HMDA 2020 Filing Instructions Guide
Now that you have filed your 2019 Home Mortgage Disclosure Act (“HMDA”) data, it is time to focus on 2020. The CFPB has issued the new 2020 Filing Instructions Guide (“FIG”) for submissions and data collection which can be found on the FFIEC website. The 2020 updates incorporate changes to the HMDA Rule issued by the Consumer Financial Protection Bureau in October 2019. The 2020 FIG can be found at https://www.ffiec.gov/hmda/guide.htm
While there are no substantial changes as to how you compile and submit your data, it is important to point out that we are seeing regulators requiring resubmissions and rescrubbing of HMDA data if it is not completed correctly. If you struggled with compiling and scrubbing last year’s HMDA data, Regulatory Solutions is here to help. Using our proprietary HMDA software, we compare your source documents in the loan file to the data points recorded on the HMDA LAR and provide you with an exception report detailing data points which need correction. Contact us today to begin your 2020 HMDA LAR Data Scrub.
Consumer Financial Protection Bureau Updates HMDA Guide
The Consumer Financial Protection Bureau (“CFPB”) has published an updated HMDA Small Entity Compliance Guide. You can access the updated guide at https://www.consumerfinance.gov/policy-compliance/guidance/hmda-implementation/.
Regulatory Solutions specializes in helping you scrub your HMDA data to ensure the data you are submitting on your HMDA LAR is correct. Contact us to discuss how we can assist you in this process. Read more here >
HMDA Final Rule Update For Reporting In 2020
On October 10, 2019, the CFPB issued a final rule that could affect your HMDA reporting for 2020. The first part of the rule extends the 500 threshold for open-end lines of credit until January 1, 2022. This means that institutions that originate fewer than 500 open-end lines of credit in the two preceding calendar years will not be required to report these lines of credit on their 2020 and 2021 LARS.
This final rule also incorporates the partial exemptions that were laid out in EGRRCPA into Regulation C. It also incorporates clarifications that smaller institutions have encountered when collecting their data to comply with the partial exemptions. Such as, whether a partial exemption applies after a merger or acquisition.
A copy of the final HMDA rule can be found below.
https://files.consumerfinance.gov/f/documents/cfpb_hmda_final-rule-2019.pdf
At Regulatory Solutions, we have developed HMDA software in order to complete full HMDA scrubs, including for those who qualify for partial exemptions.
HMDA Scrub Sample Size
What percentage of loans or applications on the HMDA LAR should I scrub?
This is a question we get asked quite often and my response is that you should look to the percentage examiners scrub. The Federal Financial Institutions Examination Council’s (FFIEC) HMDA Examiner Transaction Testing Guidelines (Guidelines) describe the validation process which examiners use and the circumstances in which examiners may direct institutions to correct and resubmit HMDA data. The examiners select a random sample of loans/applications to test using the following sample sizes and thresholds as indicated in the Guidelines at https://files.consumerfinance.gov/f/documents/201708_cfpb_ffiec-hmda-examiner-transaction-testing-guidelines.pdf:
| Total Sample Size (A) | Initial Sample Size (B) | Initial Sample Threshold (C) | Resubmission Threshold (D) | ||
| # | % | ||||
| 25-50 | 30* | 15 | 2 | 3 | 10.0* |
| 51-100 | 30 | 20 | 2 | 3 | 10.0 |
| 101-130 | 47 | 29 | 2 | 3 | 6.4 |
| 131-190 | 56 | 29 | 2 | 3 | 5.4 |
| 191-500 | 59 | 30 | 2 | 3 | 5.1 |
| 501-100,000 | 79 | 35 | 2 | 4 | 5.1 |
| 100,001+ | 159 | 61 | 2 | 4 | 2.5 |
*If less than 30 LAR lines, the institution should use the full sample size and the resubmission threshold remains at 3.
Let us scrub your HMDA data against source documents and provide you with an exception-based report indicating the percentage of errors by data point. You select your sample size either using the Guidelines or a certain percentage of HMDA loans/applications. Contact us today to discuss your HMDA scrub.
Automated Underwriting System (AUS) Requirements
Now that it is 2018, financial institutions will have to report the name of the Automated Underwriting System (AUS) and the results that were generated as part of their HMDA data. This data point allows a financial institution to not only use the already well established AUSs, but to also report if they used one that they developed themselves. If this is the case, this system must meet all of the elements of the AUS definition. According to the CFPB’s Small Entity Compliance Guide, an AUS is: i) developed by a securitizer, Federal government insurer, or Federal government guarantor of Closed-End Mortgage Loans or Open-End Lines of Credit; and ii) provides results that address both the applicant’s credit risk and whether the loan is eligible to be originated, purchased, insured, or guaranteed by the securitizer.
It is important to note that this data point is required to be reported if an AUS was used to evaluate the loan. The intention of the financial institution, whether to sell or to keep it as part of their portfolio, will not affect this reporting requirement. That being said, using an AUS is not a requirement for generating a loan. If one was not used in evaluating the application, then this data point can be reported as “not applicable” on your HMDA LAR. The other two circumstances in which “not applicable” can be reported is if you are reporting on a purchased loan or if the applicants are not natural persons.
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 Requires Reporting Of Total Dwelling Units
When reporting your HMDA data in 2018, you will now have to report the total number of individual dwelling units for the property that is securing the loan. This data point will always be answered with a number as this is one of the few data points where “not applicable” cannot be reported. When you are dealing with an application that did not end in origination, then the institution should rely on the best information that was available at the time action was taken.
When the loan is secured by a manufactured home community, the data point should include the total number of manufactured home sites that can be occupied. It does not matter if the units are already occupied when you are reporting this data point. When you are reporting on a loan that is secured by only one manufactured home and it is located in a manufactured home community, then this data point should be listed as being “1”.
If the loan is secured by a condominium, then the total number of individual units should be reported on your HMDA LAR. If such things such as manager apartments, vehicle pads, site-built homes, or other rental spaces are considered under the financial institutions underwriting guidelines, then they should also be included in the total of units.
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.
Reporting of the Introductory Rate Period New HMDA Regulation
Under the new HMDA regulation, an institution must now report the introductory interest rate period. If there is one involved in the transaction, you must report the number of months from the day the loan closed until the first day that the interest rate may change. If the introductory interest rate period is measured in days, then the institution should report the number of whole months that the period meets and disregard any of the remainder. For instance, if the introductory interest rate period is 40 days, then the institution should report the term as being “1” on their HMDA LAR. If the period is less than one whole month, then the institution should still report the period as being “1”.
There are circumstances where “not applicable” will be reported on the HMDA LAR. One instance is with preferred rates. This data point is not required to be reported when the introductory interest rate period is based on preferred rates. That is unless the terms of the loan provide that the preferred rate will expire at a defined time. Preferred rates occur when the terms of the loan state that the initial rate is fixed but that it may increase or decrease if a certain event occurs, for example if an employee of the financial institution decides to find other employment. The other instance where this data point is reported as “not applicable” is when you are reporting on a fixed rate transaction.
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.