Yes we are…. with the 2018 data submission deadline literally days away, Regulation C, the Home Mortgage Disclosure Act (HMDA), is and will remain the subject of industry conversation. The corresponding data that is required to be collected and reported under Regulation C has been updated repeatably, beginning with the Obama administration in 2015. Additional policy and guidance has been issued on a number of occasions under the Trump administration, from policy introduced in 2017 on loan-level data to more recent policy guidance issued as recently as December of last year. This latter policy offered clarification and outlined the detailed rules for public disclosure of loan-level HMDA data. Applicable to the 2018 collected data, guidelines also outline corresponding balancing testing that serves to equalize privacy risk versus disclosure benefits.
The list of changes that must be included as a part of the 2018 HMDA data submission on March 1st is not slight, and although impacted institutions are not strangers to HMDA reporting, some of the real work is just beginning. Insured depository institutions and credit unions will need to ensure both third-party vendors and internal resources have properly implemented new requirements. Will data files upload properly, passing validations? What processing exceptions will require immediate follow-up, interim redesign and/or longer-term systemic change? Identifying and addressing these errors and exceptions early as a part of quality control processes will help ensure future state and investor audits reflect HMDA compliance, as well as position reporting institutions for further clarification and change.
Highlights of HMDA requirements that have been changed for March 1st reporting follow:
Privacy protection – disclosure of data as a range versus specific values for age, loan amount, number of units in subject property, and data reported on debt-to-income (DTI) ratios as used for credit decision.
Data exclusions – universal loan identifier (ULI) and non-universal loan identifier; application received date; date action taken; address of subject property; credit score(s); unique identifiers assigned by Nationwide Mortgage Licensing System (NMLS); automated underwriting system (AUS) results.
Free form text exclusions – applicant race; applicant ethnicity; credit score model name/version; denial reason(s); automated underwriting system (AUS) name.
Partial exemptions – if depository institution originated less than 500 closed-end loans in past two preceding calendar years; and/or originated less than 500 open-end lines of credit in past two preceding calendar years.
Implementation considerations – exception from collection, recording and reporting on some data points; 2018 loan application registry (LAR) formats not affected; partial exemption doesn’t apply to non-depository institutions
As the industry settles into refreshed HMDA rules, don’t think the conversation ends here. Further modification of HMDA requirements is on the horizon. The Consumer Financial Protection Bureau (CFPB) plans to begin further rulemaking this Spring. Additionally, the recent CFPB semi-annual report, the first under new director, Kathleen Kraninger, listed HMDA under both upcoming initiatives and upcoming rules. Although some of the information in the recent report is redundant to existing and new HMDA policy, the semi-annual report does imply that the door is open for Kraninger if she wants to further modify collection criteria, reporting and/or exemptions under HMDA.
Institutions subject to HMDA requirements should approach this next phase of data collection,
reporting and continued rulemaking with an extra dose of caution. While agencies with oversight responsibilities intend to show leniency as the industry adapts to recent changes, this will not prevent them from citing errors, overlooked rules, and/or misapplied policies. As your organization embraces the new HMDA, it becomes even more important that your compliance partner understands the nuances of your business, not just the regulations. The QMS suite of boutique services and automated solutions is designed to add flexibility to monitoring, auditing and compliance to regulation, regardless of the amount of change. QMS is the mortgage quality control and audit technology solutions company. Feel confident that your institution is on top of ongoing regulatory disruption, while ensuring your team is positioned to take advantage of improved process efficiency and cost savings, with QMS as your QC and compliance partner. Offering industry required audits as a core product solution for over 20 years, QMS is ready to meet existing and forthcoming HMDA change.