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 Specifically, when to report an application as being withdrawn or file being closed for incompleteness.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First there are applications that must be reported as being withdrawn. Under the new HMDA regulation, withdrawn is reported when the application is expressly withdrawn by the applicant before a credit decision was made. An application is also reported as withdrawn if the financial institution provides conditional approval that specifies underwriting conditions which must be met and the applicant withdraws the application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 An application would still be considered as being “withdrawn” if the financial institution made a counteroffer which the borrower agreed to and the loan was subsequently conditionally approved with underwriting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.
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.
Manufactured Home Secured Property Type & Manufactured Home Land Property Interest
Beginning in 2018, a financial institution will report manufactured home information as part of their HMDA data. Specifically, the secured property type and the land property interest information should be reported in regards to the manufactured home that is securing the loan.
For the secured property type, a financial institution will have to report whether the loan is secured by a manufactured home and land or if the land is not securing the loan. A financial institution will report that the Manufactured Home is not secured by land even if the Manufactured Home is considered real property under state law.
For the land property interest, the financial institution should report the information about the applicant’s ownership interest in the land where the manufactured home is located. The first option that can be reported is direct ownership. This is used when the applicant has direct ownership in the land and the ownership is more than a possessory real property ownership interest. Another option is indirect ownership. This is reported when the applicant is a member of a resident-owned community that is structured as a housing cooperative which owns the underlying land. If the applicant lives in a resident-owned community but is not a member, the land property interest would be reported as a paid leasehold. A paid leasehold can occur when the applicant does not have an ownership interest in the land but they have a written lease for the lot that specifies rent payments. This data point can also be reported as an unpaid leasehold. This occurs when there is no written lease and therefore no agreement for rent payments.
There is an additional circumstance for the land property interest data point. This will be reported as “not applicable” if the location for the manufactured home has not yet been identified at the time action was taken. When it comes to reporting these data points as “not applicable” on your HMDA LAR, there is some overlap. Both of these data points will be reported as “not applicable” when the dwelling that is securing the loan is not a manufactured home or if it is a manufactured home community that is a multifamily dwelling.
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.
Application Channel and New HMDA Data
There are two questions for this data point that must be reported as part of the new HMDA data. First, you must report whether the applicant submitted the application directly to your financial institution. For HMDA purposes, an application is treated as being submitted directly to your financial institution if the applicant was directed to a third-party agent who performed origination activities on behalf of the financial institution. However, this would not be the case if the third-party agent assisted the applicant with their application for a loan with another institution. If the applicant completed an application with a broker or correspondent who then sent the application to your financial institution for approval, then this would not be reported as being submitted directly to your financial institution.
The other data point that must be reported is whether the obligation that arises from the application is or would have been initially payable to your financial institution. For applications that are withdrawn, denied, or closed for incompleteness, this particular data point should be reported as “not applicable” if at the time action was taken, the financial institution had not determined whether the loan would be initially payable to this institution.
The one major exception is when you are reporting on a purchased loan. In this instance, both of these data points 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.
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.
Consistency Is Key To HMDA Reporting Of Application Date
Under the new HMDA regulations that will take full effect in 2018, the Application Date is one of the HMDA reporting data points that will not change. Your financial institution will either report the date that the application was received or the date that is listed on the initial loan application. While the rule gives the institution leeway to choose which to report, the method should remain generally consistent throughout the entire reporting process.
How an institution treats a loan application can also effect which date is reported. An example of this is when within the same calendar year, the applicant asks to reinstate a counteroffer that had been previously rejected or when the applicant asks the lender to reconsider an application that had been denied, withdrawn, or incomplete. The institution has two options. It can consider it a continuation of the previous loan, in which case the original application date should be reported. Alternatively, it can also be treated as a new transaction, making the date of the request for reconsideration the date that is reported.
Figuring out the application date can be relatively easy for consumer applications; however commercial loans can be more difficult. For these types of loans that are HMDA reportable, it can be hard to determine which date to report as applications are not necessarily required. One method that could be used by an institution for HMDA reporting of commercial loans is to report the date that the loan request was received.
Remember, consistency is key when reporting the application date.