HMDA – Action Taken
We are now almost two months into the new HMDA regulation and there have been several questions as to reporting the action taken. Specifically, when to report an application as being withdrawn or file being closed for incompleteness. While this data point existed under the old HMDA regulation, it can still be confusing.
First there are applications that must be reported as being withdrawn. Under the new HMDA regulation, withdrawn is reported when the application is expressly withdrawn by the applicant before a credit decision was made. An application is also reported as withdrawn if the financial institution provides conditional approval that specifies underwriting conditions which must be met and the applicant withdraws the application before satisfying all of the specified underwriting and credit worthiness conditions. An application would still be considered as being “withdrawn” if the financial institution made a counteroffer which the borrower agreed to and the loan was subsequently conditionally approved with underwriting conditions but the borrower later withdraws before satisfying those conditions.
When do you report an application as being closed for incompleteness? This part of the HMDA regulation coincides with ECOA. While the HMDA regulation itself does not necessarily require a notice to be sent regarding missing information, for an application to be considered as “file closed for incompleteness”, however a written notice of incompleteness as described under Regulation B 12 CFR 1002.9 (c)(2) must be sent to the applicant. If the applicant fails to respond to the written notice, there is no further action needed on the part of the financial institution and the action taken would be “file closed for incompleteness”. If an oral request for additional information is made by the financial institution and, if the application remains incomplete after the oral request is made, then a written notice denying the application based on the application being incomplete must be sent. In this instance, the file is denied for incompleteness instead of being closed for incompleteness. There are some financial institutions that provide both the notice of incompleteness under Regulation B, and then send an notice of denial for incompleteness. In this circumstance, reporting the application as closed for incompleteness or denied is left entirely up to the financial institution. As always, remember to document your file accordingly.
For more information on our HMDA services please contact Regulatory Solutions at contact@regulatorysol.com or Toll Free 855.734.7655.
Reverse Mortgage, Open-End Line of Credit, or Business or Commercial Purpose
There are certain transaction indicators that will have to be reported as part of your HMDA data now that it is 2018. The new HMDA regulation added three new data points that will provide more information as to the terms of the loan application. These are if the application is for a reverse mortgage, an open-end line of credit, and if it is for a commercial or business purpose. These new data points are fairly straightforward and it is important to note that they do not have the option of being reported as “not applicable”.
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.