What are the Major HMDA related changes and When Do They Go into Effect?

A number of things are changing with the new rule that impacts process, workflow, and fields. The amount of data collection required is significantly increasing, above and beyond the original Dodd Frank mandate. The way you report that data is changing as well, with HELOC and Denial Reasons moving from optional submissions to required data elements. There’s also an expanded focus on accurately capturing and reporting borrower ethnicity.

Most significantly, the rule includes revisions as to how depository institutions and non-depository institutions are defined. This change is significant because it determines which financial institutions will have to report HMDA data to their regulators, based on these definitions and specific criteria, like loan volume.

For example, the definition of depository institutions has been expanded to include those that originated at least 25 closed-end loans or at least 100 open-end lines of credit in the previous two calendar years. The definition of non-depository institutions has been revised to include those with a home office or branch in a Metropolitan Statistical Area (MSA) that originated at least 24 closed-end loans or at least 100 open-end lines of credit. The new definition eliminates previous language involving total asset criteria of $10 million and 100 purchase loans, as well as that around volume based originations.

This effectively means that entities that close 2 loans per month are included under the purview of this definition of financial institution. 

Modifications and New requirements include:

• Expanded documentation of loan type to include FHA, VA, RHS, and FSA.
• More detailed information on occupancy, loan amount, and the action taken.
• New fields detailing the credit score(s) and model used to determine lending decision.
• Mandated reporting of up to four reasons for denial of application, beginning in the collection period (that information is optional until January 1 of that year).
• Required reporting for HELOC loans, or any loans providing via an open-end line of credit, which are presently optional until the 2018 collection of data.
• More detailed documentation of borrower ethnicity to ensure everyone is treated fairly, and to monitor compliance with equal credit, fair housing, and home mortgage disclosure laws.

HMDA Data - what it includes

What are HMDA data?

HMDA data cover home purchase and home improvement loans and refinancings, and contain information about loan originations, loan purchases, and denied, incomplete or withdrawn applications. With some exceptions, for each transaction the lender reports data about:

• the loan (or application), such as the type and amount of the loan made (or applied for) and, in limited circumstances, its price;

• the disposition of the application, such as whether it was denied or resulted in an origination of a loan;

• the property to which the loan relates, such as its type (single-family vs. multi-family) and location (including the census tract), and

• the applicant’s ethnicity, race, sex, and income.

In 2003, HMDA data included a total of 42 million reported loans and applications. More information about HMDA data can be found at http://www.ffiec.gov/hmda. 

Data collected on HMDA
The data includes:
•    the mortgage loan number;
•    the date the mortgage application was received;
•    the type and purpose of the mortgage;
•    whether the application resulted in a pre-approval, denial or origination;
•    the property type of the property securing the mortgage;
•    the owner-occupancy status of the real estate securing the mortgage;
•    the mortgage amount;
•    the action taken by the lender on the application;
•    an identification of the MSA and census tract in which the property is located;
•    the ethnicity, race and sex of the mortgage applicant;
•    the gross annual income of the mortgage applicant;
•    the type of investor that will purchase the mortgage;
•    the spread between the annual percentage rate (APR) and the annual prime offer rate; and
•    whether the mortgage is subject to the Home Ownership and Equity Protection Act (HOEPA). 
 

 Additional HMDA data which will be collected in 2018 includes:
•    the borrower or applicant’s age;
•    the borrower or applicant’s credit score;
•    automated underwriting information;
•    a unique loan identifier;
•    property value;
•    the lending channel, e.g., retail or broker;
•    points and fees paid;
•    borrower-paid origination charges;
•    discount points;
•    lender credits;
•    the term of any prepayment period;
•    interest rate;
•    the presence of terms resulting in potential negative amortization; and
•    the mortgage term. 

Happy New Year - HMDA Primer

As we begin a new year - thought we might be able to start with an article about a topic that is going to be talked about a lot in 2018 as a result in changes made to Dodd-Frank.

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So, what is the Home Mortgage Disclosure Act (HMDA)?

HMDA, enacted by Congress in 1975, requires most mortgage lenders located in metropolitan areas to collect data about their housing-related lending activity, report the data annually to the government, and make the data publicly available. Initially, HMDA required reporting of the geographic location of originated and purchased home loans. In 1989, Congress expanded HMDA data to include information about denied home loan applications, and the race, sex, and income of the applicant or borrower. In 2002, the Federal Reserve Board (the Board) amended the regulation that implements HMDA (Regulation C) to add new data fields, including price data for some loans. HMDA does not prohibit any lending activity, nor is it intended to encourage unsound lending practices or the allocation of credit. 

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What are the purposes of HMDA?

Congress enacted HMDA to:

§  provide the public with information to judge whether lenders are serving their communities;

§  enhance enforcement of laws prohibiting discrimination in lending;

§  provide private investors and public agencies with information to guide investments

            in housing

In another blog post we will mention the data collected as part of HMDA and also the impact of some of the changes proposed.