannot include funds or amounts in addition to income, even if it was relied upon when making the credit decision. There was some confusion as to what type of funds fell into this exception, so the CFPB has issued a correction to this portion of the HMDA regulation, they clarified that they were excluding such things as income derived from underwriting calculations and not income from retirement accounts and other assets.
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.