Debt-to-Income Ratio New HMDA Reporting Requirement
Another addition to what must be collected as part of your HMDA data in 2018 is the borrower’s debt-to-income ratio. This must be reported if the DTI ratio was relied upon when the financial institution made their credit decision. This does not mean that in order for this data point to be reportable it had to be a deciding factor when the financial institution made their credit decision. The DTI ratio merely had to have been considered during the credit decision process.
On your HMDA LAR, this data point can be reported as being “not applicable” in a number of circumstances. One instance is if the DTI ratio was not relied upon when the credit decision was made. “Not applicable” can also occur when you are reporting on a purchased loan and for applications that were closed for incompleteness or withdrawn before a credit decision could be made. Another occasion where “not applicable” is reported on your HMDA LAR is when the applicant and the co-applicant are not natural persons. It is important to note that when reporting the DTI ratio, what is securing the loan will also affect what you report on your HMDA LAR. When the loan is secured by a multifamily dwelling, this data point should be 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.
Discount Points, Lender Credits, and Interest Rate New HMDA Regs
For the new HMDA regulation, a financial institution will now have to report more information in regards to the terms of the loan. This includes such information as the total discount points, lender credits and the interest rate.
The total discount points that are paid to the creditor to reduce the interest rate can be found on page 2 of the Closing Disclosure on Line A.01. If there were no discount points paid, then this data point should be left blank. The other data point that can be found on the Closing Disclosure is the total of lender credits which is on page 2 Line J. Like with the discount points, if there were no lender credits, this data point should be left blank. If a revised Closing Disclosure was issued, then the revised amounts should be reported on the HMDA LAR.
Both of these data points are to be reported as “not applicable” in the same circumstances. The first is if the application did not end in origination. The second circumstance is if the loan or application is not subject to Regulation Z. The last instance is if it is a purchased loan with an application that was received prior to the effective date of Regulation Z.
Another item that must be reported as part of your HMDA data is the interest rate. This data point must be reported for loans that originated and for those that are approved but not accepted. For applications that were denied, withdrawn or closed for incompleteness, this data point should be reported as being “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 Preapproval Modification and 2018 HMDA Reporting
There has been a slight modification as to what is considered to be a reportable request under the new HMDA rules. It still must be reported whether a loan or application involved a request for preapproval for a home purchase loan under the financial institution’s preapproval program. Under the rule that takes effect in 2018, the financial institution no longer has the option to decide whether or not to report a preapproval request that was approved but not accepted. These are now required to be reported.
Now what is considered to be a preapproval for HMDA purposes? An application could only be a preapproval request if it is for a home purchase. It cannot be secured by a multifamily dwelling and it cannot be for an open-end line of credit or for a reverse mortgage. The application must also be reviewed under a Preapproval Program which is where a comprehensive analysis of the applicant’s creditworthiness is conducted and the lender issues a written commitment that is for a home purchase loan; is valid for a designated period of time and up to a specified amount; and is subject only to specifically permitted conditions.
A loan or application should be reported as not involving a preapproval request in several circumstances. These are for a purchased loan, an open-end line of credit, a reverse mortgage, an application that was denied, an application that was closed for incompleteness or withdrawn, a loan for any other purpose other than a home purchase, or if the loan is secured by a multifamily dwelling.
Side note: When it comes to reporting the data for preapprovals, the only requests that are reported are those that were denied or approved but not accepted. The requests that resulted in origination will also be reported, but those will be as an originated Covered Loan.
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.
12 CFR 1003.4(a)(4)