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Justin Fitzhugh

Shaping Mortgage Industry Regulations: Call for Commentary on Proposed HMDA Reporting Changes

Wednesday, August 6, 2014 - Article by: Justin Fitzhugh - Nations Lending Corporation - Message

Last month, July 24th, 2014, the Consumer Financial Protection Bureau, CFPB, proposed changes to HMDA reporting requirements, regulation C.[1] Changes include the types of institutions required to report, types of transactions required to be reported, aligning reporting to mirror MISMO Standards, extending and/or modifying data points, and increasing the frequency of the reporting. These changes are extensive, and will require reporting by all institutions that originate more than 24 mortgages during a calendar year. I think this changes will have a tremendous impact in our industry as whole, and it is important we understand the changes before the rule is final. The rule is under the commentary period, and you may submit your opinion and contribute to the shaping of policies that impact us all.

Overview of the proposed modifications to HMDA reporting requirements:[2]

ALL FINANCIAL INSTITUTIONS REQUIRED TO SUBMIT HMDA REPORTS

The Bureau proposes that ALL financial institutions that originate more than 24 loans, excluding open-end lines of credit, be required to collect and report HMDA data.

Currently, Regulation Cs requires data collection of all depository institutions that originate one first-lien home purchase loan or refinancing secured by one-to-four family dwelling, while non-depository institutions may originate up to 99 home purchase loans without reporting data.

The bureau believes reporting by non-depository institutions will improve the quality of HMDA data. Also, the Bureau recognizes that requiring institutions who originate only one mortgage loan imposes costs that are not justified by the expenses, and the uniform 25 loans threshold would relieve depositary institutions who originate few loans.

EXPAND TYPES OF TRANSACTIONS SUBJECT TO REGULATION C

The Bureau proposes to require the reporting of all closed-end loans, open-end lines of credit, and reverse mortgages secured by dwellings. Reverse mortgages and open-end lines of credit would be identified as such to allow for differentiation from other loan types. The proposal would eliminate the reporting of unsecured home improvement loans.

Institutions would no longer be required to identify the purpose of the loan, but they would still be required to itemize dwelling-secured loans by purpose when reporting, and loans on unimproved land and temporary financing would continue to be excluded from HMDA reporting.

Further changes on the data points to elucidate characteristics of different data points.

Currently, HMDA reporting requires the inclusion of home purchase loans, home improvements loans, and refinancings, and home equity lines may be reported at financial institutions option, but it is not a requirement.

The Bureau believes the specification of reverse mortgages, and clarity on the characteristics of a loan would solve current gaps in the HMDA data.

PROPOSED MODIFICATIONS TO REPORTABLE DATA REQUIREMENTS

the Bureau proposes to align HMDA reporting to the Mortgage Industry Standards Maintenance Organization (MISMO) for residential mortgages. this change would make HMDA reporting easier for companies.

MODIFICATION / EXTENSION OF DATA POINTS

The Bureau proposes the extension and/or modification of HMDA data points. These can be classified into four broad categories

  • Information about the applicant and the underwriting process:
    • age
    • credit score
    • debt-to-income ratio
    • if denied: reasons for denial
    • application channel
    • automated underwriting system results
  • Information about the property securing the loan
    • construction method
    • property value
    • lien priority
    • individual dwelling units in the property
    • additional information about manufactured and multifamily housing
  • Information about loan features
    • pricing information
    • loan term
    • interest rate
    • introductory rate period
    • non-amortizing features
    • type of loan
  • Unique identifiers
    • universal loan identifier
    • property address
    • loan originator identifier
    • legal entity identifier for financial institutions

REPORTING FREQUENCY

The Bureau proposes to increase reporting to quarterly basis, and to require reporting financial institutions to make their reports available through a publicly-available website.

Currently, institutions are required to file HMDA reports on March 1 after the end of year, and reporters are required to disclosed their statements at their home offices, and post notices the data is available upon written request.

CLARIFY REGULATION C

According to the Bureau, there are aspects of regulation C that are unclear or confusing, and the bureau proposes to clarify certain points that may include:

  • clearly defining types of residential structures that are considered dwellings
  • treatment of manufactured and modular homes and multiple properties
  • coverage and pre-approval programs and temporary financing
  • how to report a transaction that involved multiple financial institutions
  • reporting the action taken in an application
  • reporting the type of purchaser for a covered loan

THESE ARE EXTENSIVE CHANGES to the current reporting requirements, and these will impose expenses even to small non-depository lenders. On the bright side, mirroring MISMO reporting will make things easier, is like preparing one report, but the increase in frequency for the reporting is a bit of a pain. Remember the commentary period of proposed rulemaking gives us an opportunity to voice potential problems or to hurray a change. IF you see a problem with this proposal, you can submit your commentary through the Federal Register, or communicate with industry associations and groups that represent our interests.

You can read the proposed rule,and submit commentary through here: [PENDING LINK, THE NEWS IS RECENT AND THE FEDERAL REGISTER TAKES A COUPLE OF DAYS BEFORE THE DOCKET IS AVAILABLE ONLINE. I WILL HAVE LINK BEFORE THIS IS PUBLISHED]

1) http://www.infobytesblog.com/cfpb-proposes-rule-to-implement-dodd-frank-hmda-changes/

2) http://files.consumerfinance.gov/f/201407_cfpb_proposed-rule_home-mortgage-disclosure_regulation-c.pdf

We offer mortgage branch opportunities across the country. We are looking to partner with seasoned branch managers who want to focus on production. Although not a net branch company, Nations Lending Corporation allows you to broker deals for which we have no products. Still, better than other mortgage net branch opportunities, we offer all government sponsored products.

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