Vol. 79 Friday, 

No. 168 August 29, 2014 

Part IV 

Bureau of Consumer Financial Protection 

12 CFR Part 1003 

Home Mortgage Disclosure (Regulation C); Proposed Rule 


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51732 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

1 12 U.S.C. 2801–2810. 

2 Dodd-Frank Act, Public Law 111–203, section 

1094, 124 Stat. 1376, 2097 (2010). 

3 12 CFR part 1003. 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1003 

[Docket No. CFPB–2014–0019] 

RIN 3170–AA10 

Home Mortgage Disclosure 

(Regulation C) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Proposed rule with request for 

public comment. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is 

publishing for public comment a 

proposed rule amending Regulation C to 

implement amendments to the Home 

Mortgage Disclosure Act (HMDA) made 

by section 1094 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (Dodd-Frank Act). Consistent with 

section 1094 of the Dodd-Frank Act, the 

Bureau proposes to add several new 

reporting requirements and to clarify 

several existing requirements. The 

Bureau is also proposing changes to 

institutional and transactional coverage 

under Regulation C. 

DATES: Comments must be received on 

or before October 29, 2014. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2014– 

0019 or RIN 3170–AA10, by any of the 

following methods: 

• Email: FederalRegisterComments@

cfpb.gov. 

• Electronic: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Monica Jackson, Office of the 

Executive Secretary, Consumer 

Financial Protection Bureau, 1700 G 

Street NW., Washington, DC 20552. 

• Hand Delivery/Courier: Monica 

Jackson, Office of the Executive 

Secretary, Consumer Financial 

Protection Bureau, 1275 First Street NE., 

Washington, DC 20002. 

Instructions: All submissions should 

include the agency name and docket 

number or Regulatory Information 

Number (RIN) for this rulemaking. 

Because paper mail in the Washington, 

DC area and at the Bureau is subject to 

delay, commenters are encouraged to 

submit comments electronically. In 

general, all comments received will be 

posted without change to http://

www.regulations.gov. In addition, 

comments will be available for public 

inspection and copying at 1275 First 

Street NE., Washington, DC 20002, on 

official business days between the hours 

of 10 a.m. and 5 p.m. Eastern Time. You 

can make an appointment to inspect the 

documents by telephoning (202) 435– 

7275. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and 

subject to public disclosure. Sensitive 

personal information, such as account 

numbers or Social Security numbers, 

should not be included. Comments will 

not be edited to remove any identifying 

or contact information. 

FOR FURTHER INFORMATION CONTACT: 

David Jacobs, Terry J. Randall, or James 

Wylie, Counsels; or Elena Grigera 

Babinecz, Joan Kayagil, Thomas J. 

Kearney, Amanda Quester, or Laura 

Stack, Senior Counsels, Office of 

Regulations, at (202) 435–7700. 

SUPPLEMENTARY INFORMATION: 

I. Summary of Proposed Rule 

For almost 40 years, HMDA1 has 

provided the public with information 

about how financial institutions are 

serving the housing needs of their 

communities. This information has 

helped to promote access to fair credit 

in the housing market. Section 1094 of 

the Dodd-Frank Act amended HMDA to 

improve the utility of the HMDA data 

and revise Federal agency rulemaking 

and enforcement authorities.2 The 

Bureau views implementation of the 

Dodd-Frank Act changes to HMDA as an 

opportunity to assess other ways to 

improve upon the data collected, reduce 

unnecessary burden on financial 

institutions, and streamline and 

modernize the manner in which 

financial institutions collect and report 

HMDA data. Accordingly, the Bureau is 

proposing to implement the Dodd-Frank 

Act amendments and to make other 

changes in the Bureau’s Regulation C,3

which implements HMDA. 

Specifically, the Bureau is proposing 

several changes to revise the tests for 

determining which financial institutions 

and housing-related credit transactions 

are covered under HMDA. The Bureau 

also is proposing to require financial 

institutions to report new data points 

identified in the Dodd-Frank Act, as 

well as other data points that the Bureau 

believes may be necessary to carry out 

the purposes of HMDA. Further, the 

Bureau is proposing to better align the 

requirements of Regulation C to existing 

industry standards where practicable. 

To improve the quality and timeliness 

of HMDA data, the Bureau is proposing 

to require financial institutions with 

large numbers of reported transactions 

to submit their HMDA data on a 

quarterly, rather than an annual, basis. 

To minimize costs to HMDA reporters 

associated with making certain data 

available to the public, the Bureau is 

proposing that reporters may direct 

members of the public to a publicly 

available Web site to obtain the data. 

The Bureau is also proposing several 

changes to clarify and provide 

additional guidance on existing 

requirements of Regulation C that 

financial institutions and other 

stakeholders have identified as 

confusing or unclear. The Bureau 

solicits public comment on all issues 

involved with this proposal, including 

each of its specific proposals to amend 

Regulation C. 

A. Proposed Modifications to 

Institutional and Transactional 

Coverage 

The Bureau is proposing 

modifications to institutional and 

transactional coverage to better achieve 

HMDA’s purposes in light of current 

market conditions and to reduce 

unnecessary burden on financial 

institutions. The Bureau is proposing to 

adjust Regulation C’s institutional 

coverage test to simplify the 

institutional coverage requirements by 

adopting, for all financial institutions, a 

uniform loan-volume threshold of 25 

loans. Currently, Regulation C contains 

different coverage criteria for depository 

institutions (banks, savings associations, 

and credit unions) and nondepository 

institutions. Depository institutions that 

originate one first-lien home purchase 

loan or refinancing secured by a one-tofour family dwelling and that meet other 

criteria for a financial institution under 

Regulation C must collect and report 

HMDA data, while some nondepository 

institutions that originate as many as 99 

home purchase loans, including 

refinancings of home purchase loans, 

annually do not have to collect and 

report HMDA data. 

Under the proposal, depository and 

nondepository institutions that meet all 

other criteria for a financial institution 

under Regulation C would be required 

to report HMDA data if they originated 

25 covered loans, excluding open-end 

lines of credit, in the previous calendar 

year. The Bureau believes that this 

proposal would improve the quality of 

HMDA data by increasing visibility into 

the practices of nondepository 

institutions. In addition, the Bureau is 

concerned that the requirement for 

depository institutions to report even if 

they originate only one mortgage loan 

may impose costs not justified by the 

benefits. The proposal would relieve 

depository institutions that originate a 

small number of mortgage loans from 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51733 

4The proposed modifications to institutional 

coverage are discussed in more detail below in the 

section-by-section analysis of proposed § 1003.2(g). 5Covered loans generally are discussed in more 

detail below in the section-by-section analysis of 

proposed § 1003.2(e). Home improvement loans are 

discussed in more detail below in the section-bysection analysis of proposed § 1003.2(i). Open-end 

lines of credit and home-equity lines of credit are 

discussed in more detail below in the section-bysection analyses of proposed §§ 1003.2(o), 

1003.4(a)(37), 1003.4(a)(39), and 1003.4(c)(3). 

Reverse mortgages are discussed in more detail 

below in the section-by-section analyses of 

proposed §§ 1003.2(q) and 1003.4(a)(36). 

6MISMO is the federally registered service mark 

of the Mortgage Industry Standards Maintenance 

Organization, a wholly-owned subsidiary of the 

Mortgage Bankers Association. 

7The use of data standards, and the MISMO data 

standards in particular, are discussed in more detail 

below in part II.B. 

8The data points the Bureau is proposing to add 

or modify are discussed in more detail below in the 

section-by-section analysis of proposed § 1003.4(a). 

9Quarterly reporting is discussed in more detail 

below in the section-by-section analysis for 

proposed § 1003.5(a). 

10The disclosure statement is discussed in more 

detail below in the section-by-section analysis for 

proposed § 1003.5(b). 

the burden of reporting HMDA data 

without significantly impacting the 

data’s quality for analysis at the 

national, community, or institutional 

level.4

The Bureau is also proposing to 

generally expand the types of 

transactions subject to Regulation C, 

while eliminating the requirement to 

report unsecured home improvement 

loans. Currently, Regulation C requires 

reporting of three types of loans: home 

purchase, home improvement, and 

refinancing. Reverse mortgages that are 

home purchase loans, home 

improvement loans, or refinancings are 

reported under Regulation C, but they 

are not separately identified and many 

data points do not currently account for 

the features of reverse mortgages. Homeequity lines of credit may be reported at 

financial institutions’ option, but are not 

required to be reported. As a result, 

HMDA data currently contains gaps in 

data regarding important segments of 

the housing market. 

Under the proposal, financial 

institutions generally would be required 

to report all closed-end loans, open-end 

lines of credit, and reverse mortgages 

secured by dwellings. Unsecured home 

improvement loans would no longer be 

reported. Thus, financial institutions 

would no longer be required to ascertain 

an applicant’s intended purpose for a 

dwelling-secured loan to determine if 

the loan is required to be reported under 

Regulation C, though they would still 

itemize dwelling-secured loans by 

different purpose when reporting. 

Certain types of loans would continue to 

be excluded from Regulation C 

requirements, including loans on 

unimproved land and temporary 

financing. Reverse mortgages and openend lines of credit would be identified 

as such to allow for differentiation from 

other loan types. Further, many of the 

data points would be modified to take 

account of the characteristics of, and to 

clarify reporting requirements for, 

different types of loans. The Bureau 

believes these proposals will yield more 

consistent and useful data and better 

align Regulation C with the current 

housing finance market.5

B. Proposed Modifications to Reportable 

Data Requirements 

The Bureau believes that it can make 

HMDA compliance and data submission 

easier for HMDA reporters by aligning, 

to the extent practicable, Regulation C 

requirements with existing industry 

standards for collecting and transmitting 

data on mortgage loans and 

applications. Therefore, the Bureau is 

proposing to align many of the HMDA 

data requirements with the widely-used 

Mortgage Industry Standards 

Maintenance Organization (MISMO) 

data standards for residential 

mortgages.6 The Bureau believes that 

having consistent data standards for 

both industry and regulatory use 

promotes regulatory compliance, 

improves regulatory clarity, market 

efficiency, and data utility.7

The Bureau is proposing to add new 

data points to the reporting 

requirements established in Regulation 

C, as well as to modify certain existing 

data points. Some of the new data 

points are specifically identified by the 

Dodd-Frank Act. Others are proposed 

pursuant to the Bureau’s discretionary 

rulemaking authority to carry out the 

purposes of HMDA by addressing data 

gaps. The data points that the Bureau is 

proposing to add or modify can be 

grouped into four broad categories: 

• Information about applicants, 

borrowers, and the underwriting 

process, such as age, credit score, debtto-income ratio, reasons for denial if the 

application was denied, the application 

channel, and automated underwriting 

system results. 

• Information about the property 

securing the loan, such as construction 

method, property value, lien priority, 

the number of individual dwelling units 

in the property, and additional 

information about manufactured and 

multifamily housing. 

• Information about the features of 

the loan, such as additional pricing 

information, loan term, interest rate, 

introductory rate period, non-amortizing 

features, and the type of loan. 

• Certain unique identifiers, such as a 

universal loan identifier, property 

address, loan originator identifier, and a 

legal entity identifier for the financial 

institution.8

C. Proposed Modifications to Disclosure 

and Reporting Requirements 

Regulation C requires financial 

institutions to submit their HMDA data 

to the appropriate Federal agency by 

March 1 following the calendar year for 

which the data are compiled. The 

Bureau is proposing to require financial 

institutions that report large volumes of 

HMDA data to submit their data to the 

appropriate agency on a quarterly, 

rather than an annual basis. The Bureau 

believes that quarterly reporting would 

allow regulators to use the data to 

effectuate the purposes of HMDA in a 

more timely and effective manner, 

would reduce reporting errors and 

improve the quality of HMDA data, and 

may facilitate the earlier release of 

annual HMDA data to the public.9

The Bureau also is proposing to allow 

HMDA reporters to make their 

disclosure statements available by 

referring members of the public that 

request a disclosure statement to a 

publicly-available Web site. Currently, a 

financial institution is required to make 

its disclosure statement available to the 

public in its home offices and, in 

addition, to either make it available in 

certain branch offices or to post notice 

of its availability and provide it in 

response to a written request. The 

Bureau believes that this proposal will 

facilitate public access to HMDA data 

while minimizing burdens to financial 

institutions.10

D. Proposed Modifications To Clarify 

the Regulation 

Financial institutions and other 

stakeholders have, over time, identified 

aspects of Regulation C that are unclear 

or confusing. The Bureau believes that 

the implementation of the Dodd-Frank 

Act amendments is an opportunity to 

address many of these longstanding 

issues through improvements to the 

regulatory provisions, the instructions 

in appendix A, and the staff 

commentary. Examples of these 

clarifications include guidance on what 

types of residential structures are 

considered dwellings; the treatment of 

manufactured and modular homes and 

multiple properties; coverage of 

preapproval programs and temporary 

financing; how to report a transaction 

that involved multiple financial 

institutions; reporting the action taken 


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11The proposed guidance is discussed 

throughout the section-by-section analysis. 

12HMDA section 302(b), 12 U.S.C. 2801(b); see 

also 12 CFR 1003.1(b)(1)(i)–(ii). 

13Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989, Public Law 101–73, 

section 1211 (‘‘Fair lending oversight and 

enforcement’’ section), 103 Stat. 183, 524–26 (1989). 

14 54 FR 51356, 51357 (Dec. 15, 1989), codified 

at 12 CFR 1003.1(b)(1). 

15The FFIEC is a formal interagency body 

empowered to prescribe uniform principles, 

standards, and report forms for the Federal 

examination of financial institutions by the Bureau, 

the Board, the Federal Deposit Insurance 

Corporation (FDIC), the National Credit Union 

Administration (NCUA), and the Office of the 

Comptroller of the Currency (OCC), and to make 

recommendations to promote uniformity in the 

supervision of financial institutions. In 2006, the 

State Liaison Committee was added to the Council 

as a voting member. 

16As one example of many, in 2008 the City of 

Albuquerque used HMDA data to characterize 

neighborhoods as ‘‘stable,’’ ‘‘prone to 

gentrification,’’ or ‘‘prone to disinvestment’’ for 

purposes of determining the most effective use of 

housing grants. See City of Albuquerque, Five Year 

Consolidated Housing Plan and Workforce Housing 

Plan 100 (2008), available at http://www.cabq.gov/ 

family/documents/ConsolidatedWorkforce

HousingPlan20082012final.pdf. As another 

example, Antioch, California, monitors HMDA data, 

reviews it when selecting financial institutions for 

contracts and participation in local programs, and 

supports home purchase programs targeted to 

households purchasing homes in Census Tracts 

with low loan origination rates based on HMDA 

data. See City of Antioch, California, Fiscal Year 

2012–2013 Action Plan 29 (2012), http:// 

www.ci.antioch.ca.us/CitySvcs/CDBGdocs/ 

Action%20Plan%20FY12-13.pdf. Similarly, 

Lawrence, Massachusetts, identified a need for 

homebuyer counseling and education based on 

HMDA data, which showed a high percentage of 

high-cost loans compared to surrounding 

communities. See City of Lawrence, Massachusetts, 

HUD Consolidated Plan 2010–2015, at 68 (2010), 

http://www.cityoflawrence.com/Data/Sites/1/ 

documents/cd/Lawrence_Consolidated_Plan_

Final.pdf. 

17For example, under section 2301 of the 

Housing and Economic Recovery Act of 2008, 

Public Law 110–289, 122 Stat. 2654 (July 30, 2008), 

the U.S. Department of Housing and Urban 

Development (HUD) created the Neighborhood 

Stabilization Program. Under this program, funds 

were provided for stabilizing communities that 

suffered from foreclosures and abandonment. The 

statute required HUD to swiftly devise a funding 

formula based on foreclosures, subprime loans, and 

loans in default or delinquency. HMDA data on 

loans, and particularly high-cost loans, in 

communities were used to develop the formula. See 

http://portal.hud.gov/hudportal/documents/ 

huddoc?id=DOC_14172.pdf. 

18See, e.g., Yana Kunichoff, Lisa Madigan Credits 

Reporter with Initiating Largest Discriminatory 

Lending Settlements in U.S. History (June 14, 2013), 

http://www.chicagonow.com/chicago-muckrakers/ 

2013/06/lisa-madigan-credits-reporter-withinitiating-largest-discriminatory-lendingsettlements-in-u-s-history/ (‘‘During our ongoing 

litigation . . . the Chicago Reporter study looking 

at the HMDA data for the City of Chicago came out. 

. . . It was such a startling statistic that I said . . . 

we have to investigate, we have to find out if this 

is true. . . . We did an analysis of that data that 

substantiated what the Reporter had already found. 

. . . [W]e ultimately resolved those two lawsuits. 

They are the largest fair-lending settlements in our 

nation’s history.’’); Press Release, New York State 

Office of the Attorney General, Attorney General 

Cuomo Obtains Approximately $1 Million For 

Victims Of Greenpoint’s Discriminatory Lending 

Practices (July 16, 2008), http://www.ag.ny.gov/ 

press-release/attorney-general-cuomo-obtainsapproximately-1-million-victims-greenpoints 

(describing settlement arising from review of 

HMDA data). 

19 ‘‘I have been analyzing HMDA data for 14 years 

and believe that HMDA is an invaluable tool to 

on an application; and reporting the 

type of purchaser for a covered loan.11

II. Background 

A. HMDA’s Role in the Mortgage Market 

Overview of HMDA and Regulation C 

The Home Mortgage Disclosure Act 

(HMDA), 12 U.S.C. 2801 et seq., requires 

certain depository institutions and forprofit nondepository institutions to 

collect, report, and disclose data about 

originations and purchases of mortgage 

loans, as well as mortgage loan 

applications that do not result in 

originations (for example, applications 

that are denied or withdrawn). As 

originally adopted, HMDA identifies its 

purposes as providing the public and 

public officials with information to help 

determine whether financial institutions 

are serving the housing needs of the 

communities in which they are located, 

and to assist public officials in their 

determination of the distribution of 

public sector investments in a manner 

designed to improve the private 

investment environment.12 Congress 

later expanded HMDA to, among other 

things, require financial institutions to 

report racial characteristics, gender, and 

income information on applicants and 

borrowers.13 In light of these 

amendments, the Board of Governors of 

the Federal Reserve System (Board) 

subsequently recognized a third HMDA 

purpose of identifying possible 

discriminatory lending patterns and 

enforcing antidiscrimination statutes, 

which now appears with HMDA’s other 

purposes in Regulation C.14

The Bureau’s Regulation C, 12 CFR 

part 1003, implements HMDA. 

Regulation C currently requires 

depository institutions (i.e., banks, 

savings associations, and credit unions) 

and for-profit nondepository mortgage 

lending institutions to submit and 

publicly disclose certain HMDA data if 

they meet criteria set forth in the rule. 

Whether a depository institution is 

required to report and publicly disclose 

data depends on its asset size, the 

location of its home and branch offices, 

the extent to which it engages in 

residential mortgage lending, and the 

extent to which the institution or its 

loans are federally-related. Whether a 

for-profit nondepository mortgage 

lending institution is required to report 

and publicly disclose data depends on 

its size, the location of its home and 

branch offices, including the extent of 

its business in metropolitan statistical 

areas (MSAs), and the extent to which 

it engages in residential mortgage 

lending. 

Covered financial institutions are 

required to report originations and 

purchases of mortgage loans (home 

purchase and refinancing) and home 

improvement loans, as well as loan 

applications that do not result in 

originations. The information reported 

under Regulation C currently includes, 

among other items: application date; 

loan or application type, purpose, and 

amount; property location and type; 

race, ethnicity, sex, and annual income 

of the loan applicant; action taken on 

the loan application (approved, denied, 

withdrawn, etc.), and date of that action; 

whether the loan is subject to the Home 

Ownership and Equity Protection Act of 

1994 (HOEPA); lien status (first lien, 

subordinate lien, or unsecured); and 

certain loan price information. 

Financial institutions report HMDA 

data to their supervisory agencies on an 

application-by-application basis using a 

register format referred to as the loan 

application register. Institutions must 

make their loan application registers 

available to the public, with certain 

fields redacted to preserve applicants’ 

and borrowers’ privacy. At present, the 

Federal Financial Institutions 

Examination Council (FFIEC),15 on 

behalf of the supervisory agencies, 

compiles the reported data and prepares 

an individual disclosure statement for 

each institution and aggregate reports 

for all covered institutions in each 

metropolitan area. These disclosure 

statements and reports are available to 

the public. On behalf of the agencies, 

the FFIEC also annually releases a loanlevel dataset containing all reported 

HMDA data for the preceding calendar 

year with certain fields redacted to 

protect the privacy of applicants and 

borrowers. 

History of HMDA’s Role in the Mortgage 

Market 

For nearly 40 years, HMDA has 

provided the public with information 

about mortgage lending activity within 

communities throughout the nation. 

Public officials use the information 

available through HMDA to develop and 

allocate housing and community 

development investments,16 to respond 

to market failures when necessary,17

and to monitor whether financial 

institutions may be engaging in 

discriminatory lending practices.18 The 

data are used by the mortgage industry 

to inform business practices,19 and by 


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understand how the mortgage market works in 

practice. Our HMDA work at [the Mortgage Bankers 

Association] helps our members reach new 

customers and develop products and underwriting 

tools to better serve new and established portions 

of the market.’’ Home Mortgage Disclosure Act: 

Newly Collected Data and What It Means, Hearing 

Before the Subcomm. on Fin. Servs. and Consumer 

Credit of the H. Comm. on Fin. Servs., 109th Cong. 

(2006) (oral testimony of Douglas G. Duncan, Senior 

Vice President and Chief Economist, Research and 

Business Development, Mortgage Bankers Ass’n), 

available at http://www.gpo.gov/fdsys/pkg/CHRG109hhrg31528/html/CHRG-109hhrg31528.htm. 

20 ‘‘In recent years . . . scores of community 

groups have used HMDA data to document the 

emergence and dramatic expansion of the subprime 

mortgage market and its concentration in minority 

communities.’’ Home Mortgage Disclosure Act: 

Newly Collected Data and What It Means, Hearing 

Before the Subcomm. on Fin. Servs. and Consumer 

Credit of the H. Comm. on Fin. Servs., 109th Cong. 

4 (2006) (written testimony of Calvin Bradford, 

President, Calvin Bradford Associates, Ltd., on 

behalf of the Nat’l Fair Hous. Alliance), available 

at http://archives.financialservices.house.gov/ 

media/pdf/061306cb.pdf. 

21Housing Act of 1949, Public Law 81–171, 

section 2, 63 Stat. 413 (1949). 

22 Id. 

23The National Advisory Commission on Civil 

Disorders, The Kerner Report: The 1968 Report of 

the National Advisory Commission on Civil 

Disorders 467 (Pantheon Books, 1988) [hereinafter 

The Kerner Report]. 

24 Id. 

25HUD replaced the Housing and Home Finance 

Agency. Congress elevated the agency to cabinetlevel status in order to more effectively coordinate 

affordable housing and urban renewal programs. 

Department of Housing and Urban Development 

Act, Public Law 89–174, section 3, 79 Stat. 667 

(1965). 

26Civil Rights Act of 1968, Public Law 90–284, 

title VIII, 82 Stat. 73 (1968). Segregation, 

discrimination, and poverty had prevented 

minorities from moving to the suburbs and 

achieving the economic gains and improved 

housing conditions that other Americans had, and 

they disproportionately bore the burden of the 

deteriorating urban housing stock. See The Kerner 

Report at 467. 

27 ‘‘The Committee heard from neighborhood 

representatives, community leaders and public 

officials from fifteen major cities in which 

disinvestment in older neighborhoods is considered 

a serious problem.’’ Comm. on Banking, Hous. and 

Urban Affairs, report on S. 1281, Home Mortgage 

Disclosure Act of 1975, S. Rep. 94–187, at 279 

(1975). 

28 ‘‘Typically, a potential buyer with a good credit 

rating attempting to purchase a sound home in an 

older urban neighborhood often meets a cool 

reception from local lenders. . . . Conversely, the 

same buyer finds 90 percent-30 year mortgages 

plentiful in the adjoining suburbs.’’ Id. at 280. 

29 ‘‘A [Milwaukee] resident was told by a loan 

officer that she could get only a 12 year mortgage 

because of the age of the property and its location. 

‘Go west of 60th Street and then we can talk 20 to 

25 years.’ ’’ Id. at 283. 

30 Id. at 280. 31 ‘‘[Baltimore] lending institutions adopted 

policies related to property that eliminated a large 

segment of city houses on the market, e.g. loans not 

available on houses over 20 years old or those 

which are less than 18 feet wide. By the way, 

almost two-thirds of [Baltimore] houses were built 

before 1939, and many . . . are row houses 12, 14, 

and 16 feet wide.’’ Id. at 285. 

32 ‘‘Home improvement loans become difficult if 

not impossible to obtain, causing housing to 

deteriorate prematurely. Prospective home buyers 

are encouraged to buy their home in a new 

suburban development rather than in an urban 

neighborhood which according to the lending 

official is on the decline. Existing homeowners 

begin to panic and sell to speculators.’’ Comm. on 

Banking, Currency and Hous. Report on H.R. 10024, 

Depository Institutions Amendments of 1975, H. 

Rep. 94–561, at 117 (1975). 

33 Id. ‘‘Given the lack of money to make the 

necessary repairs, the neighborhood rapidly takes 

on the characteristics of a slum—severe property 

maintenance problems, high rate of foreclosures, 

housing abandonment, not to mention the attendant 

negative social and economic consequences for the 

area. Owner/occupants representing good, stable 

families move out; absentee landlords and 

speculators move in. The prophecy fulfills itself.’’ 

Id. See generally S. Rep. 94–187, at 307. 

34With respect to home improvement loans: 

‘‘Despite intensive efforts to devise a way to 

measure rehabilitation activity, we have not been 

successful in developing a feasible system, 

primarily due to the fact that there is no known way 

to measure the volume or quality of private 

rehabilitation efforts.’’ H. Rep. 94–561, at 115. With 

respect to home purchase loans, Congress identified 

difficulties in analyzing claims regarding 

disinvestment, which it believed ‘‘illustrate[d] the 

need for reliable data, which can be obtained only 

through disclosure.’’ S. Rep. 94–187, at 287. 

local communities to ensure that 

lenders are serving the needs of 

individual neighborhoods.20 To 

maintain the data’s usefulness, HMDA 

and Regulation C have been updated 

and expanded over time in response to 

the changing needs of homeowners and 

evolution in the mortgage market. What 

is currently a critical source of 

nationwide home finance information 

began as a method of empowering 

neighborhoods by providing visibility 

into community mortgage lending 

practices. 

Community Deterioration and Access 

to Mortgage Credit. In the decades that 

followed World War II, the standard of 

living sharply declined in many U.S. 

cities as people left central cities for the 

suburbs. A significant cause of this 

decline was the gradual deterioration in 

the urban housing supply. Congress 

committed to improving the nation’s 

housing stock in the Housing Act of 

1949, which established a goal of ‘‘a 

decent home and suitable living 

environment for every American 

family’’ through development and 

redevelopment of communities and 

elimination of slums and blighted 

areas.21 To achieve this goal, Congress 

envisioned a partnership between 

private enterprise, governments, and 

local public bodies.22 However, during 

the 1950s, construction of new housing 

happened overwhelmingly outside the 

central cities.23

By the 1960s, despite improvements 

in the housing supply throughout the 

country, there were neighborhoods and 

areas within many cities where the 

housing situation continued to 

deteriorate.24 During the 1960s, several 

efforts were made to improve urban 

housing. These efforts included the 

creation of the U.S. Department of 

Housing and Urban Development (HUD) 

and its elevation to cabinet-level agency 

status in 1965.25 In addition, Congress 

enacted the Fair Housing Act of 1968, 

which prohibited discrimination in the 

sale, rental, or financing of housing.26

However, by the 1970s it was clear that 

the lack of credit in urban communities 

was one of the major factors 

contributing to the decline in these 

communities. 

Congressional hearings revealed that 

many financial institutions were 

unwilling to provide mortgage loans for 

the purchase of homes in urban areas.27

In many cases, potential homebuyers 

were told by their financial institution 

that financing would not be available for 

an existing urban home, but a mortgage 

loan could be provided for a new home 

in the suburbs.28 In other cases, 

financial institutions were willing to 

provide mortgage loans for homes 

located in both urban and suburban 

areas, but the cost of credit for the urban 

home was significantly higher than that 

for the suburban home.29 As a result of 

these practices, the supply of buyers for 

urban homes dwindled, weakening the 

urban real estate market and 

contributing to a decline in the value of 

urban homes. 

The unavailability of home 

improvement financing also was a 

significant problem. Financial 

institutions generally were unwilling to 

provide home improvement loans, 

which tend to be smaller and less risky 

than home purchase loans, in urban 

neighborhoods.30 Some financial 

institutions adopted policies that 

prohibited financing secured by homes 

beyond a certain age or other proxies for 

year of construction.31 As a result, urban 

residents were unable to obtain 

financing to maintain, repair, or 

remodel their homes.32 As these homes 

fell into disrepair, appraisers undervalued them, potential buyers found 

them less attractive, and financial 

institutions viewed them as riskier, 

thereby contributing to a cycle of 

neighborhood decline.33

While these market failures were 

generally acknowledged and 

understood, Congress was unable to 

determine the extent and severity of the 

situation.34 Over the course of several 

hearings, representatives from industry, 

communities, and various Federal 

agencies provided wide-ranging 

testimony as to the scope of the 

problem, and these witnesses generally 

cited a lack of reliable data as an 


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35See H. Rep. 94–561, at 116. 

36Public Law 94–200, sections 301–310, 89 Stat. 

1124, 1125–28 (1975). HMDA was originally set to 

expire after four years, but was temporarily 

extended several times before Congress made it 

permanent in 1988. Public Law 100–242, section 

565, 101 Stat. 1815, 1945 (1988). 

37 41 FR 23931 (June 14, 1976). The Board also 

issued interpretations in 1977 to clarify two aspects 

of the rule. 42 FR 19123 (Apr. 12, 1977). 

38 41 FR 23931, 23936–38 (June 14, 1976). 

39 Id. 

40 Id. 

41Public Law 93–383, section 101, 88 Stat. 633 

(1974) (‘‘The Congress finds and declares that the 

Nation’s cities, towns, and smaller urban 

communities face critical social, economic and 

environmental problems arising in significant 

measure from . . . inadequate public and private 

investment and reinvestment in housing . . . 

resulting in the growth and persistence of urban 

slums and blight and the marked deterioration of 

the quality of the urban environment.’’) 

42 12 U.S.C. 2901–2908. ‘‘The [CRA] reflected the 

congressional judgment that many banks were 

neglecting important credit needs within their 

communities and that regulators’ efforts were 

inadequate to deter banks from continuing to 

engage in these practices.’’ Allen Fishbein, The 

Ongoing Experiment with ‘‘Regulation from Below:’’ 

Expanded Reporting Requirements for HMDA and 

CRA, 3 Housing Policy Debate 601, 609 (1992). 

43See John Goering and Ron Wienk (eds), 

Mortgage Lending, Racial Discrimination and 

Federal Policy 10 (1996). 

44See, e.g., Ira Goldstein & Dan UrevickAckelburg, The Reinvestment Fund, Subprime 

Lending, Mortgage Foreclosures, and Race: How Far 

Have We Come and How Far Have We to Go? 2– 

3 (Ohio State Univ. Kirwan Institute for the Study 

of Race and Ethnicity 2008), http://

kirwaninstitute.osu.edu/docs/pdfs/goldstein_trf_

paper.pdf. 

45See, e.g., Glen B. Canner & Joe M. Cleaver, The 

Community Reinvestment Act: A Progress Report, 

Fed. Reserve Bulletin, vol. 66, no. 2, 87–96 (Feb. 

1980); Robert B. Avery & Thomas M. Buynak, 

Mortgage Redlining: Some New Evidence, 21 Fed. 

Reserve Bank of Cleveland, Economic Review 18– 

32 (Summer 1981). 

46See George J. Benston, Fed. Reserve Bank of 

Boston, Mortgage Redlining Research: A Review and 

Critical Analysis Discussion, 12 Journal of Bank 

Research 144 (Oct. 1979). 

47See Mark S. Sniderman, Fed. Reserve Bank of 

Cleveland, Economic Commentary: Issues in CRA 

Reform (Mar. 1991). 

48See Harold Black, Robert L. Schweitzer, & 

Lewis Mandell, Discrimination in Mortgage 

Lending, 68 American Econ. Review 186, 189 (May 

1978); Robert Schafer & Helen F. Ladd, MITHarvard Joint Center for Urban Studies, 

Discrimination in Mortgage Lending 287–300 

(1981); Thomas A. King, New York Univ., 

Discrimination in Mortgage Lending: A Study of 

Three Cities 50 (1981). 

49See Staff of S. Comm. on Banking, Hous., & 

Urban Affairs, 95th Cong., Second Report on 

Enforcement of the Equal Credit Opportunity and 

Home Mortgage Disclosure Acts 2–3 (Comm. Print 

1977) (‘‘The committee’s principal recommendation 

called for promulgation of regulations to establish 

. . . the requirement that lenders keep records 

indicating the race and sex of loan applications. 

. . . The committee called for a thorough periodic 

review by examiners of a lender’s pattern of 

mortgage loans, making use of both racial and sex 

notations and the data provided under the Home 

Mortgage Disclosure Act.’’). The Committee also 

supported development of an ‘‘objective test for 

discrimination that can be inferred from a 

comparison of the racial and economic 

characteristics of successful and unsuccessful loan 

applicants.’’ Id. at 4. 

50Housing and Community Development Act of 

1980, Public Law 96–399, section 340, 94 Stat. 

1614, 1657–58 (1980). 

51 47 FR 750 (Jan. 7, 1982). 

52See Bill Dedman, The Color of Money, AtlantaJournal Constitution, May 1–4, 1988; David Everett 

et al., The Race for Money, Detroit Free Press, July 

24–27, 1988; Bill Dedman, Blacks Turned Down for 

impediment to finding a solution.35 To 

address the lack of reliable data, 

Congress enacted HMDA in 1975.36 The 

Board implemented HMDA by 

promulgating Regulation C in 1976.37

As originally enacted and 

implemented, HMDA applied to 

depository institutions with over 

$10,000,000 in assets that made 

federally related mortgage loans and 

that were located in standard 

metropolitan statistical areas.38 HMDA 

required the disclosure of the number 

and dollar amount for both home 

improvement loans and residential 

mortgage loans, broken down into a 

number of categories.39 Depository 

institutions were required to make their 

mortgage loan disclosure statements 

available to the public for copying and 

inspection.40

Deteriorating urban housing 

conditions and inadequate private 

investment led Congress to enact other 

laws as well. These laws included the 

Housing and Community Development 

Act of 1974, which allocated funds to 

States and units of general local 

development to address urban 

conditions,41 and the Community 

Reinvestment Act of 1977 (CRA), which 

was intended to ensure that depository 

institutions were meeting the credit 

needs of their communities.42 In 

conjunction with laws such as these, 

HMDA was intended to promote 

neighborhood stability by empowering 

communities through information 

disclosure. 

HMDA created a degree of 

transparency that immediately 

improved the public’s understanding of 

the relationship between mortgage 

lending and community stability. The 

data enabled community groups to 

understand the magnitude of 

disinvestment within minority 

neighborhoods.43 Studies of the HMDA 

data by academic researchers 

demonstrated the extent to which 

lending disparities existed between 

communities.44 Public officials also 

relied on the HMDA data to study and 

analyze whether financial institutions 

were serving the credit needs of their 

communities.45 Even with the limited 

amount of data HMDA provided, the 

data’s disclosure lessened the 

information asymmetry between 

industry and the public, which 

improved the ability of communities to 

monitor industry and determine 

whether mortgage lenders were 

providing loans in a manner that 

facilitated stable and sustainable 

neighborhoods. 

Individual Discrimination and Market 

Evolution. Although HMDA improved 

the public’s understanding of the 

mortgage market, it became evident that 

critical data elements were missing. The 

HMDA data did not include information 

related to demand for mortgage credit or 

the creditworthiness of individual 

applicants.46 This led to many cases 

where community groups asserted that 

the HMDA data evidenced community 

disinvestment, but lenders countered 

that the data were misleading because 

they lacked information related to 

creditworthiness.47 Several studies 

conducted during the late 1970s and 

early 1980s used the HMDA data in 

conjunction with data obtained from 

surveys or through the examination 

process to analyze the relationship 

between community disinvestment and 

potential discrimination in mortgage 

lending.48 Congress also realized that 

the data provided were not adequate to 

fulfill HMDA’s statutory goals, and 

encouraged agency cooperation and 

combined implementation and 

enforcement of various statutes with 

similar goals.49

Beginning in the early 1980s, 

Congress made a number of significant 

changes to HMDA to expand the types 

of institutions covered, the data 

collected, and public access to such 

data. In 1980, Congress amended HMDA 

to require the newly established FFIEC 

to prepare and publish aggregate data 

tables for each standard MSA.50 The 

1980 amendments also required the 

Board to prescribe a standard format for 

HMDA disclosures, which it did in 

1982.51

While HMDA was successful in 

helping the public understand mortgage 

lending discrimination between 

neighborhoods, events in the late 1980s 

shifted public attention to 

discrimination between individual 

applicants and borrowers. Community 

groups had argued that individuals 

within a particular neighborhood were 

experiencing discrimination during the 

mortgage lending process. These groups 

lacked sufficient evidence to prove the 

extent and severity of the problem, until 

a series of investigative reports 

supported their arguments by 

demonstrating significant racial 

disparities in mortgage lending between 

several neighborhoods in both Atlanta 

and Detroit.52 At the same time, a 


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Home Loans from S&Ls Twice as Often as Whites, 

Atlanta Journal-Constitution, Jan. 22, 1989. 

53 ‘‘The data show that mortgages were originated 

on 6.9 percent of separately owned structures and 

condominiums in majority white neighborhoods 

during an average year between 1982 and 1987. The 

figure drops to 3.5 percent for majority black 

neighborhoods and to 2.7 percent for 

neighborhoods with populations that were more 

than 80 percent black.’’ Katharine Bradbury et al., 

Geographic Patterns of Mortgage Lending in Boston, 

1982–1987, New Eng. Econ. Rev., Sept./Oct. 1989, 

at 23. 

54 ‘‘HMDA proponents believed that this new 

research provided the ‘smoking gun’ needed to 

make the case for further changes to HMDA and the 

need for enhanced emphasis on fair lending 

enforcement.’’ Ren Essene & Allen Fishbein, 

Harvard Univ. Joint Center for Hous. Studies, The 

Home Mortgage Disclosure Act at Thirty-Five: Past 

History, Current Issues 17 (Aug. 2010). 

55See FDIC, History of the Eighties—Lessons for 

the Future: Volume I: An Examination of the 

Banking Crises of the 1980s and Early 1990s, at 241 

(Dec. 1997), available at www.fdic.gov/bank/

historical/history/vol1.html. 

56See Ren Essene & Allen Fishbein, Harvard 

Univ. Joint Center for Hous. Studies, The Home 

Mortgage Disclosure Act at Thirty-Five: Past 

History, Current Issues 17–18 (Aug. 2010). 

57Public Law 100–242, section 565, 101 Stat. 

1815, 1945 (1988); 53 FR 31683 (Aug. 19, 1988) 

(implementing these amendments and making other 

revisions to Regulation C). 

58Public Law 101–73, section 1211, 103 Stat. 183, 

524–26 (1989). 59 Id. The Federal Deposit Insurance Corporation 

Improvement Act of 1991 subsequently authorized 

the Board, in consultation with HUD, to develop a 

new exemption standard for nondepository 

mortgage lenders that is comparable to the 

exemption for depository institutions with $10 

million or less in total assets. Public Law 102–242, 

section 224, 105 Stat. 2236, 2307 (1991). In 1992, 

the Board adopted a standard that expanded 

coverage of nondepository institutions by providing 

that a nondepository mortgage lender with an office 

in an MSA would be covered if it met either an 

asset-size test or a lending activity test. 57 FR 56963 

(Dec. 2, 1992). 

60Public Law 101–73, section 1211, 103 Stat. 183, 

524–26 (1989); see Allen J. Fishbein, The Ongoing 

Experiment with ‘‘Regulation from Below:’’ 

Expanded Reporting Requirements for HMDA and 

CRA, 3 Housing Policy Debate 601, 615–16 (1993). 

61The Board implemented these changes in a 

final rule later that year. 54 FR 51356 (Dec. 15, 

1989). 

62See Alicia H. Munnell, et al., Mortgage Lending 

in Boston: Interpreting the HMDA Data, American 

Econ. Review. Fed. Reserve Bank of Boston 

Working Paper 92–7, at 22 (1992); James H. Carr & 

Isaac F. Megbolugbe, The Federal Reserve Bank of 

Boston: Study on Mortgage Lending Revisited, 4 

Journal of Housing Research 2, 277 (1993). 

63See e.g., Richard D. Marisco, Shedding Some 

Light on Lending: The Effect of Expanded 

Disclosure Laws on Home Mortgage Marketing, 

Lending, and Discrimination in the New York 

Metropolitan Area, 27 Fordham Urb. L. J. 481, 506 

(1999); Bd. of Governors of the Fed. Reserve Sys., 

Interagency Policy Statement on Fair Mortgage 

Lending Practices, Oct. 9, 1992, available at http:// 

www.federalreserve.gov/bankinforeg/

interagencystatement.htm; Interagency Task Force 

on Fair Lending Policy Statement on Discrimination 

in Lending, 73 FR 18266 (Apr. 15, 1994). 

64See Adam Rust, Fed. Reserve Bank of Boston 

and Fed. Reserve Bank of San Francisco, A 

Principle-Based Redesign of HMDA and CRA Data 

in Revisiting the Community Reinvestment Act: 

Perspectives on the Future of the Community 

Reinvestment Act 179 (Feb. 2009). 

65See Riegle-Neal Interstate Banking and 

Branching Efficiency Act of 1994, Public Law 103– 

328, 108 Stat. 2338. 

66See Patricia A. McCoy & Elizabeth Renuart, 

Harvard Univ. Joint Center for Hous. Studies, The 

Legal Infrastructure of Subprime and 

Nontraditional Home Mortgages 8–10 (Feb. 2008). 

67U.S. Fin. Crisis Inquiry Comm’n, The Financial 

Crisis Inquiry Report: Final Report of the National 

Commission on the Causes of the Financial and 

Economic Crisis in the United States 72 (Official 

Gov’t ed. 2011), available at http://www.gpo.gov/

fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf. 

68See Ben Bernanke, Chairman, Fed. Reserve Bd. 

(Speech), ‘‘The Community Reinvestment Act: Its 

Evolution and New Challenges,’’ Mar. 30, 2007, 

available at http://www.federalreserve.gov/

newsevents/speech/bernanke20070330a.htm. 

Federal Reserve Bank of Boston study 

that cross-referenced HMDA data, 

census data, and individual deed 

transfer data confirmed that similar 

racial disparities existed in the Boston 

mortgage market.53 These major reports 

and studies confirmed the arguments 

advanced by community groups and fair 

housing advocates that HMDA needed 

to be updated to improve the publicly 

available information about lending 

practices.54

These revelations coincided with the 

savings and loan crisis of the late 1980s, 

during which many depository 

institutions throughout the country 

failed.55 Concerns over mortgage 

lending discrimination, coupled with 

the need to respond to the savings and 

loan crisis, motivated Congress to 

amend HMDA significantly.56 In 1988, 

Congress amended HMDA to expand 

institutional coverage to include 

mortgage banking subsidiaries of bank 

holding companies and savings and 

loan holding companies, and savings 

and loan service corporations that 

originate or purchase mortgage loans.57

As amended, HMDA applied to 

depository institutions, mortgage 

banking subsidiaries of holding 

companies, and savings and loan service 

corporations with over $10 million in 

assets and offices in MSAs or primary 

MSAs. 

One year later, the Financial 

Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA) 

fundamentally changed HMDA in 

several other ways.58 FIRREA amended 

HMDA to cover certain mortgage 

lenders that are not affiliated with 

depository institutions or holding 

companies.59 To provide greater 

transparency into the mortgage lending 

process, HMDA was amended to require 

disclosure, on a transaction-level basis, 

of data on applications received in 

general, as well as data on the race, 

gender, and income of individual 

applicants and borrowers.60 These 

changes marked a substantial shift in 

the statutory approach to the public 

disclosure of mortgage market data.61

This shift from aggregate to 

transaction-level reporting, and from 

limited to more detailed loan data, 

substantially increased the usefulness of 

the HMDA data. Studies conducted 

using the expanded HMDA data 

confirmed that, in many cases, an 

applicant’s race alone influenced 

whether the applicant was denied 

credit.62 These studies led the Federal 

financial institution regulators to 

announce that the new HMDA data 

would be used to determine whether 

financial institutions were fulfilling 

their fair lending obligations.63 While 

the new data strengthened fair lending 

oversight and enforcement, it also had a 

powerful effect on the relationship 

between communities and financial 

institutions. Community groups used 

the data to monitor lending within their 

communities and enter into agreements 

with financial institutions to ensure that 

the local needs were being served in a 

responsible manner.64 By increasing the 

degree of transparency in the mortgage 

market, the FIRREA amendments to 

HMDA dramatically improved the 

public’s understanding of how mortgage 

lending decisions affected both 

communities and individual applicants 

and borrowers. 

Market Evolution, Subprime Lending, 

and Its Aftermath. After the FIRREA 

amendments, three major developments 

prompted rapid changes in the mortgage 

industry. First, the deregulation of the 

banking industry in 1994 led to a 

substantial number of bank mergers and 

reorganizations.65 Second, the 

expansion of the secondary market 

increased the availability of mortgage 

loans while enabling lenders to offer 

new types of mortgage loans to a wider 

range of borrowers.66 Third, advances in 

mortgage lending technology enabled 

the mortgage market to move from 

lengthy, manual origination processes to 

less burdensome and more efficient, 

computerized processes.67 These 

developments increased the availability 

of mortgage loans to all borrowers, but 

they also increased the sophistication of 

lending institutions and the complexity 

of the mortgage lending process. 

HMDA data, coupled with 

amendments to the CRA, helped 

communities engage with financial 

institutions to address issues stemming 

from deregulation. Community groups 

used HMDA data to challenge proposed 

bank mergers, and many depository 

institutions developed lending programs 

dedicated to addressing the needs of 

their communities.68 However, HMDA 


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69 ‘‘From essentially zero in 1993, subprime 

mortgage originations grew to $625 billion by 2005, 

one-fifth of total mortgage originations in that year, 

a whopping 26 percent annual rate of increase over 

the whole period.’’ Edward M. Gramlich, Urban 

Institute and Fed. Reserve Bank of Kansas City, 

Booms and Busts: The Case of Subprime Mortgages 

107 (Aug. 31, 2007). 

70Allen Fishbein & Harold Bunce, HUD, 

Subprime Market Growth and Predatory Lending, 

Hous. Policy in the New Millennium 274–76 (2000), 

http://www.huduser.org/publications/pdf/brd/

13fishbein.pdf. 

71 ‘‘While HMDA data have been a crucial tool 

allowing policy makers, regulators and the public 

to understand mortgage lending patterns, additional 

data not now required to be reported would more 

completely describe mortgage markets—the 

subprime market, in particular. Greater 

transparency in this market would promote more 

informed policy making and regulation, and may 

itself help to improve practices of lenders.’’ HUD, 

U.S. Dep’t of Treas., Curbing Predatory Home 

Mortgage Lending: A Joint Report 100 (June 2000), 

http://archives.hud.gov/reports/treasrpt.pdf. 

72 63 FR 12329 (Mar. 12, 1998). 

73 65 FR 78656 (Dec. 15, 2000). 

74 67 FR 7252 (Feb. 15, 2002). 

75 67 FR 7222 (Feb. 15, 2002); 67 FR 30771 (May 

8, 2002); 67 FR 43218 (June 27, 2002). 

76See Patricia A. McCoy, The Home Mortgage 

Disclosure Act: A Synopsis and Recent Legislative 

History, 29 Journal of Real Estate Research, no. 4 

at 388 (2007). 

77 ‘‘The growing incidence of abusive practices in 

a segment of the mortgage lending market has been 

stripping borrowers of home equity and threatening 

families with foreclosure, destabilizing the very 

communities that are beginning to enjoy the fruits 

of our Nation’s economic success.’’ Allen Fishbein 

& Harold Bunce, HUD, Subprime Market Growth 

and Predatory Lending, Hous. Policy in the New 

Millennium 278 (2000), http://www.huduser.org/

publications/pdf/brd/13fishbein.pdf. ‘‘In the three 

markets with data available on trends in 

foreclosures over time, it was found that 

foreclosures by subprime lenders grew sharply 

during the 1990s even as foreclosures by other 

lenders declined or grew at a much more moderate 

pace.’’ Harold L. Bunce et al., HUD, Subprime 

Foreclosures: The Smoking Gun of Predatory 

Lending? 268 (2000). 

78 ‘‘HMDA is a limited data set for groups without 

financial resources to pay for better information. A 

set of data providers . . . buy loan-level home 

mortgage data and then repackage the data for 

consumption by other lenders, analysts, and 

academics. Some nonprofit groups buy this 

information, but for the most part, it is too 

expensive for them.’’ Adam Rust, Fed. Reserve Bank 

of Boston and Fed. Reserve Bank of San Francisco, 

A Principle-Based Redesign of HMDA and CRA 

Data in Revisiting the Community Reinvestment 

Act: Perspectives on the Future of the Community 

Reinvestment Act 181 (Feb. 2009), http://

www.frbsf.org/community-development/files/

revisiting_cra.pdf. 

79See The U.S. Housing Market: Current 

Conditions and Policy Conditions 1 (Fed. Reserve 

Bd. White Paper Jan. 4, 2012), http://

www.federalreserve.gov/publications/other-reports/

files/housing-white-paper-20120104.pdf. 

80For example, the U.S. Department of the 

Treasury’s Hardest Hit Fund provides funds for 

homeownership stabilization programs in Alabama, 

Arizona, California, Florida, Georgia, Illinois, 

Indiana, Kentucky, Michigan, Mississippi, Nevada, 

New Jersey, North Carolina, Ohio, Oregon, Rhode 

Island, South Carolina, Tennessee, and Washington, 

DC. http://www.treasury.gov/initiatives/financialstability/TARP-Programs/housing/hhf/Pages/

Program-Purpose-and-Overview.aspx. See also 

supra note 17. 

81See Cong. Budget Office, Options for 

Responding to Short-Term Economic Weakness 21– 

22 (Jan. 2008), available at http://www.cbo.gov/

sites/default/files/cbofiles/ftpdocs/89xx/doc8916/

01-15-econ_stimulus.pdf. 

82See Joint Center for Hous. Studies Harvard 

Univ., The State of the Nation’s Housing 2010, at 

19 (2010), http://www.jchs.harvard.edu/research/

publications/state-nations-housing-2010. 

83See Fed. Reserve Bank of Cleveland, Facing the 

Foreclosure Crisis in Greater Cleveland: What 

Happened and How Communities are Responding 

13–14 (June 2010). 

data were not sufficient to help 

communities fully understand and 

address one major development that 

grew out of increased securitization and 

technological advances—the expansion 

of the subprime market. Between the 

mid-1990s and the mid-2000s, subprime 

lending dramatically increased.69 While 

subprime lending increased access to 

credit to many borrowers and in many 

communities, studies suggested that 

many subprime lenders offered loans in 

a predatory and discriminatory 

manner.70 Studies conducted by Federal 

agencies in the early 2000s concluded 

that there were significant concerns 

about discrimination in the subprime 

market, but that the HMDA data did not 

provide enough transparency to help 

communities and public officials 

understand the scope of the problem 

and devise effective solutions.71

The Board responded by amending 

Regulation C to provide greater visibility 

into the subprime market. The Board 

initiated its last comprehensive review 

of Regulation C through an advance 

notice of proposed rulemaking in 

1998 72 and notices of proposed 

rulemakings in 2000 73 and 2002,74

which culminated in final rules 

promulgated in 2002.75 Among other 

things, the Board’s 2002 revisions to 

Regulation C: 

• Required financial institutions to 

report pricing information for higherpriced mortgage loans; 

• Required financial institutions to 

identify loans subject to HOEPA; 

• Required financial institutions to 

report denials of applications received 

through certain preapproval programs 

and permitted financial institutions to 

report requests for preapproval that 

were approved but not accepted; 

• Expanded the coverage of 

nondepository financial institutions by 

adding a loan origination dollar-volume 

threshold of $25 million to the loanpercentage test; 

• Required financial institutions to 

report whether a loan involves a 

manufactured home; and 

• Required financial institutions to 

ask applicants their ethnicity, race, and 

sex in applications taken by telephone 

and conform the collection of data on 

ethnicity and race to standards 

established by the Office of Management 

and Budget (OMB) in 1997. 

The 2002 revisions to Regulation C 

focused on the data elements that are 

required rather than the institutions or 

transactions that are covered. In 

adopting the revisions, the Board 

considered changes that had occurred in 

the home mortgage market, including 

the growth of subprime lending. The 

revisions improved the usefulness of the 

HMDA data, especially with respect to 

fair lending concerns, but adding a 

limited number of loan pricing variables 

only modestly addressed the need for 

increased transparency in the subprime 

mortgage market.76

However, discrimination was only 

one of the problems caused by the 

predatory practices employed by certain 

subprime lenders. Evidence 

demonstrated that predatory subprime 

lending in the late 1990s resulted in 

high rates of delinquency and 

foreclosure, threatening the stability of 

many communities.77 This threat only 

increased as underwriting standards 

deteriorated throughout the 2000s. But 

when communities needed more 

granular loan data the most, HMDA did 

not provide it. As a result, communities 

could not understand the magnitude of 

the risk to which they were exposed. 

Neither could many community groups 

or public officials, who could not afford 

to purchase the detailed loan datasets 

available to the financial industry.78

Communities throughout the nation 

were devastated when the housing and 

financial markets collapsed in 2007. The 

financial crisis resulted in the loss of 

nearly $7 trillion in household wealth, 

and an unprecedented number of 

homeowners faced foreclosure.79

Federal, State, and local officials created 

relief programs intended to assist 

distressed homeowners, prevent a 

complete collapse of local housing 

markets, and to assist communities 

impacted by foreclosure and 

abandonment.80 While the crisis 

initially affected subprime borrowers, 

the problems eventually extended to the 

entire mortgage market.81 Both prime 

and subprime borrowers experienced 

high levels of delinquency and 

foreclosure, which destabilized 

communities across the country.82 In 

the wake of the unprecedented number 

of foreclosures, communities were 

forced to grapple with numerous 

abandoned homes, properties stripped 

of fixtures, and vandalism, which 

contributed to the downward spiral in 

neighborhood property values.83

Furthermore, although the crisis 

affected homeowners across the nation, 


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84See supra note 82. 

85See, e.g., Hearing Before the Federal Reserve 

Board on Regulation C on Implementing the Home 

Mortgage Disclosure Act of 1975 (2010) (testimony 

of Claudia Monterrosa, Director, Policy & Planning, 

Los Angeles Housing Department, City of Los 

Angeles), available at http:// 

www.federalreserve.gov/communitydev/files/ 

monterrosa.pdf. See also supra note 17. 

86 Id. 

87For example, the Atlanta Regional Commission 

and the Office of University-Community 

Partnerships at Emory University used the HMDA 

data and a purchased dataset to understand the full 

scope of the properties at risk of foreclosure in the 

greater Atlanta area. See G. Thomas Kingsley et al., 

Urban Institute, Addressing the Foreclosure Crisis: 

Action-Oriented Research in Three Cities 17–18 

(2009), http://www.urban.org/publications/ 

412001.html. 

88 73 FR 63329 (Oct. 24, 2008). 

89 Id. at 63331; 73 FR 44522 (July 30, 2008). 

90See Mortgage Reform and Anti-Predatory 

Lending Act of 2007, H.R. 3915, 110th Cong.; H.R. 

Rep. No. 110–441 (2007); Mortgage Reform and 

Anti-Predatory Lending Act, H.R. 1728, 111th Cong. 

(2009); H.R. Rep. No. 111–94 (2009). 

91Public Law 111–203, 124 Stat. 1376, 1980, 

2035–38, 2097–101 (2010). In 2010, the Board also 

conducted public hearings on potential revisions to 

Regulation C, which are discussed below. 

92 Dodd-Frank Act section 1094(3), amending 

HMDA section 304(b), 12 U.S.C. 2803(b). 

93 Id. 

94 Id. 

95See part III.A for a discussion of several public 

hearings conducted by the Board in 2010, during 

which many participants requested that additional 

information be made publicly available through 

HMDA. 

96See Administrative Conference of the United 

States Recommendation 2011–5 (adopted December 

8, 2011), at 1. 

97National Technology Transfer and 

Advancement Act, Public Law 104–113 (1996), 110 

Stat. 775, 783, 15 U.S.C. 272 note. 

98 ‘‘Federal Participation in the Development and 

Use of Voluntary Consensus Standards and in 

Conformity Assessment Activities,’’ http:// 

www.whitehouse.gov/omb/circulars_a119/. OMB 

Circular A–119 defines ‘‘voluntary consensus 

standards’’ to mean standards created by 

organizations whose processes provide attributes of 

openness, balance, due process, an appeal, and 

decisionmaking by general agreement. 

99 See Dept. of Treas. Off. of Fin. Research, 2012 

Annual Report to Congress, ‘‘Chapter 5: Promoting 

Data Standards,’’ 107, http://www.treasury.gov/ 

initiatives/wsr/ofr/Documents/OFR_Annual_

Report_071912_Final.pdf. 

a disproportionate share of wealth was 

lost by minority and low-income 

households.84

Communities and public officials 

used HMDA data, including the data on 

subprime lending, to identify at-risk 

neighborhoods and to develop 

foreclosure relief and homeownership 

stabilization programs.85 However, the 

limited data points reported under 

HMDA presented several challenges for 

public officials attempting to create 

effective and responsive relief 

programs.86 In some cases, cities and 

counties were able to purchase mortgage 

data from commercial providers to 

complement the HMDA data and obtain 

a more complete picture of the risks 

posed to their communities.87 To begin 

addressing the need to improve publicly 

available mortgage market data, 

Congress amended HMDA and the 

Board revised Regulation C shortly after 

the mortgage crisis began. Specifically, 

in 2008, the Board revised the rules for 

reporting price information on higherpriced mortgage loans.88 These 

revisions conformed Regulation C 

requirements to the definition of 

‘‘higher-priced mortgage loan’’ adopted 

by the Board under Regulation Z in July 

2008.89

At the same time, Congress began 

preparing a legislative response to the 

financial crisis.90 In 2010, Congress 

amended HMDA in the Dodd-Frank Act, 

which also transferred HMDA 

rulemaking authority and other 

functions from the Board to the 

Bureau.91 Among other changes, the 

Dodd-Frank Act expands the scope of 

information relating to mortgage 

applications and loans that must be 

compiled, maintained, and reported 

under HMDA. New data points include 

the age of loan applicants and 

mortgagors, information relating to the 

points and fees payable at origination, 

the difference between the annual 

percentage rate (APR) associated with 

the loan and a benchmark rate or rates 

for all loans, the term of any 

prepayment penalty, the value of real 

property to be pledged as collateral, the 

term of the loan and of any introductory 

interest rate for the loan, the presence of 

contract terms allowing non-amortizing 

payments, the origination channel, and 

the credit scores of applicants and 

mortgagors.92 The Dodd-Frank Act also 

authorizes the Bureau to require, ‘‘as [it] 

may determine to be appropriate,’’ a 

unique identifier that identifies the loan 

originator, a universal loan identifier, 

and the parcel number that corresponds 

to the real property pledged or proposed 

to be pledged as collateral for the 

mortgage loan.93 The Dodd-Frank Act 

also provides the Bureau with the 

authority to require ‘‘such other 

information as the Bureau may 

require.’’ 94

While the Dodd-Frank Act added new 

reporting requirements that will 

increase the level of transparency in the 

mortgage market, many argue that more 

publicly available information is needed 

to help inform communities of lending 

practices that affect local economies and 

may endanger neighborhood stability.95

The Board convened public hearings in 

2010 to gather feedback on how to 

improve the HMDA data. To ensure that 

HMDA continues to empower 

communities by providing transparency 

into mortgage lending practices, the 

Bureau believes that the HMDA data 

must be updated to address the 

informational shortcomings exposed by 

the financial crisis, to meet the needs of 

homeowners, potential homeowners, 

and neighborhoods throughout the 

nation, and to reflect changes in 

business practices and the technological 

evolution of the mortgage market. 

B. Mortgage Technology and Data 

Standards 

As discussed above, Congress made 

major amendments to HMDA in the 

Dodd-Frank Act, including specifying 

new data points for collection and 

providing the Bureau with broad 

authority to, among other things, require 

the collection of other data points and 

change the format and submission 

requirements for HMDA reporting. The 

collection and reporting of improved 

loan-level mortgage data has drawn 

strong interest from both market 

participants and regulators in the wake 

of the financial crisis. In light of its 

authorities, the Bureau has investigated 

potential uses of and alignments with 

industry data standards as a means to 

improve the quality of HMDA data that 

is collected and reported, and to reduce 

the processing and compliance costs on 

financial institutions. 

Federal policy strongly favors agency 

use of voluntary consensus standards, 

and reliance on appropriate existing 

standards would allow the Bureau to 

draw on the expertise and resources of 

other data standards developers to serve 

the public interest.96 In particular, 

reliance on existing voluntary 

consensus standards would be 

consistent with the National Technology 

Transfer and Advancement Act of 

1995 97 and OMB Circular A–119,98

which direct Federal agencies to use 

such standards in lieu of governmentunique standards except where 

inconsistent with law or otherwise 

impractical. The Office of Financial 

Research within the U.S. Department of 

the Treasury has stated that, for the 

financial services market, appropriate 

data standards would provide data 

transparency, comparability, and 

quality, and also promote sound risk 

management by the industry by 

reducing costs, fostering automation, 

facilitating the aggregation of data from 

disparate sources, and enabling the endto-end tracking of a financial 

transaction.99 As discussed further 

below, the Bureau believes that HMDA 

compliance and data submission can be 

made easier, and HMDA data quality 

improved, by aligning the requirements 

of Regulation C to the extent practicable 


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100 12 CFR part 1003, App. A. 

101 12 CFR part 1003. 

102E.g., FFIEC, A Guide to HMDA Reporting: 

Getting it Right!; FFIEC, Home Mortgage Disclosure 

Act Regulatory and Interpretive FAQs [hereinafter 

FFIEC FAQs], available at http://www.ffiec.gov/ 

hmda/. 

103Comment 5(a)–2. 

104The Department of Treasury’s Office of 

Financial Research has identified the lack of 

consistent data standards as a key source of risk 

during the recent financial crisis, and has noted the 

benefits of consistent data standards for both 

industry and regulators. Supra note 99. 

105MISMO is an all-volunteer non-profit 

organization governed by a committee elected from 

its more than 150 subscribers, which include 

mortgage bankers, lenders, servicers, vendors, 

service providers, and the GSEs. See http:// 

www.mismo.org/AboutMISMO. 

106About MISMO, http://www.mismo.org/

AboutMISMO. 

107 XML is an open standard developed, 

maintained, and updated by the World Wide Web 

Consortium. See http://www.w3.org/standards/ 

xml/. An enumeration is a value associated with the 

defined data point. An example in the current 

HMDA data is the enumeration for ‘‘loan 

originated’’ within the data point of ‘‘action taken.’’ 

108Federal Housing Finance Agency, Fannie Mae 

and Freddie Mac Launch Joint Effort to Improve 

Loan and Appraisal Data Collection (May 24, 2010), 

available at http://fhfa.gov/Media/PublicAffairs/

Pages/Fannie-Mae-and-Freddie-Mac-Launch-JointEffort-to-Improve-Loan-and-Appraisal-DataCollection.aspx. 

109See Fannie Mae, Uniform Loan Delivery 

Dataset, https://www.fanniemae.com/singlefamily/

uniform-loan-delivery-dataset-uldd; Freddie Mac, 

Uniform Loan Delivery Dataset, http://

www.freddiemac.com/singlefamily/sell/uniform_

delivery.html. 

110See Inside Mortgage Fin., Mortgage 

Originations by Product, Inside Mortgage Finance 

Newsletter, Issue 2014:04 (Jan. 31, 2014). 

with existing industry standards for 

collecting and transmitting mortgage 

data. 

Currently, HMDA data are submitted 

in the loan application register format, 

consistent with the instructions in 

appendix A to Regulation C.100 The data 

points reported on each loan application 

register entry are defined by Regulation 

C, its appendices, and commentary.101

Financial institutions also seek further 

information in other materials.102

Financial institutions submit the data in 

an electronic, machine-readable format 

that conforms to the loan application 

register format, except for financial 

institutions that report 25 or fewer 

entries, which may submit their loan 

application register entries in paper 

format.103

Financial institutions maintain 

records of mortgage loan applications 

and originations in many forms and in 

many systems outside of those used for 

HMDA reporting. In many cases, these 

systems use or define data points in 

ways that differ from Regulation C 

requirements. As a result, those systems 

are not directly compatible with the 

HMDA loan application register format, 

so that financial institutions have to use 

additional software and modify data in 

existing systems in order to submit 

HMDA data in the proper format. 

The Bureau believes that the burden 

associated with Regulation C 

compliance and data submission can be 

reduced by aligning the requirements of 

Regulation C to the extent practicable 

with existing industry standards for 

collecting and transmitting data on 

mortgage loans and applications. The 

Bureau believes that promoting 

consistent data standards for both 

industry and regulatory use has benefits 

for market efficiency, market 

understanding, market oversight, and 

improved data quality.104 In light of 

these considerations, the Bureau is 

proposing to align the HMDA data 

requirements, to the extent practicable, 

with the widely used Mortgage Industry 

Standards Maintenance Organization 

(MISMO) standards for residential 

mortgages, including the Uniform Loan 

Delivery Dataset (ULDD) that is used in 

the delivery of loans to the Federal 

National Mortgage Association (Fannie 

Mae) and the Federal Home Loan 

Mortgage Corporation (Freddie Mac) 

(collectively, the government-sponsored 

entities (GSEs)). 

MISMO, a wholly owned non-profit 

subsidiary of the Mortgage Bankers 

Association, has developed an extensive 

set of data standards for electronic 

delivery of loan-level mortgage data.105

MISMO’s mission includes: ‘‘Fostering 

an open process to develop, promote, 

and maintain voluntary electronic 

commerce procedures and standards for 

the mortgage industry.’’ 106 As part of 

MISMO’s standardization efforts, it has 

developed an XML architecture for 

mortgage data and a data dictionary to 

provide data point names, definitions, 

and enumerations.107 The mortgage 

industry has been increasingly adopting 

the MISMO data standard since its 

inception and this development has 

spurred the interest of Federal 

regulators in MISMO as well. 

When the Federal Housing Finance 

Agency (FHFA) assumed oversight of 

the GSEs, it mandated that they align to 

the MISMO data standard. The FHFA 

directed the GSEs to develop a Uniform 

Mortgage Data Program (UMDP) to 

enhance the accuracy and quality of 

mortgage loan data delivery to each 

GSE.108 A key component of the UMDP 

is the ULDD, which refers to MISMO to 

identify the data points and the data 

delivery format required in connection 

with the delivery of single-family loans 

to each GSE.109 As of July 23, 2012, all 

loans delivered to the GSEs have been 

required to meet ULDD requirements. 

Given that a majority of mortgages 

originated in 2013 conformed to GSE 

guidelines—and that a large segment of 

the market sells at least some of their 

originated loans to the GSEs directly or 

indirectly—a significant portion of the 

market is already operating in 

accordance with the MISMO data 

standard.110

The Bureau recognizes that not every 

mortgage industry member would 

support alignment of the HMDA data 

requirements with MISMO/ULDD data 

standards—particularly small financial 

institutions that do not sell loans to the 

GSEs or that conduct only portfolio 

lending. Financial institutions that do 

not currently use the MISMO/ULDD 

data standards may have reservations 

about the alignment of the HMDA data 

requirements with such industry 

standards. However, the Bureau believes 

that the efficiencies achieved by 

aligning HMDA data with widely used 

industry data standards justify potential 

burdens and that the efficiencies will 

grow over time. Aligning with MISMO/ 

ULDD data standards means relying on 

uniform data standards that are already 

familiar to financial institutions and 

data vendors. A HMDA reporter or data 

vendor using MISMO for business 

purposes would be able to use the same 

standard for its HMDA submission, 

thereby reducing the resources required 

to translate data into a different 

standard, such as the particular 

government standards currently used 

only for purposes of HMDA compliance. 

In addition, the Bureau believes that 

grounding HMDA in the common 

vocabulary and data standards of the 

industry will continue to reduce 

burdens should the need arise to modify 

Regulation C in the future. Alignment 

with MISMO/ULDD is also consistent 

with the policies discussed above that 

encourage use of voluntary consensus 

standards by Federal agencies. 

C. Applicant and Borrower Privacy 

As discussed above, HMDA’s 

purposes are to provide the public and 

public officials with sufficient 

information to enable them to determine 

whether institutions are serving the 

housing needs of the communities and 

neighborhoods in which they are 

located, to assist public officials in 

distributing public sector investments in 

a manner designed to improve the 

private investment environment, and to 

assist in identifying possible 

discriminatory lending patterns and 

enforcing antidiscrimination statutes. 

Today, HMDA data are the preeminent 

data source for regulators, researchers, 

economists, industry, and advocates 


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111The Small Business Regulatory Enforcement 

Fairness Act of 1996 (SBREFA), as amended by 

section 1100G(a) of the Dodd-Frank Act, requires 

the Bureau to convene a Small Business Review 

Panel before proposing a rule that may have a 

substantial economic impact on a significant 

number of small entities. See Public Law 104–121, 

tit. II, 110 Stat. 847, 857 (1996) (as amended by 

Public Law 110–28, section 8302 (2007)). As 

discussed in part III.C below, the Bureau convened 

a Small Business Review Panel concerning this 

proposal in February 2014. 

112 Final Report of the Small Business Review 

Panel on the CFPB’s Proposals Under Consideration 

for the Home Mortgage Disclosure Act (HMDA) 

Rulemaking (Apr. 24, 2014) [hereinafter Small 

Business Review Panel Report], http://

files.consumerfinance.gov/f/201407_cfpb_report_

hmda_sbrefa.pdf at 24 (loans made to financial 

institutions’ employees), 26 (loan originator 

identifier, parcel identifier), 27–28 (age, credit 

score, debt-to-income ratio), 30–31 (property value, 

total points and fees, interest rate), 35 (data 

disclosed on the modified loan application register), 

41 (combined loan-to-value). 

113See Small Business Review Panel Report at 27, 

40. Small entity representatives suggested that age 

could be reported in ranges (e.g., 20–49, 50–62, and 

63 and up). Id. at 27. 

114See Small Business Review Panel Report at 40. 

115Section 1003.5(c); HMDA section 304(j)(2)(B). 

Section 1003.5(c) requires that, before making its 

loan application register available to the public, a 

financial institution must delete three fields to 

protect applicant and borrower privacy: 

Application or loan number, the date that the 

application was received, and the date action was 

taken. 

116Section 1003.5(b); HMDA section 304(k). 

117Section 1003.5(f); HMDA section 304(f). 

118Section 1003.5(f); HMDA section 310. 

119The agencies first released loan-level HMDA 

data in October 1991. In announcing that the loanlevel data submitted to the agencies on the loan 

application register would be made available to the 

public, the FFIEC noted that ‘‘[a]n unedited form of 

the data would contain information that could be 

used to identify individual loan applicants’’ and 

that the data would be edited prior to public release 

to remove the application identification number, 

the date of application, and the date of final action. 

55 FR 27886, 27888 (July 6, 1990). 

analyzing the mortgage market both for 

HMDA’s purposes and for general 

market monitoring. In implementing 

HMDA to effectuate its purposes, the 

appropriate protection of applicant and 

borrower privacy in light of the goals of 

the statute is a significant priority for 

the Bureau. The Bureau is mindful that 

privacy concerns may arise both when 

financial institutions compile and report 

data to the Bureau and other agencies 

and when HMDA data are disclosed to 

the public. The Bureau has considered 

both types of potential concerns in 

developing this proposal, and it 

continues to assess the implications for 

applicant and borrower privacy of the 

public disclosure of HMDA data both by 

financial institutions and by Federal 

agencies. 

Compiling and Reporting of HMDA Data 

Financial institutions collect various 

types of information from consumers in 

the course of processing loan 

applications. To promote HMDA’s goals, 

HMDA and Regulation C require 

financial institutions to compile and 

report to the Bureau and other agencies 

some of this information and other 

information obtained or generated 

concerning the application or loan. As 

discussed above, the Dodd-Frank Act 

both expanded the scope of information 

that financial institutions must compile 

and report and authorized the Bureau to 

require financial institutions to compile 

and report additional data. The Bureau 

has considered applicant and borrower 

privacy in developing its proposal to 

implement the Dodd-Frank amendments 

and otherwise amend Regulation C. The 

Bureau’s proposals are intended to 

ensure that data compiled and reported 

by financial institutions fulfill HMDA’s 

purposes while appropriately protecting 

applicant and borrower privacy. 

During the Small Business Review 

Panel process,111 some small entity 

representatives expressed concerns 

about the privacy implications of 

reporting certain current and proposed 

HMDA data.112 Several small entity 

representatives suggested that applicant 

and borrower age and credit score, two 

new data points added to HMDA by the 

Dodd-Frank Act, should be reported to 

the Bureau and other appropriate 

agencies in ranges, rather than exact 

values, to mitigate privacy concerns.113

The Small Business Review Panel 

recommended that the Bureau evaluate 

ways to address any privacy risks that 

may be created by the reporting of 

HMDA data to the Bureau and other 

agencies.114 Consistent with this 

recommendation, the Bureau’s 

consideration of applicant and borrower 

privacy in developing this proposal has 

included consideration of the format in 

which current and proposed HMDA 

data should be reported. The Bureau’s 

proposal simultaneously seeks to 

address any potential privacy risks that 

may be created by the reporting of 

HMDA data to the Bureau and other 

agencies to ensure that the data are 

reported in a format that is useful in 

fulfilling HMDA’s purposes, that avoids 

imposing undue burden on financial 

institutions or increasing the risk of 

errors in reporting; and that aligns to the 

extent practicable with existing industry 

standards for collecting and transmitting 

mortgage data. The Bureau seeks 

comment on alternatives to addressing 

any potential risks to privacy interests 

created by the reporting of HMDA data 

to the Bureau and other agencies, 

including the impact of such 

alternatives on the utility of the data, on 

burden to financial institutions and 

risks of errors in reporting, and on 

alignment with existing industry 

standards for transmitting mortgage 

data. As discussed below, the Bureau’s 

assessment of any potential risks to 

privacy interests created by the public 

disclosure of HMDA data is ongoing. 

The Bureau also has received 

feedback from industry expressing 

concern about the security of the data to 

be reported under this proposal during 

its submission. As part of its efforts to 

improve and modernize HMDA 

operations, the Bureau is considering 

various improvements to the HMDA 

data submission process, including 

further advancing encryption if 

necessary to protect the security of 

HMDA data to be reported under this 

proposal. 

Disclosures of HMDA Data 

As discussed above, HMDA is a 

disclosure statute. To fulfill HMDA’s 

purposes, the types of data a financial 

institution is required to compile and 

report under HMDA and Regulation C 

have been expanded since the statute’s 

enactment in 1975, and the formats in 

which HMDA data have been disclosed 

to the public also have evolved. At 

present, HMDA and Regulation C 

require data to be made available to the 

public in both aggregate and loan-level 

formats. First, each financial institution 

must make its ‘‘modified’’ loan 

application register available to the 

public, with three fields deleted to 

protect applicant and borrower 

privacy.115 Each financial institution 

must also make available a disclosure 

statement prepared by the FFIEC that 

shows the financial institution’s HMDA 

data in aggregate form.116 In addition, 

the FFIEC makes available disclosure 

statements for each financial 

institution117 as well as aggregate 

reports for each MSA and metropolitan 

division (MD) showing lending patterns 

by certain property and applicant 

characteristics.118 Since 1991, on behalf 

of the agencies receiving HMDA data, 

the FFIEC also has released annually a 

loan-level dataset containing all 

reported HMDA data for the preceding 

calendar year. To reduce the possibility 

that data users could identify particular 

applicants or borrowers in these data, 

the same three fields that are deleted 

from the modified loan application 

register that financial institutions make 

available are deleted from this 

release.119

The Dodd-Frank Act amendments to 

HMDA added new section 304(h)(1)(E), 

which directs the Bureau to develop 

regulations, in consultation with other 

appropriate agencies, that ‘‘modify or 


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120Section 304(h)(3)(A) provides that a 

modification under section 304(h)(1)(E) shall apply 

to information concerning ‘‘(i) credit score data . . . 

in a manner that is consistent with the purpose 

described in paragraph (1)(E); and (ii) age or any 

other category of data described in paragraph (5) or 

(6) of subsection (b), as the Bureau determines to 

be necessary to satisfy the purpose described in 

paragraph (1)(E), and in a manner consistent with 

that purpose.’’ 

121Section 1022(c)(8) of the Dodd-Frank Act 

provides that, ‘‘[i]n collecting information from any 

person, publicly releasing information held by the 

Bureau, or requiring covered persons to publicly 

report information, the Bureau shall take steps to 

ensure that’’ certain information is not ‘‘made 

public under this title.’’ The Bureau interprets 

‘‘under this title’’ to not include data made public 

pursuant to HMDA and Regulation C. 

122Examples of disclosure techniques that may 

mitigate privacy concerns include binning, 

coarsening, perturbing, and top- and bottom-coding. 

Data binning, for example, is a technique wherein 

the original data value (for example, a number 

reported to the agencies on the loan application 

register) is placed in an interval, or bin, and is then 

represented by the value of that bin. Binning allows 

data to be shown clustered into ranges rather than 

as precise values. 

123A restricted access program could allow access 

to privacy-sensitive information, otherwise 

unavailable to the general public, for research 

purposes. 

124The Bureau agrees with the 1990 findings of 

the FFIEC agencies that ‘‘the release of the raw 

[loan-level] data is consistent with the 

congressional intent to maximize the utilization of’’ 

the HMDA data. 55 FR 27886, 27888 (July 6, 1990). 

The importance of loan-level data to HMDA’s 

purposes is also reflected in Congress’s use of the 

term ‘‘loan application register information’’ in 

HMDA section 304(j) to describe the data financial 

institutions must make available to the public upon 

request. At the time HMDA was amended to add 

section 304(j), the term ‘‘loan/application register’’ 

was used in Regulation C to describe the loan-byloan, register format for reporting HMDA data to the 

agencies. Section 304(j)(2)(A), as originally adopted, 

provided that, subject to deletions to protect 

privacy, ‘‘the loan application register information 

described in paragraph (1) may be disclosed by a 

depository institution without editing or 

compilation and in the format in which such 

information is maintained by the institution.’’ 

Housing and Community Development Act of 1992, 

Public Law 102–550, section 932(a), 106 Stat. 3672, 

3889 (1992). 

125Congress specifically identified credit score 

and age as new data points that may raise privacy 

concerns. See HMDA section 304(h)(3)(A). 

126See supra note 112. 

127See Small Business Review Panel Report at 40. 

require modification of itemized 

information, for the purpose of 

protecting the privacy interests of the 

mortgage applicants or mortgagors, that 

is or will be available to the public.’’ 

Section 304(h)(3)(B), also added by the 

Dodd-Frank Act, directs the Bureau to 

‘‘prescribe standards for any 

modification under paragraph (1)(E) to 

effectuate the purposes of [HMDA], in 

light of the privacy interests of mortgage 

applicants or mortgagors. Where 

necessary to protect the privacy 

interests of mortgage applicants or 

mortgagors, the Bureau shall provide for 

the disclosure of information . . . in 

aggregate or other reasonably modified 

form, in order to effectuate the purposes 

of [HMDA].’’ 120

The Bureau interprets HMDA, as 

amended by these provisions, to call for 

the use of a balancing test to determine 

whether and how HMDA data should be 

modified prior to its public release in 

order to protect applicant and borrower 

privacy while also fulfilling the public 

disclosure purposes of the statute.121

This proposed rule only addresses 

financial institutions’ disclosures of 

HMDA data to the public; it does not 

address the FFIEC’s release of HMDA 

data. The Bureau, in consultation with 

other appropriate agencies, will use the 

balancing test to evaluate potential 

privacy risks created by HMDA data 

made available to the public by both 

financial institutions and the FFIEC, 

including the loan-level data that the 

FFIEC currently makes available on 

behalf of the Bureau and other agencies. 

The Bureau intends to provide a process 

for the public to provide input on the 

application of the balancing test to the 

data currently made available by the 

FFIEC at a later date. 

Using the balancing test to evaluate 

particular HMDA data points, 

individually and in combination, and 

various options for providing access to 

HMDA data, the Bureau will balance the 

importance of releasing the data to 

accomplish HMDA’s public disclosure 

purposes against the potential harm to 

an applicant or borrower’s privacy 

interest that may result from the release 

of the data without modification. 

Modifications the Bureau may consider 

where warranted include various 

disclosure limitation techniques, such 

as techniques aimed at masking the 

precise value of data points,122

aggregation, redaction, use restrictions, 

query-based systems, and a restricted 

access program.123 The Bureau 

understands that the diverse 

populations of HMDA data users have 

different data needs, including with 

respect to the granularity of data, and 

recognizes that mitigating privacy risks 

in data disclosed to the public may 

decrease the data’s utility to its users. 

The Bureau interprets HMDA, as 

amended by the Dodd-Frank Act, to 

require that public HMDA data be 

modified only when the release of the 

unmodified data creates risks to 

applicant and borrower privacy interests 

that are not justified by the benefits of 

such release to the public for the 

statutory purposes. The Bureau believes 

that privacy interests arise where the 

data’s disclosure may both substantially 

facilitate the identification of an 

applicant or borrower and disclose 

information about the applicant or 

borrower that is not otherwise public 

and may be harmful or sensitive. 

The Bureau believes that its 

interpretation of HMDA to call for the 

use of the balancing test described 

herein best effectuates the purposes of 

the statute. HMDA’s purposes are to 

provide the public and public officials 

with sufficient information to enable 

them to determine whether institutions 

are serving the housing needs of the 

communities and neighborhoods in 

which they are located, to assist public 

officials in distributing public sector 

investments in a manner designed to 

improve the private investment 

environment, and to assist in identifying 

possible discriminatory lending patterns 

and enforcing antidiscrimination 

statutes. The Bureau believes that access 

to loan-level HMDA data, in particular, 

enhances the use of HMDA data by 

members of the public and public 

officials and thus best effectuates 

HMDA’s purposes.124 At the same time, 

the Dodd-Frank Act amendments and 

the Bureau’s proposals would require 

that financial institutions report on the 

loan application register submitted to 

the Bureau and other agencies 

additional data points that may raise 

potential privacy concerns if made 

available to the public.125 The Bureau 

believes that the balancing test 

described above provides for the 

appropriate protection of applicant and 

borrower privacy in light of the public 

disclosure goals of the statute. 

During the Small Business Review 

Panel process, some small entity 

representatives expressed concerns 

about the privacy implications of certain 

current and proposed HMDA data.126

The Small Business Review Panel 

recommended that the Bureau evaluate 

ways to address any privacy risks that 

may be created by the disclosure of 

HMDA data.127 The Bureau’s analysis 

under the balancing test concerning 

whether and how HMDA data should be 

modified prior to public release is 

ongoing. The Bureau also continues to 

investigate available strategies and 

techniques to protect applicant and 

borrower privacy, where warranted, 

while preserving the data’s utility for 

HMDA’s purposes. The Bureau solicits 

feedback on the balancing test described 

herein, including whether other 

interpretations of HMDA section 

304(h)(1)(E) and (h)(3) would better 

effectuate HMDA’s purposes. As 

discussed below in the section-bysection analysis of proposed § 1003.5(c), 

in order to avoid creating new privacy 

risks and imposing burdens on financial 

institutions, the Bureau is proposing 


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128See 75 FR 35030 (June 21, 2010). 

129 Id. 

130Transcript, Fed. Reserve Board Public Hearing 

on Potential Revisions to the Home Mortgage 

Disclosure Act, Washington DC, Sept. 24, 2010 

[hereinafter Washington Hearing], (remarks of Faith 

Schwartz, Senior Advisory, HOPE Now Alliance at 

Washington, DC hearing) (‘‘I think everyone should 

have the burden of reporting that has any 

meaningful originations out there . . . .’’), http://

www.federalreserve.gov/communitydev/files/full_

transcript_board_20100924.pdf ; id. (remarks of 

Josh Silver, Vice President of Research and Policy, 

National Community Reinvestment Coalition) (‘‘[I]n 

terms of your threshold, it is very confusing because 

you have depository institutions that have different 

thresholds and nondepository institutions . . . I 

suggested just make it the same for everybody. If 

you make more than [50 reportable loans under 

HMDA], you disclose. . . . So that’s a threshold I 

would propose across the board for nondepository 

institutions and depository institutions.’’). 

131See, e.g., Transcript, Fed. Reserve Board 

Public Hearing on Potential Revisions to the Home 

Mortgage Disclosure Act, Atlanta, Georgia, July 15, 

2010 [hereinafter Atlanta Hearing], http://

www.federalreserve.gov/communitydev/files/full_

transcript_atlanta_20100715.pdf. 

132See, e.g., id. (remarks of Faith Anderson, Vice 

President and General Counsel, American Airlines 

Federal Credit Union) (‘‘[A]n exemption from 

HMDA reporting should be based on the volume of 

mortgage loans that are given. Exemptions should 

not be based on the asset size of a financial 

institution.’’). 

133See, e.g., Transcript Fed. Reserve Board Public 

Hearing on Potential Revisions to the Home 

Mortgage Disclosure Act, San Francisco, California, 

Aug. 5, 2010 [hereinafter San Francisco Hearing], 

http://www.federalreserve.gov/communitydev/files/

full_transcript_sf_20100805.pdf; Washington 

Hearing, supra note 130; Atlanta Hearing, supra 

note 131. 

134See, e.g., Washington Hearing, supra note 130. 

135See, e.g., San Francisco Hearing, supra note 

133; Washington Hearing, supra note 130. 

136See, e.g., id. 

137See, e.g., Atlanta Hearing, supra note 131; 

Transcript, Fed. Reserve Board Public Hearing on 

Potential Revisions to the Home Mortgage 

Disclosure Act, Chicago, Illinois, Sept. 16, 2010 

[hereinafter Chicago Hearing], http://

www.federalreserve.gov/communitydev/files/full_

transcript_chicago_20100916.pdf; id. (remarks of 

Professor Jim Campen, University of 

Massachusetts). 

138See, e.g., Atlanta Hearing, supra note 131. 

139See, e.g., Washington Hearing, supra note 130. 

140See, e.g., Atlanta Hearing, supra note 131; San 

Francisco Hearing, supra note 133; Chicago 

Hearing, supra note 137. 

141See, e.g., San Francisco Hearing, supra note 

133; Chicago Hearing, supra note 137. 

142See, .e.g., Atlanta Hearing, supra note 131; San 

Francisco Hearing, supra note 133; Chicago 

Hearing, supra note 137; Washington Hearing, 

supra note 130. 

143See, e.g., Chicago Hearing, supra note 137. 

that financial institutions release on the 

modified loan application register only 

those data fields that are currently 

released, and is seeking comment on 

any privacy risks created by and 

disclosure benefits of those data fields. 

As noted above, the Bureau intends to 

provide a process for the public to 

provide input on the application of the 

balancing test for purposes of the data 

made available to the public by the 

FFIEC, including the loan-level data it 

currently makes available on behalf of 

the Bureau and other agencies, and on 

any proposed modifications to such 

data, at a later date. 

III. Outreach 

In 2010, when the Board had 

rulemaking authority over HMDA, the 

Board conducted a series of public 

hearings that elicited feedback on 

improvements to Regulation C. After the 

rulemaking authority for HMDA was 

transferred to the Bureau, the Bureau 

conducted outreach on implementing 

the Dodd-Frank Act amendments to 

HMDA and other potential changes to 

Regulation C by soliciting comments in 

Federal Register notices and by meeting 

with a variety of stakeholders, including 

trade associations, financial institutions, 

community groups, and other Federal 

agencies. The Bureau also convened a 

Small Business Review Panel to obtain 

feedback from small financial 

institutions as well as the general 

public. To prepare this proposal, the 

Bureau considered both the comments 

presented to the Board during its public 

hearings and feedback provided to the 

Bureau during its outreach. 

A. The Board’s 2010 Public Hearings 

In 2010, the Board convened public 

hearings on potential revisions to 

Regulation C (the Board’s 2010 

Hearings).128 The Board began the 

reassessment of HMDA in the aftermath 

of the financial crisis, as Congress was 

considering the legislation that later 

became the Dodd-Frank Act. The Board 

stated that there were three purposes of 

the hearings: (1) To provide information 

that would assist the Board in its review 

of Regulation C, (2) to help assess the 

need for additional data, and (3) to 

identify emerging issues in the mortgage 

market that could warrant additional 

research.129 Representatives from 

community organizations, consumer 

advocates, industry, academia, State and 

Federal agencies, and others 

participated in the hearings. The Board 

did not commence a rulemaking to 

consider any of the feedback provided 

during the hearings before HMDA 

rulemaking authority was transferred to 

the Bureau. 

Institutional Coverage 

The Board identified institutional 

coverage as one of the topics for 

discussion at the hearings. Participants 

addressed whether the Board should 

require reporting from additional types 

of institutions, whether certain types of 

institutions should be exempt from 

reporting, and whether any other 

changes should be made to the rules for 

determining which types of institutions 

must report data. For example, 

representatives from Federal agencies, 

lenders, and consumer advocates urged 

the Board to adopt a consistent 

minimum loan threshold across all 

types of institutions, including banks, 

savings associations, credit unions, and 

nondepository institutions.130 In 

particular, industry representatives 

noted the limited value derived from 

data reported by lower-volume 

depository institutions.131 Industry and 

community advocate representatives 

also asserted that loan volume, rather 

than asset size, should trigger reporting, 

particularly for nondepository lenders 

because they tend to have a different 

capital structure than banks, savings 

associations, and credit unions.132

Participants also urged the Board to 

expand coverage of nondepository 

institutions.133 In addition, participants 

commented that the coverage scheme 

for nondepository institutions was too 

complex and should be simplified.134

Data Elements 

The Board solicited feedback on ways 

to improve the quality and usefulness of 

HMDA data, including whether any data 

elements should be added, modified, or 

deleted. Participants provided 

suggestions about ways to improve the 

utility of HMDA data. Participants 

discussed modifications to the data 

fields currently collected in Regulation 

C that may clarify reporting 

requirements and improve the 

usefulness of HMDA data. For example, 

participants urged the Board to augment 

the information collected concerning 

multifamily properties 135 and 

manufactured housing 136 and to expand 

the reporting of rate spread to all 

originations.137 Participants also urged 

the Board to clarify specific reporting 

requirements, such as how to report 

modular homes 138 and conditional 

approvals.139 Participants discussed the 

reluctance of applicants to provide 

demographic information, such as race 

and ethnicity, and the challenges 

financial institutions face in collecting 

the information.140

In addition, participants commented 

on data fields that could be added to the 

data collected under HMDA to improve 

its utility. For example, participants 

suggested collecting information 

regarding points and fees, including 

prepayment penalties,141 information 

concerning the relationship of the loan 

amount to the value of the property 

securing the loan,142 and information 

concerning whether an application was 

submitted through a mortgage broker.143


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144 76 FR 31222 (May 31, 2011). 145 76 FR 43570 (Jul. 21, 2011). 

146 76 FR 75825 (Dec. 5, 2011). 

147 Id. 

148 76 FR 75825, 75828. 

149 76 FR 75825. 

150The reply period was initially scheduled to 

close on April 3, 2012, but was later extended to 

June 4, 2012 in response to a request from industry 

trade associations and consumer advocates. 77 FR 

14700 (Mar. 13, 2012). 

151 76 FR 78465 (Dec. 19, 2011). 

152Supra note 111. 

153Press Release, CFPB Takes Steps to Improve 

Information About Access to Credit in the Mortgage 

Market (Feb. 7, 2014) http:// 

www.consumerfinance.gov/newsroom/cfpb-takessteps-to-improve-information-about-access-tocredit-in-the-mortgage-market/. The Bureau also 

gathered feedback on the Small Business Review 

Panel Outline from other stakeholders and members 

of the public, and from the Bureau’s Consumer 

Advisory Board and Community Bank Advisory 

Council. 

B. Early Stakeholder Outreach 

Title X of the Dodd-Frank Act 

established the Bureau and, on July 21, 

2011, transferred rulemaking authority 

under HMDA from the Board to the 

Bureau. As discussed below, the DoddFrank Act also amended HMDA to add 

additional data points and make other 

statutory changes. However, pursuant to 

section 1094(3)(F) of the Dodd-Frank 

Act, financial institutions are not 

required to report new data under 

paragraphs (5) or (6) of HMDA 

subsection (b) until after the Bureau 

publishes final regulations with respect 

to such disclosures. 

On May 31, 2011, the Bureau 

published a notice for public comment 

providing a preliminary list of rules that 

would be enforced by the Bureau upon 

the designated transfer date.144 The list 

included Regulation C and invited 

public comment on the list. On July 21, 

2011, the Bureau published the final list 

of rules, which included Regulation 

C.145 The Bureau received general 

comments requesting the Bureau not to 

impose duplicative regulatory burdens, 

that it take into account differences 

between regulated entities in 

rulemaking, and that it involve 

stakeholders in the Bureau’s rulemaking 

process. 

Since the Bureau’s inception and its 

assumption of authority over Federal 

consumer financial laws, it has tried to 

be responsive to those early comments 

regarding regulatory burden, differences 

in regulated entities, and outreach to 

stakeholders in its rulemaking process. 

Building on the feedback received 

during the Board’s 2010 Hearings, the 

Bureau has conducted outreach and 

obtained significant feedback on the 

Dodd-Frank amendments and other 

potential changes to Regulation C 

through Federal Register notices and 

meetings with stakeholders. The Bureau 

met with various stakeholders during 

the proposal development process 

through in-person meetings and 

conference calls, and solicited feedback 

through correspondence. 

On December 5, 2011, the Bureau 

published a request for information in 

the Federal Register seeking feedback 

on regulations that it had inherited from 

other agencies (the Bureau’s 2011 

Streamlining Proposal).146 In the 

Bureau’s 2011 Streamlining Proposal, 

the Bureau stated that it believed there 

may be opportunities to streamline 

inherited regulations by updating, 

modifying, or eliminating outdated, 

unduly burdensome, or unnecessary 

provisions.147 The Bureau solicited 

general feedback on such opportunities. 

The Bureau noted that, under current 

Regulation C, a depository institution 

that did not ordinarily originate home 

purchase loans, but that occasionally 

refinanced a home purchase loan to 

accommodate a customer, would be 

required to report under Regulation C. 

The Bureau solicited feedback on 

whether small numbers of refinancings 

should not trigger Regulation C 

coverage.148 The Bureau’s 2011 

Streamlining Proposal provided for an 

initial comment period and a reply 

period to allow commenters to respond 

to each other’s comments.149 The initial 

comment period closed March 5, 2012 

and the reply period closed June 4, 

2012.150

The Bureau received comments 

regarding its specific solicitation for 

feedback, as well as general suggestions 

for streamlining Regulation C. 

Comments were received from 

consumer advocates, fair housing 

advocates, financial institutions, State 

bank supervisory organizations, State 

industry trade associations, and national 

industry trade associations. Comments 

from consumer and fair housing 

advocates generally focused on adding 

additional data and types of covered 

loans, and generally opposed any 

exemptions or reporting thresholds for 

Regulation C on the basis that the data 

are critical for fair lending enforcement 

and determining if community housing 

needs are being met. Other comments 

focused on various potential 

streamlining changes to Regulation C 

including establishing loan-volume or 

asset reporting thresholds, exempting 

some types of loans from coverage or 

adding others, making definitions 

consistent with other regulations, tiered 

reporting requirements, consolidating 

guidance sources, and clarifying certain 

definitions and reporting issues. 

On December 19, 2011 the Bureau 

published an interim final rule 

establishing Regulation C in 12 CFR part 

1003, implementing the assumption of 

HMDA authority from the Board (the 

Bureau’s 2011 Regulation C 

Restatement).151 The Bureau’s 2011 

Regulation C Restatement substantially 

duplicated the Board’s Regulation C and 

made only non-substantive, technical, 

formatting, and stylistic changes. The 

Bureau also solicited comment through 

that notice on any technical issues and 

any provisions that are outdated, 

unduly burdensome, or unnecessary. 

The Bureau received a few comments 

from financial institutions, State 

industry trade associations, and national 

industry trade associations. The 

comments focused on aligning 

Regulation C definitions with other 

regulations, providing a tolerance for 

enforcement actions based on low error 

rates in reported data, and establishing 

a loan-volume threshold. 

In an effort to better understand 

existing and emerging industry data 

standards and whether Regulation C 

could be aligned with them, the Bureau 

met with staff from MISMO regarding 

the MISMO residential reference model 

dataset and staff from the GSEs 

regarding ULDD. In an effort to better 

understand financial institutions’ 

internal HMDA compliance processes 

and compliance costs, the Bureau, 

through arrangements with a national 

industry trade association, met with 

community banks to obtain feedback. 

The Bureau also met with consumer and 

fair housing advocates and industry 

trade associations to understand their 

concerns with current HMDA data, 

current Regulation C, and possible 

changes to Regulation C. 

C. Small Business Review Panel 

In February 2014, the Bureau 

convened a Small Business Review 

Panel (Panel) with the Chief Counsel for 

Advocacy of the Small Business 

Administration (SBA) and the 

Administrator of the Office of 

Information and Regulatory Affairs with 

the Office of Management and Budget 

(OMB).152 As part of this process, the 

Bureau prepared an outline of proposals 

under consideration and the alternatives 

considered (Small Business Review 

Panel Outline), which the Bureau 

posted on its Web site for review by the 

small financial institutions participating 

in the panel process, as well as the 

general public.153

Prior to formally convening, the Panel 

participated in teleconferences with 

small groups of the small entity 

representatives to introduce to the 

materials and to obtain feedback. The 


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154Supra note 111. 

155 12 U.S.C. 5581. Section 1094 of the DoddFrank Act also replaced the term ‘‘Board’’ with 

‘‘Bureau’’ in most places in HMDA. 12 U.S.C. 2803 

et seq. 

156 12 U.S.C. 5581(a)(1)(A). 

157 12 U.S.C. 5512(b)(1). 

158 Dodd-Frank Act section 1002(14), 12 U.S.C. 

5481(14) (defining ‘‘Federal consumer financial 

law’’ to include the ‘‘enumerated consumer laws’’ 

and the provisions of title X of the Dodd-Frank Act); 

Dodd-Frank Act section 1002(12), 12 U.S.C. 

5481(12) (defining ‘‘enumerated consumer laws’’ to 

include HMDA). 

159 12 U.S.C. 2804(a). 

160 Id. 

161See, e.g., HMDA section 304(a)(1), (j)(2)(A), 

(j)(3), (m)(2), 12 U.S.C. 2803(a)(1), (j)(2)(A), (j)(3), 

(m)(2); see also HMDA section 304(b)(6)(I), 12 

U.S.C. 2803(b)(6)(I) (requiring covered institutions 

to use ‘‘such form as the Bureau may prescribe’’ in 

reporting credit scores of mortgage applicants and 

mortgagors). HMDA section 304(k)(1) also requires 

depository institutions covered by HMDA to make 

disclosure statements available ‘‘[i]n accordance 

with procedures established by the Bureau pursuant 

to this section.’’ 12 U.S.C. 2803(k)(1). 

162 12 U.S.C. 2803(j)(1). 

163 12 U.S.C. 2803(j)(2)(B). 

164 12 U.S.C. 2803(j)(7). 

165 12 U.S.C. 2803(e). 

166 12 U.S.C. 2803(h)(1); see also HMDA section 

304(n), 12 U.S.C. 2803(n) (discussing submission to 

the Bureau or the appropriate agency ‘‘in 

accordance with regulations prescribed by the 

Bureau’’). For purposes of HMDA section 304(h), 

HMDA section 304(h)(2) defines the appropriate 

agencies for different categories of financial 

institutions. The agencies are the Federal banking 

agencies, the FDIC, the NCUA, and the Secretary of 

HUD. 12 U.S.C. 2803(h)(2). 

167 12 U.S.C. 2803(h)(1). The Dodd-Frank Act also 

added new HMDA section 304(h)(3), which directs 

the Bureau to prescribe standards for any 

modification pursuant to HMDA section 

304(h)(1)(E), to effectuate HMDA’s purposes, in 

light of the privacy interests of mortgage applicants 

or mortgagors. 12 U.S.C. 2803(h)(1)(E), 2803(h)(3). 

168HMDA section 304(l)(2)(A), 12 U.S.C. 

2803(l)(2)(A) (setting maximum disclosure periods 

except as provided under other HMDA subsections 

and regulations prescribed by the Bureau); HMDA 

section 304(n), 12 U.S.C. 2803(n). 

169HMDA section 304(b)(5)(D), (b)(6)(J), 12 U.S.C. 

2803(b)(5)(D), (b)(6)(J). 

170HMDA section 304(b)(6)(F), (G), (H), 12 U.S.C. 

2803(b)(6)(F), (G), (H). 

171HMDA section 304(h)(3)(A)(ii), 12 U.S.C. 

2803(h)(3)(A)(ii). 

Panel conducted a full-day outreach 

meeting with the small entity 

representatives in March 2014 in 

Washington, DC. The Panel gathered 

information from the small entity 

representatives and made findings and 

recommendations regarding the 

potential compliance costs and other 

impacts of the proposed rule on those 

entities. Those findings and 

recommendations are set forth in the 

Small Business Review Panel Report, 

which will be made part of the 

administrative record in this 

rulemaking.154 The Bureau has carefully 

considered these findings and 

recommendations in preparing this 

proposal and addresses certain specific 

examples below. 

IV. Legal Authority 

The Bureau is issuing this proposed 

rule pursuant to its authority under the 

Dodd-Frank Act and HMDA. Section 

1061 of the Dodd-Frank Act transferred 

to the Bureau the ‘‘consumer financial 

protection functions’’ previously vested 

in certain other Federal agencies, 

including the Board.155 The term 

‘‘consumer financial protection 

function’’ is defined to include ‘‘all 

authority to prescribe rules or issue 

orders or guidelines pursuant to any 

Federal consumer financial law, 

including performing appropriate 

functions to promulgate and review 

such rules, orders, and guidelines.’’ 156

Section 1022(b)(1) of the Dodd-Frank 

Act authorizes the Bureau’s Director to 

prescribe rules ‘‘as may be necessary or 

appropriate to enable the Bureau to 

administer and carry out the purposes 

and objectives of the Federal consumer 

financial laws, and to prevent evasions 

thereof.’’ 157 Both HMDA and title X of 

the Dodd-Frank Act are Federal 

consumer financial laws.158

HMDA section 305(a) broadly 

authorizes the Bureau to prescribe such 

regulations as may be necessary to carry 

out HMDA’s purposes.159 These 

regulations can include ‘‘classifications, 

differentiations, or other provisions, and 

may provide for such adjustments and 

exceptions for any class of transactions, 

as in the judgment of the Bureau are 

necessary and proper to effectuate the 

purposes of [HMDA], and prevent 

circumvention or evasion thereof, or to 

facilitate compliance therewith.’’ 160

A number of HMDA provisions 

specify that covered institutions must 

compile and make their HMDA data 

publicly available ‘‘in accordance with 

regulations of the Bureau’’ and ‘‘in such 

formats as the Bureau may require.’’ 161

HMDA section 304(j)(1) authorizes the 

Bureau to issue regulations to define the 

loan application register information 

that HMDA reporters must make 

available to the public upon request and 

to specify the form required for such 

disclosures.162 HMDA section 

304(j)(2)(B) provides that ‘‘[t]he Bureau 

shall require, by regulation, such 

deletions as the Bureau may determine 

to be appropriate to protect—(i) any 

privacy interest of any applicant . . . ; 

and (ii) a depository institution from 

liability under any Federal or State 

privacy law.’’ 163 HMDA section 

304(j)(7) also directs the Bureau to make 

every effort in prescribing regulations 

under the subsection to minimize the 

costs incurred by a depository 

institution in complying with the 

subsection and regulations.164

HMDA section 304(e) directs the 

Bureau to prescribe a standard format 

for HMDA disclosures required under 

HMDA section 304.165 As amended by 

the Dodd-Frank Act, HMDA section 

304(h)(1) requires HMDA data to be 

submitted to the Bureau or to the 

appropriate agency for the reporting 

financial institution ‘‘in accordance 

with rules prescribed by the 

Bureau.’’ 166 HMDA section 304(h)(1) 

also directs the Bureau, in consultation 

with other appropriate agencies, to 

develop regulations after notice and 

comment that: 

(A) prescribe the format for such 

disclosures, the method for submission 

of the data to the appropriate agency, 

and the procedures for disclosing the 

information to the public; 

(B) require the collection of data 

required to be disclosed under [HMDA 

section 304(b)] with respect to loans 

sold by each institution reporting under 

this title; 

(C) require disclosure of the class of 

the purchaser of such loans; 

(D) permit any reporting institution to 

submit in writing to the Bureau or to the 

appropriate agency such additional data 

or explanations as it deems relevant to 

the decision to originate or purchase 

mortgage loans; and 

(E) modify or require modification of 

itemized information, for the purpose of 

protecting the privacy interests of the 

mortgage applicants or mortgagors, that 

is or will be available to the public.167

HMDA also authorizes the Bureau to 

issue regulations relating to the timing 

of HMDA disclosures.168

As amended by the Dodd-Frank Act, 

HMDA section 304 requires itemization 

of specified categories of information 

and ‘‘such other information as the 

Bureau may require.’’ 169 Specifically, 

HMDA section 304(b)(5)(D) requires 

reporting of ‘‘such other information as 

the Bureau may require’’ for mortgage 

loans, and section 304(b)(6)(J) requires 

reporting of ‘‘such other information as 

the Bureau may require’’ for mortgage 

loans and applications. HMDA section 

304 also identifies certain data points 

that are to be included in the 

itemization ‘‘as the Bureau may 

determine to be appropriate.’’ 170 It 

provides that age and other categories of 

data shall be modified prior to release 

‘‘as the Bureau determines to be 

necessary’’ to satisfy the statutory 

purpose of protecting the privacy 

interests of the mortgage applicants or 

mortgagors.171

The Dodd-Frank Act amendments to 

HMDA also authorize the Bureau’s 


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172HMDA section 307(a), 12 U.S.C. 2806(a) 

(authorizing the Bureau’s Director to utilize, 

contract with, act through, or compensate any 

person or agency to carry out this subsection). 

173HMDA section 309(a), 12 U.S.C. 2808(a). 

Director to develop or assist in the 

improvement of methods of matching 

addresses and census tracts to facilitate 

HMDA compliance by depository 

institutions in as economical a manner 

as possible.172 The Bureau, in 

consultation with the Secretary of HUD, 

may also exempt for-profit mortgagelending institutions that are comparable 

within their respective industries to a 

bank, savings association, or credit 

union that has total assets of 

$10,000,000 or less.173

In preparing this notice of proposed 

rulemaking, the Bureau has considered 

the proposed changes below in light of 

its legal authority under HMDA and the 

Dodd-Frank Act. The Bureau has 

determined that each of the changes 

proposed below is consistent with the 

purposes of HMDA and is authorized by 

one or more of the sources of statutory 

authority identified in this part. 

V. Section-by-Section Analysis 

Section 1003.1 Authority, Purpose, and 

Scope 

1(c) Scope 

As discussed further in the sectionby-section analysis of proposed 

§ 1003.2(d), 2(g), and 2(o) the Bureau 

proposes substantive modifications to 

Regulation C’s transactional and 

institutional coverage. The Bureau 

proposes technical changes to 

§ 1003.1(c) to conform to those 

substantive changes. 

Institutional Coverage 

As discussed in detail below in the 

section-by-section analysis of proposed 

§ 1003.2(g), the Bureau proposes to 

adjust Regulation C’s institutional 

coverage to adopt a uniform loan 

volume threshold of 25 covered loans, 

excluding open-end lines of credit, 

applicable to all financial institutions 

(25-loan volume test). Under the 

proposal, depository and nondepository 

institutions that meet all of the other 

applicable criteria for a ‘‘financial 

institution’’ would be required to report 

HMDA data if they originated at least 25 

covered loans, excluding open-end lines 

of credit, in the previous calendar year. 

The Bureau believes that this proposal 

would improve the quality of HMDA 

data by increasing visibility into the 

practices of nondepository institutions. 

In addition, the proposal would 

appropriately relieve institutions that 

originate a small number of mortgage 

loans from the burden of reporting 

HMDA data without impacting the 

quality of HMDA data. Furthermore, the 

proposed 25-loan volume test would 

simplify the reporting regime by 

providing a consistent loan volume 

benchmark across all financial 

institutions. 

Transactional Coverage 

As discussed below, the Bureau is 

proposing to expand the types of 

transactions for which covered financial 

institutions must report data under 

Regulation C by including all mortgage 

loans, reverse mortgages, and lines of 

credit secured by a dwelling within the 

transactional scope of the regulation. 

Regulation C currently determines 

transactional coverage according to the 

purpose of the loan; if a covered 

financial institution receives an 

application or originates or purchases a 

loan that is, among other things, for the 

purchase of a home, home 

improvement, or refinancing, the 

financial institution must collect and 

report data on the application or loan. 

As discussed below in the section-bysection analysis to § 1003.2(d), the 

Bureau is proposing to expand 

transactional coverage to include all 

mortgage loans secured by a dwelling, 

regardless of the purpose of the loan. 

This proposed modification includes 

several types of transactions that are not 

currently covered by Regulation C, 

including home-equity loans and 

commercial loans that are secured by a 

dwelling but do not satisfy the current 

purpose-based transactional coverage 

test. In addition, as discussed below in 

the section-by-section analysis to 

§ 1003.2(o), the Bureau is proposing to 

expand transactional coverage to 

include all dwelling-secured lines of 

credit, regardless of the purpose of the 

line of credit. This proposed 

modification includes all home-equity 

lines of credit, which are currently 

reported at the option of a financial 

institution if the purpose-based test is 

satisfied, as well as commercial lines of 

credit secured by a dwelling. Finally, as 

discussed below in the section-bysection analysis to § 1003.2(q), the 

Bureau is proposing to expand 

transactional coverage to include all 

reverse mortgages secured by a 

dwelling, regardless of the purpose of 

the reverse mortgage. This proposed 

modification includes all reverse 

mortgages, many of which do not satisfy 

the current purpose-based transactional 

coverage test, and therefore are not 

currently reported under Regulation C. 

The Bureau believes that these 

modifications would simplify the 

regulation, improve the quality and 

usefulness of the HMDA data, and align 

with current business practices, among 

other things. See the section-by-section 

analysis to these sections below for a 

detailed discussion of these proposed 

modifications. 

In addition, to reduce burden created 

by redundancy in Regulation C, the 

Bureau proposes a modest 

reorganization of Regulation C. For the 

reasons discussed in the section-bysection analysis below, the Bureau 

proposes to move and consolidate 

comments 1(c)–2 through 1(c)–9. 

Section 1003.2 Definitions 

Section 1003.2 of Regulation C sets 

forth definitions that are used in the 

regulation. As discussed below, the 

Bureau proposes substantive changes to 

several of these current definitions. In 

addition to these proposed substantive 

changes, the Bureau proposes technical 

revisions to § 1003.2 to enumerate the 

terms defined therein. The Bureau 

believes that these proposed technical 

revisions will facilitate compliance with 

Regulation C by making defined terms 

easier to locate and cross-reference in 

the regulation and its commentary and 

appendices. The Bureau includes in this 

proposal enumerations only for those 

definitions that it proposes to add or 

revise. The Bureau intends to provide 

enumerations for all definitions in 

§ 1003.2, including the defined terms 

not addressed in this proposal, when 

the Bureau finalizes this proposal. 

2(b) Application 

2(b)(1) In General 

Section 303(4) of HMDA defines a 

completed application as an application 

in which the creditor has received the 

information that is regularly obtained in 

evaluating applications for the amount 

and type of credit requested. Regulation 

C defines an application as an oral or 

written request for a home purchase 

loan, a home improvement loan, or a 

refinancing that is made in accordance 

with procedures used by a financial 

institution for the type of credit 

requested. 

As discussed in the section-by-section 

analysis of proposed § 1003.2(e) the 

Bureau is proposing to require financial 

institutions to report activity only for 

dwelling-secured loans, regardless of 

whether the loans are for home 

purchase, home improvement, or 

refinancing. The Bureau is proposing to 

make technical corrections and minor 

wording changes to conform the 

definition of application to the proposed 

changes in transactional coverage. 

The Bureau is not proposing other 

changes to the definition of application 

at this time. When the Bureau’s 2011 


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174 78 FR 79730, 79767 (Dec. 31, 2013). 175See Small Business Review Panel Report at 87, 

95. 176 78 FR 79767 (Dec. 31, 2013). 177 67 FR 7222, 7224 (Feb. 15, 2002). 178Section 1003.2 (definition of preapproval 

programs). 

179FFIEC FAQs. 

180Small Business Review Panel Report at 38. 

181See 41 FR 13619, 13620 (Mar. 31, 1976). 

182See 41 FR 23931, 23932 (June 14, 1976). 

Regulation C Restatement was 

published, industry trade associations 

asked the Bureau to align key 

definitions among various regulations, 

including the definition of application. 

The commenters noted the difference 

between the definition of application in 

Regulation C and Regulation X, for 

example. The Bureau responded to 

similar comments in the Bureau’s 2013 

TILA–RESPA Final Rule.174 During the 

Small Business Review Panel process, 

small entity representatives also 

suggested that the Regulation C 

definition of application be aligned with 

the definition used in the Bureau’s 2013 

TILA–RESPA Final Rule.175 As 

discussed in the Bureau’s 2013 TILA– 

RESPA Final Rule, the definition in that 

rule serves a different purpose from the 

definition in Regulation C, and the 

Bureau did not expand that definition to 

regulations that implement ECOA, 

FCRA, and HMDA.176 Consistent with 

the Bureau’s determination in the TILA– 

RESPA rulemaking, the Bureau is not 

proposing to align the Regulation C 

definition with the definition adopted 

in the Bureau’s 2013 TILA–RESPA Final 

Rule. While the Bureau is not proposing 

to make any changes to the Regulation 

C definition for alignment purposes at 

this time, the Bureau will continue to 

consider the comments received on this 

topic as it evaluates further follow up to 

the Bureau’s 2011 Streamlining Notice 

and other comments received. The 

proposal revises comments Application1 and Application-2 to make technical 

and minor wording changes. 

2(b)(2) Preapproval Programs 

Regulation C incorporates certain 

requests under preapproval programs 

into the definition of application under 

§ 1003.2. Requests for preapprovals may 

provide more complete data on the 

availability of home financing and be 

useful as a fair lending screening 

device.177 Such programs are only 

covered if they involve a comprehensive 

analysis of the creditworthiness of the 

applicant and include a written 

commitment for up to a specific 

amount, subject only to certain limited 

conditions.178 Institutions must report 

requests reviewed under covered 

preapproval programs that were denied 

or that resulted in originations (with a 

specific enumeration that preapproval 

was requested). Institutions may, at 

their option, report covered 

preapprovals that were approved but 

not accepted. The FFIEC has published 

some additional guidance on 

preapprovals in the form of frequently 

asked questions (FFIEC FAQs).179

The Bureau is proposing to make 

minor wording changes to the definition 

of a preapproval program under 

§ 1003.2(b)(2) and technical and 

clarifying changes to comment 

Application-3. The Bureau is proposing 

to delete language in the definition 

related to a certification of a clear 

termite inspection because it duplicates 

language in the commentary. The 

proposal adds language adapted from 

the FFIEC FAQs to the comment 

Application-3. This language specifies 

that a program that meets the definition 

in § 1003.2(b)(2) is a preapproval 

program for purposes of Regulation C 

regardless of its name, and that a 

program described as a ‘‘preapproval 

program’’ that does not meet the 

definition in § 1003.2(b)(2) is not a 

preapproval program for purposes of 

Regulation C. The language also 

specifies that an institution need not 

treat ad hoc requests for preapprovals as 

part of a preapproval program for 

purposes of Regulation C, but also notes 

that institutions should be generally 

consistent in procedures for considering 

such requests. 

During the Small Business Review 

Panel process, small entity 

representatives expressed concern about 

reporting preapprovals and determining 

whether certain requests are reportable 

as preapprovals. The Small Business 

Review Panel recommended that the 

Bureau specifically solicit public 

comment on whether clarification on 

the coverage of preapprovals is needed 

and, if so, how the coverage of 

preapprovals should be determined in 

light of HMDA’s purposes.180 When the 

Bureau’s 2011 Regulation C Restatement 

was published, some commenters 

requested additional guidance on 

preapproval programs and others 

requested that the Bureau eliminate the 

requirement to report activity under 

covered preapproval programs. The 

Bureau believes that preapproval data 

are valuable for HMDA’s fair lending 

purpose, as it permits visibility into 

how applicants are treated in an early 

stage of the lending process. The Bureau 

is not proposing to eliminate reporting 

of covered preapproval programs, and, 

as discussed below in the section-bysection analysis of proposed 

§ 1003.4(c)(2), is proposing to require 

reporting of preapproval requests that 

are approved by a financial institution 

but not accepted by an applicant. 

However, the Bureau notes that, as 

discussed above, the proposal does 

incorporate additional guidance into 

comment Application-3 regarding 

preapproval programs. Consistent with 

the recommendation of the Small 

Business Review Panel, the Bureau 

solicits feedback on whether additional 

clarification on the coverage of 

preapprovals is needed and, if so, how 

the coverage of preapprovals should be 

determined in light of HMDA’s 

purposes. 

2(c) Branch Office 

Section 1003.2 currently provides a 

definition of branch office, which 

includes separate definitions for 

branches of (1) banks, savings 

associations, and credit unions and (2) 

for-profit mortgage-lending institutions 

(other than banks, savings associations, 

and credit unions). The Bureau 

proposes technical and nonsubstantive 

modifications to the definition of branch 

office and to comments Branch Office2 and -3, renumbered as comments 2(c)- 

2 and -3, respectively, to clarify the 

definition and to conform to technical 

changes that the Bureau is proposing 

throughout Regulation C. The Bureau 

solicits feedback on whether the 

proposed modifications are appropriate 

generally. 

2(d) Closed-End Mortgage Loan 

HMDA section 303(2) defines a 

‘‘mortgage loan’’ as a loan which is 

secured by residential real property or a 

home improvement loan. The Board 

interpreted HMDA section 303(2) to 

refer to three types of loans: Home 

purchase loans, home improvement 

loans, and refinancings. As a result, 

Regulation C currently does not apply to 

mortgage loans that do not fall under 

one of these definitions, such as a loan 

secured by a dwelling that is used for 

business expenses, but is not considered 

a refinancing under § 1003.2. For the 

reasons discussed below, the Bureau is 

proposing a new definition for ‘‘closedend mortgage loans,’’ which would 

include all dwelling-secured loans that 

are not currently covered by Regulation 

C, regardless of the purpose of the loan. 

In the original implementation of 

Regulation C, the Board’s proposed 

scope included all loans secured by real 

property.181 However, the Board 

subsequently decided to adopt a 

narrower scope based on the purpose of 

the loan.182 At that time, the Board 

reasoned that focusing on the purpose of 

the loan would provide more useful 


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183 ‘‘There was general agreement among 

depository institutions and consumer and public 

interest groups that inclusion of mortgage loans 

unrelated to housing needs would distort the data 

from the standpoint of the purposes of the Act 

. . . . The Board believes that repeated references 

to in the legislative history of the Act to 

‘homeownership and home repair’ support a 

narrower definition of mortgage loan than was 

proposed.’’ Id. 

184 ‘‘A significant part of the default crisis is 

driven by existing homeowners borrowing heavily 

against the rising value of their house.’’ Atif Mian 

& Amir Sufi, House Prices, Home Equity-Based 

Borrowing, and the U.S. Household Leverage Crisis, 

101 a.m. Econ. Rev. 2132, p. 2154 (Aug. 2011). 

185 ‘‘The largest share of [closed-end second-lien] 

mortgages went to borrowers with relatively low 

quality non-prime mortgages. The large growth of 

[closed-end second-lien] mortgages in 2006 to 2007 

primarily went to borrowers with non-prime first 

liens that would eventually default at very high 

rates.’’ Donghoon Lee, et al., A New Look at Second 

Liens, Fed. Reserve Bank of New York Staff Report 

No. 569, at 11 (Aug. 2012). 

186See Vicki Been, et al., Furman Center for Real 

Estate & Urban Policy, Essay: Sticky Seconds—The 

Problems Second Liens Pose to the Resolution of 

Distressed Mortgages, 13–18 (Aug. 2012). 

187See Small Business Review Panel Report at 24, 

37, 59, 78, and 85. 

188See id. at 24, 27, 30, 33, 38, 39, 40. 42, 52, 

62, 75, 81, 94, 95, 101, 126, and 129. 

189See id. at 38. 

190 Id. 191 41 FR 23932 (June 14, 1976). 

data.183 While this approach was 

successful for some time, the Bureau 

believes that it now may be appropriate 

to include all dwelling-secured loans. 

Research indicates that closed-end 

home-equity lending was a significant 

factor in the financial crisis.184 In the 

years leading up to the crisis, closedend home-equity loans were often 

provided to non-prime borrowers, many 

of whom defaulted after the crisis 

began.185 Thus, data on these closedend mortgage loans may have helped 

the public better understand the risks 

posed to local housing markets. 

Furthermore, distressed homeowners 

with closed-end subordinate-lien 

mortgage loans encountered several 

challenges when seeking assistance 

from public and private mortgage relief 

programs.186 Data on these loans may 

have helped public officials improve the 

effectiveness of these relief programs. 

For these reasons, the Bureau believes 

that including dwelling-secured loans 

that are not currently covered by 

Regulation C may provide valuable 

information to the public and to public 

officials. Accordingly, the Bureau is 

proposing § 1003.2(d), which defines a 

‘‘closed-end mortgage loan’’ as a debt 

obligation secured by a lien on a 

dwelling that is not an open-end line of 

credit under § 1003.2(o), a reverse 

mortgage under § 1003.2(q), or excluded 

from coverage pursuant to § 1003.3(c). 

The Bureau solicits feedback regarding 

whether this proposed modification is 

appropriate. The Bureau also seeks 

additional information to ensure that 

this modification would provide useful 

data to the public. Specifically, the 

Bureau solicits feedback regarding 

whether this proposed modification 

would be as valuable to the public as 

the Bureau’s preliminary analysis 

suggests, whether there would be 

unique costs or burdens associated with 

this proposed modification, and 

whether there are additional 

considerations that should be included 

in the Bureau’s analysis. Furthermore, 

the Bureau is not proposing 

commentary to proposed § 1003.2(d) 

because the Bureau believes that this 

proposed definition is straightforward 

and clear. However, the Bureau solicits 

feedback regarding whether 

commentary is needed to clarify the 

definition or to facilitate compliance. 

During the Small Business Review 

Panel process, several small entity 

representatives expressed concerns 

about requiring reporting of dwellingsecured commercial credit.187 Some 

small entity representatives expressed 

concern about the potential compliance 

challenges associated with applying 

several of the HMDA requirements to 

commercial loans.188 The Small 

Business Review Panel recommended 

that the Bureau solicit public comment 

on whether any types of dwellingsecured loans should be excluded from 

Regulation C’s data collection and 

reporting requirements and, if so, which 

types of loans should be excluded.189

The Small Business Review Panel also 

encouraged the Bureau to consider and 

seek public comment on how categories 

of loans that would be affected by the 

proposal might be related to a financial 

institution’s Community Reinvestment 

Act reporting obligations.190 Based on 

this feedback and consistent with the 

Small Business Review Panel’s 

recommendation, the Bureau solicits 

feedback regarding whether any types of 

dwelling-secured loans should be 

excluded from the requirements of the 

regulation, which types of loans should 

be excluded, and how this proposed 

modification might affect a financial 

institution’s Community Reinvestment 

Act reporting requirements. In addition, 

to address the concerns raised about 

commercial credit, the Bureau solicits 

feedback regarding the extent to which 

members of the public would use data 

related to business-purpose loans to 

determine whether financial institutions 

are fulfilling their obligations to serve 

community housing needs, whether 

dwelling-secured loans used for 

business purposes should be excluded 

from the scope of the regulation, and 

information related to the potential 

compliance costs associated with 

business-purpose loans. Finally, with 

respect to the concerns raised by small 

financial institutions about applying the 

reporting requirements to loans for 

business purposes, the Bureau solicits 

feedback regarding whether any 

modifications to or exclusions from the 

requirements of proposed § 1003.4(a) 

would be appropriate if the Bureau 

decides against excluding businesspurpose loans from the reporting 

requirements. 

2(e) Covered Loan 

While HMDA section 303(2) defines a 

‘‘mortgage loan’’ as a loan which is 

secured by residential real property or a 

home improvement loan, Regulation C 

does not currently contain a defined 

term that includes all mortgage loans 

within the scope of the regulation. The 

Bureau has received feedback indicating 

that many members of industry find the 

regulation confusing and experience 

compliance challenges when 

determining whether and how to report 

the data. The Bureau believes that some 

of this confusion results from the 

current structure of the regulation, 

which links certain requirements to loan 

types, such as home-equity lines of 

credit, and other requirements to loan 

purposes, such as refinancings. 

Establishing clearly delineated 

boundaries between loan types and loan 

purposes will help clarify the 

regulation, and a new defined term that 

includes all types of loans subject to 

Regulation C should make subsequent 

references in the regulation easier to 

understand. 

Accordingly, the Bureau is proposing 

§ 1003.2(e), which defines a ‘‘covered 

loan’’ as a transaction that is, as 

applicable, a closed-end mortgage loan 

under § 1003.2(d), an open-end line of 

credit under § 1003.2(o), or a reverse 

mortgage under § 1003.2(q). The Bureau 

solicits feedback regarding whether this 

new proposed definition is appropriate. 

The Bureau is not proposing 

commentary to proposed § 1003.2(e) 

because the Bureau believes that this 

proposed definition is straightforward 

and clear. However, the Bureau solicits 

feedback regarding whether 

commentary is needed to clarify this 

proposed definition or to facilitate 

compliance. 

2(f) Dwelling 

Although HMDA does not use or 

define the term ‘‘dwelling,’’ the term has 

been included in some form in 

Regulation C since 1976 191 and is 


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192 12 CFR 1003.2 (definition of dwelling). 193 12 CFR 1003.2, comment Dwelling–1. 194 12 CFR 1003.2, comment Dwelling–2. 195Specifically, financial institutions report 

difficulty in determining coverage for mobile homes 

built prior to June 15, 1976, which are not covered 

by the HUD standards for manufactured homes. 196 24 CFR 3282.8(a). 

197 24 CFR 3282.8(g). 

198The Bureau understands that relatively few 

houseboats and recreational vehicles are used as 

residential dwellings. Based on 2008–2012 

American Community Survey estimates, 108,654 of 

the total 131,642,457 total housing units in the 

United States (0.1 percent) were vans, recreational 

vehicles, or boats. 

important to scope, reporting, and 

coverage under Regulation C. Regulation 

C defines a dwelling as a residential 

structure (whether or not attached to 

real property) located within a U.S. 

State, the District of Columbia, or Puerto 

Rico. Regulation C provides that the 

definition of a dwelling includes, but is 

not limited to, condominium units, 

cooperative units, and mobile or 

manufactured homes.192 Regulation C 

commentary interprets the term 

dwelling to include vacation and second 

homes, rental properties and 

multifamily structures.193 Recreational 

vehicles such as boats or campers, and 

transitory residences such as hotels, 

hospitals, and dormitories are not 

included in the definition.194

Financial institutions have reported 

that they experience compliance burden 

in determining whether certain 

properties are dwellings under 

Regulation C, and whether the loan or 

application associated with such 

properties should be reported on the 

loan application register. Financial 

institutions report difficulty in 

determining coverage for loans secured 

by homes that are converted to 

commercial purposes, such as homes 

converted to daycare centers or 

professional offices; recreational 

vehicles that are used as residences; 

park model recreational vehicles; 

houseboats and floating homes; and 

certain mobile homes that do not meet 

the definition of a manufactured 

home.195

The Bureau is proposing to revise the 

definition of dwelling in § 1003.2 to 

provide additional clarity. Specifically, 

the Bureau proposes to move the 

geographic location requirement 

currently in the definition of dwelling to 

§ 1003.1(c) and to add examples of 

dwellings to the commentary. The 

proposed examples have long been 

understood to be dwellings under 

Regulation C, and the revision is 

intended solely for clarity and 

illustration. The proposal revises 

comment Dwelling-1 to refer to 

investment properties rather than rental 

properties for consistency with terms 

used in the proposal regarding reporting 

of owner-occupancy status under 

§ 1003.4(a)(6). The proposal also revises 

comment Dwelling-1 to list 

condominium and cooperative 

buildings as additional examples of 

multifamily residential structures, and 

to provide that both multifamily 

complexes and individual buildings are 

covered. The Bureau solicits feedback 

on whether additional guidance is 

necessary to distinguish when multiple 

multifamily buildings should be 

considered part of the same complex 

and multifamily dwelling or when they 

should be considered separate 

properties and how to distinguish these 

scenarios. 

The proposed definition in § 1003.2 

would no longer refer to mobile homes, 

to reduce any confusion with the 

current definition of manufactured 

home. The HUD standards for 

manufactured homes do not cover 

mobile homes constructed before June 

15, 1976, and these would not be 

covered by the proposed definitions of 

manufactured home or dwelling for 

purposes of Regulation C.196 Comment 

Dwelling-1 would be revised 

accordingly. The Bureau believes that 

reported information about covered 

loans and applications secured by pre1976 mobile homes may not be useful 

given the limited volume of such loans 

and the difference in pricing and terms 

when compared to covered loans related 

to manufactured homes. Additionally, 

the Bureau believes that even if these 

dwellings were identified separately 

from manufactured homes, financial 

institutions would experience 

compliance burden in determining 

whether the homes are manufactured 

homes or pre-1976 mobile homes. 

However, the Bureau solicits feedback 

on whether this exclusion is appropriate 

or whether such homes should be 

included in the definition of dwelling 

under Regulation C and, if so, whether 

an additional enumeration should be 

added to the construction method 

reporting requirement under proposed 

§ 1003.4(a)(5) for such loans. 

The proposal clarifies that 

recreational vehicles are not considered 

dwellings under Regulation C even if 

they are used as residences. The current 

commentary provides that recreational 

vehicles such as campers and boats are 

not dwellings for purposes of Regulation 

C. However, financial institutions have 

reported confusion with the comment 

where the recreational vehicle is used as 

a residence. For example, in some cases 

borrowers use campers or boats that 

were not designed as permanent 

dwellings as residences. Financial 

institutions have also reported 

confusion about park model recreational 

vehicles, which are recreational vehicles 

which share some characteristics of 

manufactured homes but are excluded 

from the HUD standards for 

manufactured housing as recreational 

vehicles.197 Proposed comment 2(f)–2 

provides that recreational vehicles, 

including boats, campers, travel trailers, 

and park model recreational vehicles, 

are not considered dwellings for 

purposes of § 1003.2(f), regardless of 

whether they are used as residences. 

Regarding houseboats and floating 

homes that may be used as residences, 

certain financial institutions in areas 

where houseboats and floating homes 

are more common report loans related to 

floating homes and houseboats on their 

loan application registers. These 

institutions may receive consideration 

under the CRA for financing houseboats 

or floating homes. The Bureau 

recognizes that while these loans may 

provide housing for certain 

communities, the Bureau believes that 

financing of such loans is different from 

other home loans and the incidence of 

such housing is highly localized. Unlike 

manufactured housing, discussed 

below, usage and financing of 

houseboats and floating homes is not as 

prevalent, and the small number of 

houseboats used as residences suggests 

that loans secured by such properties 

should not be included in HMDA 

data.198 Therefore, the Bureau believes 

that excluding houseboats and floating 

homes will facilitate compliance with 

HMDA. However, the Bureau solicits 

feedback on whether these exclusions 

are appropriate. 

The proposal would differ from 

Regulation Z’s definition of dwelling, 

which treats recreational vehicles used 

as residences as dwellings. 12 CFR part 

1026, comment 2(a)(19)–2. When the 

Bureau’s 2011 Regulation C Restatement 

was published, industry trade 

associations asked the Bureau to align 

key definitions among various 

regulations, including the definition of 

dwelling. As discussed above, the 

proposal does not align the Regulation 

C definition with Regulation Z. Instead, 

it would exclude certain structures 

which may be covered by Regulation Z 

and provide more clarity on certain 

structures. The Bureau believes that 

additional guidance in this area and an 

exclusion for certain structures will 

reduce burden for financial institutions. 

However, the Bureau solicits feedback 

on whether financial institutions would 

prefer to report loans and applications 

for these types of structures that may be 


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199See Small Business Review Panel Report at 80. 

200See Section 1003.2 (definition of financial 

institution); HMDA sections 303(3), 309(a). 

considered dwellings under Regulation 

Z rather than having them excluded 

from the Regulation C reporting 

requirements as proposed. 

The proposal revises the sentence in 

the comment Dwelling-2 regarding 

transitory residences to delete the 

reference to principal residences 

elsewhere because the explanation is 

inconsistent with the standard 

articulated in the commentary regarding 

non-principal residences such as second 

homes. The Bureau believes that this 

exclusion is better explained by the 

transitory nature of such structures. The 

proposal provides that structures 

designed for residential purposes but 

used exclusively for commercial 

purposes would not be dwellings under 

Regulation C and provides examples of 

daycare facilities and professional 

offices. The Bureau solicits feedback 

regarding whether the proposed 

revisions provide institutions with 

sufficient clarity to identify transactions 

that must be reported and whether any 

additional exclusions or examples 

would be appropriate. 

During the Small Business Review 

Panel process, one small entity 

representative requested guidance on 

how to account for mixed-used 

buildings.199 Commentary under the 

definitions of home improvement loan 

and home purchase loan provides 

guidance on whether loans secured by 

mixed-use property are reportable by 

allowing institutions to use any 

reasonable standard to determine the 

primary use of the property. The Bureau 

is proposing to add new comment 2(f)– 

3 regarding mixed-use property, which 

is adapted from the comments currently 

provided. The Bureau believes that the 

issues associated with identifying 

mixed-use property are common to all 

types of dwelling-secured loans and it 

may facilitate compliance to include the 

discussion of the issue under the 

definition of dwelling. The comment 

also provides that if a property contains 

five or more individual dwelling units, 

a financial institution should consider it 

to have a primary residential use. The 

Bureau believes that even if such 

properties also contain commercial 

space, five individual dwelling units is 

sufficient residential use to require 

coverage. This would be consistent with 

the proposal’s new definition of a 

multifamily dwelling, discussed below 

in the section-by-section analysis of 

proposed § 1003.2(n). The Bureau 

solicits feedback on whether it would be 

preferable to establish a bright-line rule 

for mixed-use property. Specifically, the 

Bureau solicits feedback on whether a 

mixed-use property should be reported 

if it includes any individual dwelling 

units, or whether a clear standard can be 

provided for mixed-used property with 

a de minimis residential component to 

be excluded. 

Proposed section§ 1003.2(f) is 

proposed to implement, in part, the 

definition of ‘‘mortgage loan’’ in HMDA 

section 303(2). That term would be 

implemented through other terms in 

Regulation C as well, including the 

proposed definitions of ‘‘closed-end 

mortgage loan’’ and ‘‘covered loan.’’ In 

combination with other relevant 

provisions in Regulation C, the Bureau 

believes that the proposed definition of 

‘‘dwelling’’ is a reasonable 

interpretation of the definition in that 

provision. Section 1003.2(f) is also 

proposed pursuant to the Bureau’s 

authority under section 305(a) of 

HMDA. Pursuant to section 305(a) of 

HMDA, the Bureau believes that this 

proposed definition is necessary and 

proper to effectuate the purposes of 

HMDA. The proposed definition will 

serve HMDA’s purpose of providing 

information to help determine whether 

financial institutions are serving the 

housing needs of their communities by 

providing information about various 

types of housing that are financed by 

financial institutions. The definition 

will facilitate compliance with HMDA 

requirements by providing clarity 

regarding what transactions must be 

reported for purposes of Regulation C. 

2(g) Financial Institution 

Regulation C requires institutions that 

meet the definition of financial 

institution to collect and report HMDA 

data. HMDA and Regulation C establish 

different coverage criteria for depository 

institutions (banks, savings associations, 

and credit unions) than for 

nondepository institutions (for profitmortgage-lending institutions).200

Depository institutions that originate 

one first-lien home purchase loan or 

refinancing secured by a one-to-four 

unit dwelling and that meet other 

criteria for ‘‘financial institution’’ must 

collect and report HMDA data, while 

certain nondepository institutions that 

originate many more mortgage loans 

annually do not have to collect and 

report HMDA data. The Bureau believes 

that this approach may exclude 

important data about nondepository 

institutions’ practices and may 

inappropriately burden depository 

institutions that originate a small 

number of mortgage loans. 

The Bureau proposes to adjust 

Regulation C’s institutional coverage to 

adopt a uniform loan volume threshold 

of 25 loans applicable to all financial 

institutions (25-loan volume test). 

Under the proposal, depository and 

nondepository institutions that meet all 

of the other criteria for a ‘‘financial 

institution’’ would be required to report 

HMDA data if they originated at least 25 

covered loans, excluding open-end lines 

of credit, in the preceding calendar year. 

The proposed loan volume test would 

improve the availability of data 

concerning the practices of 

nondepository institutions, where 

information is needed. The Bureau 

estimates that the proposed coverage 

criteria may increase the number of 

nondepository institutions covered by 

HMDA by as much as 40 percent and 

the number of reported originations and 

applications by nondepository 

institutions by as much as 6 percent. As 

discussed below, this information is 

important because Congress and other 

stakeholders have raised concerns about 

the practices of, and loan products 

offered by, nondepository institutions 

generally and their role in the broader 

financial crisis. With data from 

additional nondepository institutions, 

the public and public officials would be 

better able to evaluate whether those 

institutions are serving the housing 

needs of their communities and whether 

those institutions’ practices pose 

possible fair lending risks. In addition, 

the data would allow the public and 

public officials to identify emerging 

products and practices in the 

nondepository mortgage market that 

may pose risks to consumers. 

Furthermore, the Bureau believes that 

the proposed 25-loan volume test may 

appropriately reduce the burdens on 

depository institutions that make very 

few loans while maintaining coverage of 

a relevant, diverse set of reporting 

institutions and reported transactions. 

The Bureau believes that eliminating 

reporting by lower-volume depository 

institutions may be a way to reduce 

burden without impacting the quality of 

HMDA data. As discussed below, the 

Bureau believes that the loss of data 

from depository institutions that 

originate fewer than 25 loans in a 

calendar year would not significantly 

impact the utility of HMDA data for 

analyzing mortgage lending at the 

national, local, and institutional levels. 

In addition, the proposed 25-loan 

volume test may simplify the reporting 

regime by providing a consistent loan 

volume benchmark across all financial 

institutions. Institutions that originate 

25 loans likely face similar burdens 

associated with HMDA reporting, 


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201See generally HMDA sections 303(5) (defining 

other lending institutions), 303(3)(B) (including 

other lending institutions in the definition of 

depository institution), and 304(a) (requiring 

depository institutions to collect, report, and 

disclose certain data if the institution has a home 

or branch office located in an MSA), 12 U.S.C. 

2802(5), 2802(3), 2803(a). 

202See HMDA section 309(a), 12 U.S.C. 2808(a). 

203The Board adopted the 10 percent loan 

volume test in 1989 to implement the 1989 FIRREA 

amendments, which extended HMDA’s reporting 

requirements to institution’s ‘‘engaged for profit in 

the business of mortgage lending.’’ See 54 FR 

51356, 51358–59 (Dec. 15, 1989). In 2002, the Board 

modified the test and added the $25 million loan 

volume test to require reporting by additional 

nondepository institutions. See 67 FR 7222, 7224 

(Feb. 15, 2002). 

204Under § 1003.2 (definition of branch office), a 

nondepository institution has a branch office in an 

MSA if it originated, received applications for, or 

purchased five or more covered loans in that MSA. 

205 In 1989, the $10 million asset test, derived 

from section 309, applied to both depository and 

nondepository institutions. See 54 FR 51356, 51359 

(Dec. 15, 1989). Because the 1989 amendments 

failed to cover as many nondepository lenders as 

Congress had intended, in 1991, Congress amended 

the asset test in HMDA section 309 to apply only 

to depository institutions, and it granted the Board 

discretion to exempt comparable nondepository 

institutions. See Public Law 102–242, section 224 

(1991). Pursuant to that authority, the Board added 

the 100 loan volume test for nondepository 

institutions in 1992. See 57 FR 56963, 56964–65 

(Dec. 2, 1992). 

206See 65 FR 78656, 78657 (Dec. 15, 2000) 

(proposing changes to coverage of nondepository 

institutions); 67 FR 7222, 7224–25 (Feb. 15, 2002) 

(finalizing changes to coverage of nondepository 

institutions). 207See U.S. Gov’t Accountability Office, GAO– 

08–78R, Briefing to the Committee on Financial 

Services House of Representatives, ‘‘Home Mortgage 

Defaults and Foreclosures: Recent Trends and 

Associated Economic Developments 54 (2007), 

http://www.gao.gov/assets/100/95215.pdf. 

208 Id. 

209See, e.g., House Consideration of HR 4173, 155 

Cong. Record H14430 (daily ed. Dec. 9, 2009) 

(statement of Cong. Ellison (MN), ‘‘One of the most 

important causes of the financial crisis, as I 

mentioned, is the utter failure of consumer 

protection. The most abusive and predatory lenders 

were not federally regulated, were not regulated at 

all in some cases, while regulation was overly lax 

for banks and other institutions that were 

covered.’’); U.S. Gov’t Accountability Office, GAO– 

09–704, Fair Lending: Data Limitations and the 

Fragmented U.S. Financial Regulatory Structure 

Challenge Federal Oversight and Enforcement 

Efforts 28–29 (2009), available at http://

www.gao.gov/new.items/d09704.pdf. 

210See Dodd-Frank Act section 1024. 

211See GAO–09–704, at 28–29 (‘‘[I]ndependent 

lenders and nonbank subsidiaries of holding 

companies are more likely than depository 

institutions to engage in mortgage pricing 

discrimination.’’). 

212 Id. at 29–30. See also GAO–08–78R, at 54. 

213See, e.g., San Francisco Hearing, supra note 

133; Washington Hearing, supra note 130 (remarks 

of Faith Schwartz, Senior Advisor, HOPE NOW 

Alliance) (urging reporting by all institutions that 

have ‘‘any meaningful originations’’); id. (remarks 

of Allison Brown, Acting Assistant Director, 

Division of Financial Practices, Federal Trade 

Continued 

regardless of whether the institution is 

a depository or nondepository 

institution. Thus, setting a consistent 

loan volume threshold across all 

financial institutions may spread the 

burden of reporting more evenly among 

lower-volume institutions. The specific 

proposed changes to the definition of 

financial institution applicable to 

nondepository and depository 

institutions are discussed below 

separately. 

Coverage of Nondepository Financial 

Institutions 

HMDA extends reporting 

responsibilities to certain nondepository 

institutions, defined as any person 

engaged for profit in the business of 

mortgage lending other than a bank, 

savings association, or credit union.201

HMDA section 309(a) also authorizes 

the Bureau to adopt an exemption for 

covered nondepository institutions that 

are comparable within their respective 

industries to banks, savings 

associations, and credit unions with $10 

million or less in assets in the previous 

fiscal year.202

Under the current definition of 

financial institution in § 1003.2, a 

nondepository institution is a financial 

institution if it meets three criteria. 

First, the institution satisfies the 

following loan volume or amount test: 

In the preceding calendar year, the 

institution originated home purchase 

loans, including refinancings of home 

purchase loans, that equaled either at 

least 10 percent of its loan-origination 

volume, measured in dollars, or at least 

$25 million.203 Second, on the 

preceding December 31, the institution 

had a home or branch office in an 

MSA.204 Third, the institution meets 

one of the following two criteria: (a) On 

the preceding December 31, the 

institution had total assets of more than 

$10 million, counting the assets of any 

parent corporation; or (b) in the 

preceding calendar year, the institution 

originated at least 100 home purchase 

loans, including refinancings of home 

purchase loans.205

As discussed below, the Bureau 

proposes to modify the coverage criteria 

applicable to nondepository institutions 

by replacing the current loan volume or 

amount test with the same 25-loan 

volume test that the Bureau proposes for 

depository institutions. Under this 

approach, a nondepository institution 

would be required to report HMDA data 

if it had a home or branch office in an 

MSA on the preceding December 31 and 

it originated at least 25 covered loans, 

excluding open-end lines of credit, in 

the preceding calendar year. For the 

reasons discussed below, the Bureau 

believes that it may be appropriate to 

adopt a different formulation for 

determining whether a nondepository 

institution is ‘‘engaged for profit in the 

business of mortgage lending’’ than the 

formulation adopted by the Board and 

to eliminate the asset-size and loan 

volume exemption for nondepository 

institutions pursuant to its discretionary 

authority under HMDA section 309(a). 

The need for greater visibility into 

nondepository institution practices. 

During the years leading up to the 

financial crisis, many stakeholders 

expressed concern over the lack of 

visibility into nondepository institution 

activity in the mortgage market. 

Concerns about nondepository 

institution involvement in the subprime 

market motivated the Board to expand 

nondepository institution coverage in 

2002.206 A 2007 report by the U.S. 

Government Accountability Office 

(GAO) also raised concerns that 

nondepository institutions, which were 

not subject to regular Federal 

examination at the time, ‘‘may tend to 

originate lower-quality loans.’’ 207 GAO 

found that 21 of the 25 largest 

originators of subprime and Alt-A loans 

in 2006 were nondepository institutions 

and that those 21 nondepository 

institutions had originated over 80 

percent in dollar volume of the 

subprime and Alt-A loans originated in 

2006.208

In the aftermath of the financial crisis, 

Congress and other stakeholders 

expressed concerns about the lending 

practices of nondepository institutions 

generally and called for greater 

oversight of those institutions.209 In the 

Dodd-Frank Act, Congress granted 

Federal supervisory authority to the 

Bureau over certain nondepository 

institutions because it was concerned 

about nondepository institutions’ 

practices generally and believed that the 

lack of Federal supervision of those 

institutions had contributed to the 

financial crisis.210 In addition, a 2009 

GAO study found that nondepository 

institutions that reported HMDA data 

had a higher incidence of potential fair 

lending problems than depository 

institutions that reported HMDA 

data.211 GAO also suggested that the 

loan products and marketing practices 

of those nondepository institutions may 

have presented greater risks for 

applicants and borrowers.212 Moreover, 

community advocates and Federal 

agencies urged the Board during the 

Board’s 2010 Hearings to expand 

HMDA’s institutional coverage to 

include lower-volume nondepository 

institutions because they were active in 

the mortgage market and the lack of 

visibility into their practices created 

risks for communities.213 In addition, 


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51752 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

Commission) (urging expanded reporting by 

nondepository institutions ‘‘to ensure that all 

nondepositories that made significant numbers of 

mortgage decisions report these essential data, 

providing the government and the public an 

accurate, timely picture of mortgage lending 

activity’’); id. (remarks of Michael Bylsma, Director 

for Community and Consumer Law, Office of the 

Comptroller of the Currency) (urging the Board to 

‘‘review whether its rule-making authority’’ would 

permit it to expand HMDA coverage to additional 

institutions); Atlanta Hearing, supra note 131. 

214See Official Transcript, First Public Hearing of 

the Financial Crisis Inquiry Commission, 97–98 

(Jan. 10, 2010), (remarks of Sheila C. Bair, 

Chairman, Federal Deposit Insurance Corporation, 

and Mary L. Schapiro, Chairman, U.S. Securities 

and Exchange Commission), available at http://fcicstatic.law.stanford.edu/cdn_media/fcic-testimony/

2010–0114-Transcript.pdf. 

215Banks, savings associations, and credit unions 

are required to report if they originate at least one 

home purchase or refinancing of a home purchase 

loan secured by a first lien on a one-to-four family 

dwelling and if they meet the other criteria in the 

definition of financial institution. See Section 

1003.2 (definition of financial institution). 

216Every national bank, State member bank, and 

insured nonmember bank is required by its primary 

Federal regulator to file consolidated Reports of 

Condition and Income, also known as Call Report 

data, for each quarter as of the close of business on 

the last day of each calendar quarter (the report 

date). The specific reporting requirements depend 

upon the size of the bank and whether it has any 

foreign offices. See, e.g., FDIC, Call and Thrift 

Financial Reports, http://www2.fdic.gov/call_tfr_

rpts/. Credit unions are also required to report Call 

Report data to NCUA. See, e.g., NCUA, 53000 Call 

Report Quarterly Data, http://www.ncua.gov/ 

DataApps/QCallRptData/Pages/default.aspx. 

217NMLSR is a national registry of nondepository 

institutions. Nondepository institutions report 

information about mortgage loan originators, 

mortgage loan originations, the number and dollar 

amount of loans brokered, and HOEPA originations. 

218See Dodd-Frank Act section 1024. 

219See 54 FR 51356, 51358–59 (Dec. 15, 1989). 

officials that participated in the 

Financial Crisis Inquiry Commission 

hearings in 2010 noted that practices 

that originated in the nondepository 

mortgage sector, such as lax 

underwriting standards and loan 

products with potential payment shock, 

created competitive pressures on 

depository institutions to follow the 

same practices, which may have 

contributed to the broader financial 

crisis.214

Because of this history, the Bureau 

believes that it may be appropriate to 

increase transparency into mortgage 

lending by nondepository institutions. 

Currently, there are fewer publicly 

available data about nondepository 

institutions than about depository 

institutions. The differing institutional 

coverage criteria currently in Regulation 

C result in HMDA data including more 

information about lower-volume 

depository institutions, which may be 

required to report even if they 

originated only one mortgage loan in the 

preceding calendar year, than about 

lower-volume nondepository 

institutions, which may not be required 

to report unless they originated 100 

applicable loans in the preceding 

calendar year and met other loan 

amount thresholds.215 In addition, 

outside of HMDA, there are less 

publicly available data about 

nondepository institutions than about 

depository institutions. Depository 

institutions, even those that do not 

report HMDA data, report detailed 

financial information at the bank level 

to the Federal Deposit Insurance 

Corporation (FDIC) or to the National 

Credit Union Association (NCUA), 

much of which is publicly available.216

Nondepository institutions, on the other 

hand, report some data to the 

Nationwide Mortgage Licensing System 

and Registry (NMLSR), but detailed 

financial information and data on 

mortgage applications and originations 

are not publicly available.217

As a result, the public and public 

officials face challenges analyzing 

whether lower-volume nondepository 

institutions are serving the housing 

needs of their communities. The lack of 

data from lower-volume nondepository 

institutions may also hinder the ability 

of the public and public officials to 

understand access to and sources of 

credit in particular communities. For 

example, HMDA data users cannot as 

easily identify a higher concentration of 

risky loan products in a given 

community. In addition, with the 

current HMDA data, the public and 

public officials cannot readily 

understand whether a lower-volume 

nondepository institution’s practices 

pose potential fair lending risks. The 

lack of data from lower volume 

nondepository institutions may also 

make it more difficult for the public and 

public officials to identify trends in the 

nondepository mortgage market that 

pose potential risks, such as the 

emergence of new loan products or 

underwriting practices. Requiring 

additional nondepository institutions to 

report HMDA data may help resolve 

many of these problems and may 

provide greater visibility into the 

nondepository mortgage market sector. 

The 25-loan volume test. Due to the 

questions raised about potential risks 

posed to applicants and borrowers by 

nondepository institutions and the lack 

of other publicly available data sources 

about nondepository institutions, the 

Bureau believes that requiring 

additional nondepository institutions to 

report HMDA data may better effectuate 

HMDA’s purposes. The Bureau 

estimates that the proposed 25-loan 

volume test, in place of Regulation C’s 

current loan volume and amount and 

asset thresholds for nondepository 

coverage, would increase the number of 

nondepository institutions required to 

report HMDA data by as much as 40 

percent and the number of originations 

and applications reported by those 

institutions by as much as 6 percent. 

This additional data may provide 

valuable information about the 

nondepository sector of the mortgage 

market, such as emerging products or 

underwriting practices or a higher 

concentration of particularly risky loan 

products in a given community. 

In addition, the proposed change in 

coverage may support the Bureau’s 

supervision of nondepository 

institutions. The Dodd-Frank Act 

granted Federal supervisory authority to 

the Bureau over certain nondepository 

institutions.218 The proposed change in 

coverage will increase the number of 

nondepository institutions that report 

HMDA data and may provide HMDA 

data for nondepository institutions that 

the Bureau now supervises. This data 

may assist the Bureau in identifying 

lower-volume nondepository 

institutions that pose possible fair 

lending risks. 

Loan volume or amount test. The 

Bureau’s proposal would eliminate the 

existing loan volume or amount test for 

nondepository institutions (i.e., the test 

that provides that, in the preceding 

calendar year, the institution must have 

originated home purchase loans, 

including refinancings of home 

purchase loans, that equaled either at 

least 10 percent of its loan-origination 

volume, measured in dollars, or at least 

$25 million.) The Bureau believes that 

replacing the existing loan volume or 

amount test with the proposed 25-loan 

volume test may be appropriate. The 

current loan volume or amount test 

implements HMDA sections 303(3)(B) 

and 303(5), which require persons other 

than banks, savings associations, and 

credit unions that are ‘‘engaged for 

profit in the business of mortgage 

lending’’ to report HMDA data. When 

the Board initially implemented this 

provision, it explained that it 

interpreted the provision to evince the 

intent to exclude from coverage 

institutions that make a relatively small 

volume of mortgage loans.219 The 

Bureau agrees with the Board’s 

interpretation but believes that 

Regulation C’s current coverage test for 

nondepository institutions may 

inappropriately exclude nondepository 

institutions that are engaged for profit in 

the business of mortgage lending. The 

Bureau estimates that financial 

institutions that reported 25 loans in 

HMDA for the 2012 calendar year 


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220See Washington Hearing, supra note 130. 

221See § 1003.2(2)(iii) (definition of financial 

institution). 

222See 54 FR 51356, 51358–59 (Dec. 15, 1989); 57 

FR 56963, 56964–65 (Dec. 2, 1992). 

223See 12 U.S.C. 2802(3). 

224See Comment Financial institution-2 to 

§ 1003.2. 

225See Section 1003.2(financial institution)(1). 

226See, e.g., Atlanta Hearing, supra note 131, 

(remarks of Phil Greer, Senior Vice President of 

Loan Administration, State Employees Credit 

Union) (noting that the burden of reporting only 

one loan would be low, but that the data reported 

would not provide ‘‘meaningful information’’). 

originated an average of approximately 

$5,359,000 in covered loans. Given this 

level of mortgage activity, and 

consistent with the policy reasons 

discussed above, the Bureau believes 

that it may be appropriate to interpret 

‘‘engaged for profit in the business of 

mortgage lending’’ to include 

nondepository institutions that 

originated 25 or more covered loans, 

excluding open-end lines of credit, in 

the preceding calendar year. 

As discussed below under the 

coverage criteria for depository 

institutions, the Bureau believes that it 

may not be appropriate to require 

institutions that originate fewer than 25 

covered loans annually, excluding openend lines of credit, to report HMDA 

data. The Bureau believes that the costs 

to institutions that originate fewer than 

25 covered loans may not be justified by 

the benefit from the data collected from 

those institutions. 

Replacing the current loan volume or 

amount test for nondepository 

institutions with the proposed 25-loan 

volume test may also simplify the 

nondepository coverage criteria. The 

Bureau has received feedback that the 

current loan volume or amount test, 

which is in part based on the percentage 

of an institution’s total loan origination 

volume in dollars, is difficult both for 

institutions and public officials to 

calculate because many institutions do 

not otherwise measure or report their 

overall loan origination volume.220

Nondepository asset-size or loan 

volume exemption. As discussed above, 

Regulation C’s current coverage criteria 

for nondepository institutions includes 

the following asset-size or loan volume 

thresholds: The institution must either 

have had total assets of more than $10 

million (including assets of any parent 

corporation) on the preceding December 

31, or it must have originated at least 

100 home purchase loans, including 

refinancings of home purchase loans, in 

the preceding calendar year.221 The 

Board implemented this coverage 

requirement as an exercise of its 

discretion to exempt certain 

nondepository institutions.222 HMDA 

section 309(a) states that, after 

consultation with the HUD Secretary, 

the Bureau may, but is not required to, 

exempt other lending institutions that 

are comparable within their respective 

industries to a bank, savings association, 

or credit union that had total assets of 

$10,000,000 or less as of its last fiscal 

year, not adjusted for inflation. Due to 

changes in the mortgage market and for 

the reasons given above, the Bureau 

believes that it may be appropriate to 

exercise its discretion under HMDA 

section 309(a) to no longer exempt 

certain nondepository institutions. The 

Bureau solicits feedback on whether, 

and if so to what extent, an asset-size 

exemption for nondepository 

institutions should be retained. 

The Bureau’s proposal. For the 

reasons discussed above, the Bureau 

proposes to modify the current 

definition of financial institution in 

§ 1003.2 as it relates to for-profit 

mortgage-lending institutions. Proposed 

§ 1003.2(g)(2) provides that the term 

financial institution includes a 

nondepository financial institution, 

which means a for-profit mortgagelending institution (other than a bank, 

savings association, or credit union) that 

meets the following two requirements: 

First, on the preceding December 31, the 

institution must have had a home or 

branch office in an MSA. Second, in the 

preceding calendar year, the institution 

must have originated at least 25 covered 

loans, excluding open-end lines of 

credit. The Bureau seeks comment on 

the benefits and burdens associated 

with the proposed modification to 

nondepository institution coverage. The 

Bureau seeks comment on whether it 

has appropriately calibrated the loan 

volume test in terms of the number of 

loans included. There may be 

advantages to setting the loan volume 

test at higher or lower levels in terms of 

the quality and quantity of the data 

collected. In addition, the Bureau 

solicits comment on whether the loan 

volume test excludes important data 

about particular types of transactions, 

such as multifamily loans. The Bureau 

also solicits feedback on whether 

nondepository institutions that do not 

satisfy the proposed 25-loan volume test 

are comparable within their respective 

industries to depository institutions 

with $10 million or less in assets. 

By requiring data from a broader 

range of nondepository institutions, the 

Bureau believes that this proposed 

provision would ensure that the public 

and public officials are provided with 

sufficient information to enable them to 

determine whether financial institutions 

are fulfilling their obligations to serve 

the housing needs of communities and 

neighborhoods in which they are 

located. Furthermore, these data would 

assist public officials in their 

determination of the distribution of 

public sector investments in a manner 

designed to improve the private 

investment environment. In addition, 

because nondepository institutions pose 

different fair lending risks than 

depository institutions, the proposed 

changes would ensure that the public 

and public officials are provided with 

sufficient information to identify 

potential fair lending concerns. 

Coverage of Depository Financial 

Institutions 

HMDA extends reporting 

responsibilities to depository 

institutions that satisfy certain location, 

asset-threshold, and federally related 

requirements.223 Regulation C 

implements HMDA’s coverage criteria 

in the definition of financial institution 

in § 1003.2. Under the definition of 

financial institution in § 1003.2, a bank, 

savings association, or credit union 

meets the definition of financial 

institution if it satisfies all of the 

following criteria: (1) On the preceding 

December 31, it had assets of at least 

$43 million; 224 (2) on the preceding 

December 31, it had a home or branch 

office in an MSA; (3) during the 

previous calendar year, it originated at 

least one home purchase loan or 

refinancing of a home purchase loan 

secured by a first-lien on a one-to-four 

unit dwelling; and (4) the institution is 

Federally insured or regulated, or the 

mortgage loan referred to in item (3) was 

insured, guaranteed, or supplemented 

by a Federal agency or intended for sale 

to Federal National Mortgage 

Association or the Federal Home Loan 

Mortgage Corporation.225 For the 

reasons discussed below, the Bureau 

proposes an additional loan-volume 

threshold to the coverage criteria for 

depository institutions. The new 

criterion would require reporting only 

by depository institutions that meet the 

current criteria in § 1003.2 and that 

originated at least 25 covered loans, 

excluding open-end lines of credit, in 

the preceding calendar year. 

As part of this rulemaking, the Bureau 

is seeking ways to reduce burden 

without impairing the quality of HMDA 

data. Participants in the Board’s 2010 

Hearings urged the Board to eliminate 

reporting by lower-volume depository 

institutions.226 The Bureau believes that 

eliminating reporting by lower-volume 

depository institutions may be a way to 

reduce burden without impacting the 

ability of HMDA to achieve its purposes. 


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227See Comment 5(a)–2. 

228See, e.g., Small Business Review Panel Report 

at 37. 

229See id. 

Cumulatively, the loans made by 

depository institutions that originated 

fewer than 25 covered loans account for 

a very small percentage of all loans 

reported under HMDA. For example, the 

loans reported by depository 

institutions that originated fewer than 

25 covered loans, excluding open-end 

lines of credit, accounted for less than 

one percent of originations reported by 

depository institutions for the 2012 

calendar year. Depository institutions 

that originated fewer than 25 covered 

loans, excluding open-end lines of 

credit, accounted for approximately 25 

percent of depository institutions that 

reported HMDA data for the 2012 

calendar year. Moreover, as discussed 

below in part VI, loans made by these 

depository institutions do not represent 

a significant portion of lending in most 

local markets. Therefore, eliminating 

reporting by these depository 

institutions may not affect HMDA’s 

ability to provide data to analyze 

whether communities or markets could 

benefit from private or public sector 

investment. In addition, HMDA data 

collected from depository institutions 

with fewer than 25 loans may not be 

useful for statistically analyzing an 

individual institution’s lending to 

identify possible discriminatory lending 

patterns and enforce antidiscrimination 

statutes. Finally, the proposed 25-loan 

volume test may not impact HMDA’s 

utility as a tool to evaluate whether 

depository institutions are serving the 

needs of the communities that they 

serve. Therefore, the Bureau believes 

that adding a 25-loan volume test to the 

current coverage criteria for depository 

institutions may appropriately balance 

the burden of HMDA reporting with the 

benefits to the public and public 

officials provided by the reported data. 

Eliminating reporting by depository 

institutions that originate fewer than 25 

loans annually also is consistent with 

the Bureau’s proposal discussed below 

to require electronic reporting by all 

institutions. Currently, only institutions 

that report 25 or fewer entries annually 

are permitted to submit the loan 

application register in paper form.227 As 

discussed in the section-by-section 

analysis of proposed § 1003.5(a), the 

Bureau proposes to eliminate that 

option. 

For the reasons discussed above, the 

Bureau proposes that § 1003.2(g)(1), the 

proposed definition of depository 

financial institution, include a new 

criterion: in the preceding calendar 

year, the institution originated at least 

25 covered loans, excluding open-end 

lines of credit. The Bureau is also 

proposing technical changes to 

paragraph one of the definition of 

financial institution included in 

§ 1003.2. The Bureau solicits comment 

on the proposed 25-loan volume test, 

including (1) the extent to which it may 

exclude valuable data, (2) whether it 

would prevent public officials and the 

public from understanding if the 

institutions excluded by the proposed 

25-loan volume test are serving the 

needs of their communities, and (3) 

whether it would prevent public 

officials and the public from identifying 

geographic areas that may benefit from 

private and public sector investment. 

The Bureau also solicits comment on 

whether the proposed 25-loan volume 

test may exclude data that are valuable 

for identifying possible fair lending 

issues. 

The Bureau also solicits comment on 

whether the loan-volume test for 

depository financial institutions 

excludes important data about 

particular types of transactions, such as 

multifamily loans. As discussed more 

fully below in part VI, the applications 

and originations reported in 2012 by 

depository institutions that originated 

25 or fewer covered loans have different 

characteristics than overall HMDA data. 

For example, applications and 

originations reported by lower-volume 

depository institutions were more likely 

to have higher interest rates, lower loan 

amounts, relate to manufactured 

housing or to multifamily properties, 

and to be portfolio loans than those 

reported by depository institutions that 

originated more than 25 covered loans. 

The Bureau also seeks comment on 

whether it has appropriately calibrated 

the proposed loan-volume test for 

depository financial institutions in 

terms of the number of loans included. 

There may be advantages to setting the 

volume test at higher or lower levels in 

terms of the quality and quantity of the 

data collected. 

The Bureau proposes § 1003.2(g)(1), 

the proposed definition of depository 

financial institution, pursuant to its 

authority under section 305(a) of HMDA 

to provide for such adjustments and 

exceptions for any class of transactions 

that the Bureau judges are necessary and 

proper to effectuate the purposes of 

HMDA. Pursuant to section 305(a) of 

HMDA, for the reasons given above, the 

Bureau believes that this proposed 

exception is necessary and proper to 

effectuate the purposes of HMDA. By 

reducing burden on financial 

institutions and establishing a 

consistent loan-volume test applicable 

to all financial institutions, the Bureau 

believes that the proposed provision 

would facilitate compliance with 

HMDA’s requirements. 

Composition of Loan-Volume Test 

The Bureau analyzed HMDA data to 

determine the optimal loan volume 

threshold to propose. As discussed 

above, the Bureau aims to propose a 

loan volume test that would reduce 

burden while maintaining sufficient 

data for meaningful analysis at the 

institution, local, and national levels. 

The Bureau excluded open-end lines of 

credit from the data it used for this 

analysis because HMDA data currently 

does not include comprehensive data on 

open-end lines of credit. Specifically, 

under the current rule financial 

institutions may but are not required to 

report data on home-equity lines of 

credit. In addition, other open-end lines 

of credit, such as commercial lines, are 

not currently reported. As a result, the 

Bureau’s proposed loan volume 

threshold also excludes open-end lines 

of credit from the loans that count 

toward the proposed 25-loan volume 

test. 

The Bureau solicits feedback on 

whether it should include open-end 

lines of credit in the types of loans that 

count toward the proposed loan volume 

threshold in light of the potential value 

of information about open-end lines of 

credit discussed further in the sectionby-section analysis of proposed 

§ 1003.2(o) below. The Bureau solicits 

information that would allow it to 

estimate the impact on HMDA data if 

open-end lines of credit were excluded 

from or included in the loan volume 

threshold. The Bureau is particularly 

interested in determining the types of 

institutions that would be covered or 

not covered, the types of mortgage 

businesses in which they engage, and 

the communities they serve. 

During the Small Business Review 

Panel process, small entity 

representatives generally supported the 

proposal to establish a uniform loanvolume threshold. The Panel 

recommended that the Bureau consider 

revisions to Regulation C that would 

simplify and clarify whether a financial 

institution is required to report HMDA 

data.228 In addition, the Panel 

recommended that the Bureau solicit 

feedback to help the Bureau establish an 

appropriate loan-volume threshold that 

would minimize the burden on small 

entities while ensuring adequate data 

collection to fulfill HMDA’s 

objectives.229 The Panel also 

recommended that the Bureau solicit 


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230See id. 

231See id. 

232See Chicago Hearing, supra note 137, and 

Atlanta Hearing, supra note 131. 

233 In 2012, out of 18,691,551 total HMDA 

records, only 340,097 were identified as unsecured 

home improvement loans. 

feedback on the types of mortgage loans 

that should count toward the loanvolume test.230 In addition, the Panel 

recommended that the Bureau consider 

whether a multiyear look-back period 

would establish more predictable 

coverage obligations for small financial 

institutions.231 Consistent with the 

Panel’s recommendation, as discussed 

above, the Bureau solicits feedback on 

all aspects of the proposed 25-loan 

volume test, including the number and 

types of loans that should be included. 

The Bureau solicits feedback on 

whether a multiyear look-back period 

would ease the burdens associated with 

unpredictable compliance obligations 

that may result from the proposed 25- 

loan volume test. 

To clarify the definition of financial 

institution and facilitate compliance, 

the Bureau also proposes to modify and 

to renumber the commentary to the 

definition of financial institution. 

Proposed comment 2(g)–1 discusses the 

meaning of the preceding calendar year 

and the preceding December 31 and 

provides an illustrative example. 

Proposed comment 2(g)–3 discusses 

coverage after a merger or acquisition 

and provides several illustrative 

examples. Proposed comment 2(g)–4 

provides cross references to 

commentary that are helpful in 

determining whether activities with 

respect to a particular loan constitute an 

origination. Proposed comments 2(g)–5 

and –6 provide guidance on whether 

branches and offices of foreign banks 

meet the definition of financial 

institution. 

2(i) Home Improvement Loan 

HMDA section 303(2) defines a 

‘‘mortgage loan’’ as a loan that is 

secured by residential real property or a 

home improvement loan. However, 

HMDA does not expressly define ‘‘home 

improvement loan.’’ Regulation C 

currently defines ‘‘home improvement 

loan’’ to mean a loan secured by a lien 

on a dwelling that is for the purpose, in 

whole or in part, of repairing, 

rehabilitating, remodeling, or improving 

a dwelling or the real property on which 

it is located. The current definition also 

includes a non-dwelling secured loan 

that is for the purpose, in whole or in 

part, of repairing, rehabilitating, 

remodeling, or improving a dwelling or 

the real property on which it is located, 

and that is classified by the financial 

institution as a home improvement loan. 

For the reasons discussed below, the 

Bureau is proposing to exclude loans 

that are not secured by a lien on a 

dwelling from the definition of home 

improvement loan. 

During the 2010 Board Hearings, 

several participants provided feedback 

that financial institutions encounter 

substantial compliance challenges when 

reporting home improvement loans that 

are not secured by a dwelling.232 These 

unsecured loans are often processed, 

underwritten, and originated through 

different loan origination systems than 

are used for secured lending. For 

financial institutions that focus on 

portfolio lending, unsecured home 

improvement loans may be handled by 

different staff than handle secured 

lending, which increases the training 

cost and compliance burden. Thus, the 

compliance burden associated with 

unsecured home improvement lending 

appears to be significant. 

The Bureau acknowledges that 

unsecured home improvement loan data 

was useful when Regulation C was 

originally implemented. However, it 

appears that the current value of 

unsecured home improvement loan data 

is limited. For example, in 2012 

unsecured home improvement loans 

comprised only approximately 1.8 

percent of all HMDA records.233 The 

Bureau is not aware of any instances 

where a community group relied on 

unsecured home improvement loan data 

to determine if a financial institution 

was serving the housing needs of a 

neighborhood, such as through 

discussions related to bank merger or 

branch expansion requests. In addition, 

few fair lending cases appear to use 

unsecured home improvement loan 

data, and the Bureau is not aware of any 

research studies or public or private 

investment programs that relied on 

unsecured home improvement loan 

data. Therefore, unsecured home 

improvement loan data may not provide 

useful information to the public. 

Based on these considerations, the 

burden associated with reporting 

unsecured home improvement loan data 

appears to outweigh the value of the 

information, and it may be appropriate 

to exclude unsecured loans from the 

reporting requirements of Regulation C. 

Accordingly, the Bureau is proposing to 

modify § 1003.2(i) to define home 

improvement loan as a covered loan that 

is for the purpose, in whole or in part, 

of repairing, rehabilitating, remodeling, 

or improving a dwelling or the real 

property on which it is located. The 

Bureau solicits feedback regarding 

whether this proposed exclusion is 

appropriate. In addition to general 

feedback, the Bureau specifically 

requests comment regarding the extent 

to which members of the public use 

unsecured home improvement loan data 

to determine whether financial 

institutions are fulfilling their 

obligations to serve community housing 

needs, whether financial institutions 

rely on unsecured home improvement 

loan data for purposes of fair lending 

examinations, and whether there are 

any other considerations that the Bureau 

should analyze in determining whether 

this proposed exception is appropriate. 

Current comment Home improvement 

loan-1 discusses the classification 

requirement for loans not secured by a 

lien on a dwelling. To conform to the 

proposed exclusion of unsecured home 

improvement loans, the Bureau is also 

proposing to remove this comment. The 

Bureau is proposing to replace the 

current comment with new comment 

2(i)–1, which clarifies that a home 

improvement loan is defined by 

reference to the purpose of the 

obligation, and also explains that an 

obligation is a home improvement loan 

even if only a part of the purpose is for 

repairing, rehabilitating, remodeling, or 

improving a dwelling. Proposed 

comment 2(i)–1 also provides several 

illustrative examples. Proposed 

comment 2(i)–4 is similar to current 

comment Home improvement loan-4, 

but with modifications to conform to the 

proposed exclusion of unsecured home 

improvement loans. 

Current comment Home improvement 

loan-5 discusses reporting requirements 

for home improvement loans. The 

Bureau believes that the most 

appropriate location for information 

related to reporting requirements is in 

the commentary to the reporting 

requirements under § 1003.4. Thus, the 

Bureau is proposing to delete comment 

Home improvement loan-5. 

Section 1003.2(i) is proposed 

pursuant to the Bureau’s authority 

under section 305(a) of HMDA. 

Pursuant to section 305(a) of HMDA, the 

Bureau believes that these proposed 

modifications and exceptions are 

necessary and proper to effectuate the 

purposes of HMDA and to facilitate 

compliance therewith. The Bureau 

believes that unsecured home 

improvement loan data may distort the 

overall quality of the HMDA dataset. 

Excluding unsecured home 

improvement loans from the set of 

reportable data would improve the 

quality of the data, which would 

provide the citizens and public officials 

of the United States with sufficient 

information to enable them to determine 


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whether depository institutions are 

filling their obligations to serve the 

housing needs of the communities and 

neighborhoods in which they are 

located and to assist public officials in 

their determination of the distribution 

of public sector investments in a 

manner designed to improve the private 

investment environment. The Bureau 

also believes that this proposed 

exception would facilitate compliance 

by removing a significant compliance 

burden. The Bureau also believes that it 

is reasonable to interpret HMDA section 

303(2) to include only loans that are 

secured by liens on dwellings, as that 

interpretation aligns with common 

definitions of the term mortgage loan 

and such loans will include home 

improvement loans. 

2(j) Home Purchase Loan 

HMDA section 303(2) defines a 

‘‘mortgage loan’’ as a loan which is 

secured by residential real property or a 

home improvement loan. However, 

HMDA does not expressly define ‘‘home 

purchase loan.’’ Regulation C currently 

defines ‘‘home purchase loan’’ to mean 

a loan secured by and made for the 

purpose of purchasing a dwelling. As 

discussed above, the Bureau is 

proposing several technical 

modifications to clarify the regulation 

and facilitate compliance. To further 

these goals, the Bureau proposes 

§ 1003.2(j), which modifies the current 

definition of ‘‘home purchase loan’’ to 

replace ‘‘loan’’ with ‘‘covered loan,’’ to 

make conforming edits in several of the 

comments applicable to proposed 

§ 1003.2(j), and to add illustrative 

examples to these comments. The 

Bureau is also proposing to add a new 

comment 2(j)–1, which discusses the 

definition of home purchase loan and 

provides illustrative examples. 

As part of the effort to clarify 

Regulation C, the Bureau is proposing to 

move, modify, or delete several existing 

comments. Current comment Home 

purchase loan-3 discusses loans to 

purchase property used primarily for 

agricultural purposes. As discussed in 

the section-by-section analysis to 

§ 1003.2(b), the Bureau is proposing to 

move comment Home purchase loan-3 

to the commentary under that section. 

Current comment Home purchase loan7 discusses reporting requirements for 

home purchase loans. The Bureau 

believes that the most appropriate 

location for information related to 

reporting requirements is in the 

commentary to the reporting 

requirements under § 1003.4. Thus, the 

Bureau is proposing to delete comment 

Home purchase loan-7. As discussed in 

the section-by-section analysis to 

§ 1003.4(a)(3), the Bureau is proposing 

new comments that are substantively 

similar to existing comment Home 

purchase loan-7, but with modifications 

for clarity and additional illustrative 

examples. Finally, the Bureau is 

proposing to add new comment 2(j)–7, 

which clarifies that, for purposes of 

§ 1003.2(j), an assumption is a home 

purchase loan when a financial 

institution enters into a written 

agreement accepting a new borrower as 

the obligor on an existing obligation for 

a covered loan. This proposed comment 

would further clarify that if an 

assumption does not involve a written 

agreement between a new borrower and 

the financial institution, it is not a home 

purchase loan for purposes of 

§ 1003.2(j). This proposed comment is 

substantively similar to current 

comment 1(c)–9, which the Bureau is 

proposing to delete, as discussed in the 

section-by-section analysis to 

§ 1003.1(c). The Bureau solicits 

feedback regarding these proposed 

relocations, modifications, and 

deletions, and solicits feedback 

regarding whether additional comments 

or examples would help clarify 

proposed § 1003.2(j) or facilitate 

compliance. 

2(k) Loan Application Register 

Regulation C requires financial 

institutions to collect and record 

reportable data in the format prescribed 

in appendix A of the regulation. This 

format is referred to as the ‘‘loan 

application register,’’ but that name is 

not currently defined in the regulation. 

To improve the readability of the 

regulation, the Bureau is proposing 

§ 1003.2(k), which defines the term 

‘‘loan application register’’ to mean a 

register in the format prescribed in 

appendix A to this part. The Bureau 

solicits feedback on this technical 

modification, and whether additional 

changes could be made to improve the 

clarity of the regulation. 

2(l) Manufactured Home 

Regulation C requires financial 

institutions to report the property type 

to which a loan or application relates, 

including whether the property is a 

manufactured home as defined in 

§ 1003.2. The Bureau is proposing to 

make technical corrections and minor 

wording changes to the definition of 

manufactured home. Manufactured 

homes would continue to be defined by 

referring to the manufactured home 

construction and safety standards 

promulgated by HUD. The Bureau is 

proposing to require financial 

institutions to report additional 

information about manufactured home 

loans and applications, as discussed in 

the section-by-section analysis of 

proposed § 1003.4(a)(29) and (30). 

The proposal revises comment 

Manufactured home-1 for clarity and 

consistency with the HUD standards. It 

provides that the definition in 

§ 1003.2(l) refers to the Federal building 

code for manufactured housing 

established by HUD, and that modular 

or other factory-built homes that do not 

meet the HUD code standards are not 

manufactured homes for purposes of 

§ 1003.2(l). It would provide that 

recreational vehicles, which are 

excluded from the HUD code standards 

pursuant to 24 CFR 3282.8(g), are also 

excluded from the definition of 

dwelling for purposes of § 1003.2(f). 

Proposed new comment 2(l)–2 provides 

information on identifying 

manufactured homes with reference to 

the data plate and certification label 

required by HUD standards. The Bureau 

believes this comment will facilitate 

compliance by providing general 

guidance on distinguishing 

manufactured homes from other types of 

factory-built residential structures. The 

Bureau solicits feedback on whether 

additional guidance would provide 

greater clarity in this area. 

2(n) Multifamily Dwelling 

Section 1003.4(a)(5) of Regulation C 

requires financial institutions to report 

the property type of the dwelling to 

which a loan or application relates. 

Property type includes multifamily 

dwellings pursuant to appendix A. 

However, the term ‘‘multifamily 

dwelling’’ is not specifically defined in 

Regulation C. Multifamily residential 

structures are included within the 

definition of dwelling as provided by 

comment 1 to the definition of dwelling. 

Because multifamily lending is different 

from single-family lending, appendix A 

provides that certain data points are 

reported as not applicable for loans or 

applications related to multifamily 

dwellings, including owner-occupancy 

status and the applicant or borrower’s 

gross annual income. Additionally, the 

applicant or borrower’s ethnicity, race, 

and sex are reported as not applicable 

for applications and loans involving 

applicants that are not natural persons, 

which include many applicants for 

loans related to multifamily dwellings. 

The Bureau is proposing to add a new 

definition of multifamily dwelling as 

§ 1003.2(n). The proposal would define 

a multifamily dwelling as a dwelling, 

regardless of construction method, that 

contains five or more individual 

dwelling units. The Bureau believes this 

definition will facilitate compliance by 

providing a clear definition for 


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234Prior to the enactment of the Depository 

Institutions Deregulation and Monetary Control Act 

of 1980, depository institutions’ ability to engage in 

residential real estate lending was significantly 

limited. See Public Law 96–221, 94 Stat. 132 (Mar. 

31, 1980). 

235The Alternative Mortgage Transaction Parity 

Act of 1982 preempted State law restrictions on 

variable-rate mortgage loans, among other things, 

making it easier for depository institutions to offer 

HELOCs to consumers. See 12 U.S.C. 3801 et. seq. 

The Tax Reform Act of 1986 eliminated interest 

deductions for most types of credit, but not for 

credit secured by real estate, thereby making 

HELOCs more attractive for consumers. See Public 

Law 99–514, 100 Stat. 2085 (Oct. 22, 1986). 

236 In 1988, the Board added an instruction 

permitting financial institutions to report HELOCs 

that were home improvement loans. 53 FR 31683, 

31685 (Aug. 19, 1988). The Board subsequently 

clarified that HELOC reporting was optional. 53 FR 

52657, 52660 (Dec. 29, 1988). In 1995, the Board 

extended optional HELOC reporting to home 

purchase loans. 60 FR 63393, 63398 (Dec. 11, 1995). 

237 65 FR 78656, 78660 (Dec. 15, 2000). 

238 67 FR 7222, 7225 (Feb. 15, 2002). 

239 Id. 

240 In the fourth quarter of 1999, approximately 

$20 billion in HELOCs were originated. By the 

fourth quarter of 2005, approximately $125 billion 

in HELOCs were originated. See Donghoon Lee, 

Christopher Mayer, and Joseph Tracy, A New Look 

at Second Liens, Fed. Reserve Bank of New York 

Staff Report No. 569, p. 30 (August 2012). 

241 ‘‘There is evidence indicating HELOC use 

helped fund speculative purchases of nonowneroccupied investment properties resulting in higher 

first mortgage defaults and house price depreciation 

during 2006–2009.’’ Michael LaCour-Little, Libo 

Sun, and Wei Yu, The Role of Home Equity Lending 

in the Recent Mortgage Crisis, Real Estate 

Economics, p. 182 (Aug. 2013). 

242 ‘‘[B]oth HELOC lending and [closed-end 

second] lending grew faster in high house price 

appreciation ZIP codes, but HELOC lending has a 

much stronger association with house price 

appreciation than [closed-end second] lending.’’ 

Michael LaCour-Little, Libo Sun, and Wei Yu, The 

Role of Home Equity Lending in the Recent 

Mortgage Crisis, Real Estate Economics, p. 164 

(Aug. 2013). 

243See Vicki Been, Howell Jackson, and Mark 

Willis, Essay: Sticky Seconds—The Problems 

Second Liens Pose to the Resolution of Distressed 

Mortgages, Furman Center for Real Estate and 

Urban Policy, pp. 13–18 (Aug. 2012). 

244 ‘‘Approximately 58 percent of all HELOC 

balances are due to start amortizing between 2014 

and 2017.’’ Office of the Comptroller of the 

Currency, Semiannual Risk Perspective, p. 20 

(Spring 2012). 

245 ‘‘As one example, Korean Churches for 

Community Development in Los Angeles reports 

that 80% of the borrowers it counsels have 

HELOCs, and that many community members rely 

on HELOCs to purchase inventory and maintain 

cash flow.’’ California Reinvestment Coalition et al. 

comment letter, Board of Governors of the Fed. 

Reserve System docket number OP–1388, p. 6, 

submitted Aug. 4, 2010. 

246 ‘‘Lines of credit (LOC) are the dominant credit 

instrument used by small businesses and account 

for more than 52% of the most recent loans in our 

data set.’’ Ken S. Cavalluzzo, Linda C. Cavalluzzo, 

& John D. Wolken, Competition, Small Business 

Financing, and Discrimination: Evidence From a 

New Survey, 75 Journal of Business 641, 659 (2002). 

247A 2012 study commissioned by the Small 

Business Administration found that home-secured 

lending was the source of expansion capital for 5 

percent of all small businesses, but this lending 

accounted for 6 percent of expansion capital for 

immigrant-owned small businesses, and 7.1 percent 

of expansion capital for small businesses owned by 

Asian immigrants. See Robert W. Fairlie, Immigrant 

Entrepreneurs and Small Business Owners, and 

Their Access to Financial Capital, p. 23 (May, 

2012). 

248See e.g. San Francisco Hearing, supra note 

133. 

249 ‘‘Asian Pacific Islander (API) small businesses 

rely heavily on personal real estate for their 

financing, and the significant decline in residential 

property values has led to a reduction in credit and 

rising delinquencies for API small business loans.’’ 

Ben Bernanke (speech), ‘‘Semiannual Monetary 

Policy Report to the Congress,’’ July 21, 2010, 

available at http://www.federalreserve.gov/

newsevents/testimony/bernanke20100721a.htm. 

250 ‘‘Our paper graphically illustrates the spillover 

effects of the mortgage crisis into another vital 

sector—for the economy as a whole as well as for 

LMI areas in particular. Our findings suggest that 

in order to reverse the cycle of disinvestment in 

neighborhoods hit hard by foreclosures, we need to 

address the small business sector as well as 

Continued 

multifamily dwelling for reporting and 

exception purposes. The Bureau is 

proposing to require additional 

information about multifamily 

dwellings as discussed in the sectionby-section analysis of proposed 

§ 1003.4(a)(31) and (32). The Bureau 

solicits feedback on whether the 

proposed definition of a multifamily 

dwelling is appropriate, and whether 

any existing or proposed data points 

should be modified or eliminated for 

multifamily dwellings. 

2(o) Open-End Line of Credit 

Currently, neither HMDA nor 

Regulation C provides a definition for 

the term ‘‘open-end line of credit.’’ 

Section 1003.4(c)(3) of Regulation C 

currently provides that a financial 

institution may report, but is not 

required to report, home-equity lines of 

credit made in whole or in part for the 

purpose of home improvement or home 

purchase. Regulation C does not 

currently require reporting for 

commercial lines of credit secured by a 

dwelling. For the reasons discussed 

below, the Bureau is proposing to 

require mandatory reporting of homeequity line of credit data, and to require 

reporting of dwelling-secured 

commercial line of credit data. 

The Board’s original implementation 

of Regulation C did not address homeequity lines of credit because depository 

institutions rarely offered them to 

consumers.234 However, home-equity 

lines of credit gained popularity after 

several legislative changes in the 

1980s.235 As home-equity lines of credit 

became increasingly common, the Board 

adopted several modifications to permit 

home-equity line of credit reporting in 

the late 1980s and 1990s.236 In response 

to the increasing importance of homeequity lines of credit, in 2000 the Board 

proposed to require mandatory 

reporting of all such transactions.237

However, in 2002 the Board decided to 

retain optional reporting.238 While 

mandatory reporting would have 

improved the usefulness of the data, the 

burden seemed to outweigh the 

benefit.239

As the mortgage market continued to 

evolve, the need for data about the 

home-equity line of credit market 

increased. During the mid-2000s homeequity line of credit originations 

expanded significantly.240 Research 

indicates that home-equity lines of 

credit were often used by speculative 

real estate investors both before and 

after the financial crisis.241 Studies also 

suggest that home-equity lines of credit 

were particularly popular in areas 

where house prices significantly 

increased prior to the market 

collapse.242 Thus, home-equity line of 

credit data may have helped the public 

better understand the risks posed to 

local housing markets. Furthermore, 

during the housing crisis many public 

and private mortgage relief programs 

encountered unique difficulties 

assisting distressed consumers who had 

obtained subordinate-lien loans, 

including home-equity lines of credit.243

Public officials remain concerned about 

the potential effect of home-equity lines 

of credit on the economic recovery 

because home-equity lines of credit 

generally permit interest-only payments 

for ten years after account opening.244

Thus, although permitting optional 

reporting of this data was appropriate in 

the past, it now may be appropriate to 

require mandatory reporting of data for 

home-equity lines of credit. 

Similar concerns exist for dwellingsecured commercial lines of credit. 

Many people obtain lines of credit 

secured by their dwelling with the 

intention of using the line of credit for 

business purposes.245 These dwellingsecured lines of credit are especially 

important for small businesses,246

including small businesses started by 

immigrant entrepreneurs.247 However, 

many people who had obtained 

dwelling-secured lines of credit for 

business purposes faced foreclosure 

after the mortgage crisis began.248 In 

addition, as the mortgage crisis 

decreased the availability of traditional 

business credit, some small business 

entrepreneurs turned to dwellingsecured credit to maintain business 

operations.249 The foreclosures and 

delinquencies resulting from these 

lending practices affected many 

neighborhoods throughout the country, 

including many low- to moderateincome neighborhoods.250 Thus, 


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housing.’’ Elizabeth Laderman & Carolina Reid, The 

Community Reinvestment Act and Small Business 

Lending in Low- and Moderate-Income 

Neighborhoods during the Financial Crisis, Fed. 

Reserve Bank of San Francisco Working Paper 

2010–05, p. 9 (Oct. 2005). 

251Concerns over potential evasion were raised 

during the 2010 Board Hearings. See Washington 

Hearing, supra note 130. 

252See Washington Hearing, supra note 130 

(Remarks of Lisa Rice, Vice President, National Fair 

Housing Alliance) (‘‘When I purchased my home I 

wasn’t even thinking about getting a HELOC and 

my mortgage originator—I purchased a home with 

a loan from a depository institution, retail, and the 

loan officer said to me, you need to get a HELOC 

and gave me all of these reasons why. And so I was 

sold my mortgage and my HELOC at the same time 

by the same originator. Every institution doesn’t do 

it the same way. I didn’t ask for it. It was something 

that the lending institution sold to me, and she did 

a very, very good job of selling it to me.’’). 

253See Small Business Review Panel Report at 24, 

38, 56, 57, 61, 91, 95, 96, 100, and 132. 

254See id at 24, 37, 59, 78, and 85. 

255See id. at 38. 

dwelling-secured commercial line of 

credit data would have helped the 

public better understand the risks posed 

to local housing markets, thereby 

helping enable the public to determine 

whether financial institutions were 

filling their obligations to serve the 

housing needs of the communities and 

neighborhoods in which they are 

located. 

In addition to improving the 

usefulness of the HMDA data, the 

Bureau believes that expanding the 

scope of Regulation C to include all 

dwelling-secured lines of credit would 

be necessary to prevent evasion of 

HMDA. From the perspective of an 

individual applicant or borrower, a 

closed-end mortgage loan and an openend line of credit are often 

interchangeable, as people seeking 

credit need to go through an application 

process of similar length and 

complexity. If the reporting 

requirements applied to closed-end 

mortgage loans, but not open-end lines 

of credit, unscrupulous financial 

institutions could attempt to evade 

HMDA’s requirements by persuading 

applicants to obtain an open-end line of 

credit instead of a closed-end mortgage 

loan.251 Feedback provided at the 2010 

Board Hearings suggested that lenders 

currently sell lines of credit to 

applicants seeking mortgage loans, even 

when an applicant was not initially 

interested in obtaining an open-end line 

of credit.252 Given sales practices such 

as these and the potential 

interchangeability of these products, the 

Bureau believes that there is a serious 

risk that financial institutions may steer 

applicants seeking a reportable loan, 

such as a subordinate lien purchasemoney loan or a home improvement 

loan, into an open-end line of credit to 

avoid the HMDA and Regulation C 

reporting requirements. This risk may 

be even greater should the Bureau 

determine that the proposed expansion 

to all closed-end mortgage loans, 

discussed in the section-by-section 

analysis to § 1003.2(d) above, is 

appropriate. Thus, the Bureau believes 

that some financial institutions would 

likely attempt to evade the requirements 

of Regulation C if the reporting 

requirements were not extended to 

open-end lines of credit, and that this 

adjustment is necessary and proper to 

prevent evasion of HMDA. 

For these reasons, the Bureau believes 

that expanding the reporting 

requirements of Regulation C to all 

dwelling-secured, open-end lines of 

credit would provide valuable 

information to the public and to public 

officials. Accordingly, the Bureau is 

proposing § 1003.2(o), which defines an 

open-end line of credit as a transaction 

that: Is an open-end credit plan as 

defined in § 1026.2(a)(20) of Regulation 

Z, but without regard to whether the 

credit is for personal, family, or 

household purposes, without regard to 

whether the person to whom credit is 

extended is a consumer, and without 

regard to whether the person extending 

credit is a creditor, as those terms are 

defined under Regulation Z, 12 CFR part 

1026; is secured by a lien on a dwelling, 

as defined under § 1003.2(f); is not a 

reverse mortgage under § 1003.2(q); and 

is not excluded from Regulation C. 

Proposed comment 2(o)–1 discusses the 

definition of open-end line of credit and 

provides several illustrative examples. 

This proposed comment also clarifies 

that financial institutions may rely on 

§ 1026.2(a)(20) and the related 

commentary in determining whether a 

transaction is open-end credit under 

§ 1003.2(o)(1). This Bureau solicits 

feedback regarding whether this 

proposed modification is appropriate, 

and whether this proposed modification 

would provide useful data to the public 

and otherwise serve the purposes of 

HMDA. The Bureau also solicits 

feedback regarding the costs, burdens, 

and compliance challenges that would 

be associated with expanding the 

transactional coverage of the regulation 

to include home-equity lines of credit 

and dwelling-secured commercial lines 

of credit. Importantly, the Bureau 

requests that commenters differentiate 

between home-equity lines of credit and 

dwelling-secured commercial lines of 

credit when providing feedback, as 

precise feedback about these different 

products would assist in the Bureau’s 

efforts to develop an effective and 

appropriately tailored final rule. 

As part of the Bureau’s efforts to 

reduce regulatory burden by aligning to 

existing industry or regulatory 

standards, it may be appropriate to 

define open-end line of credit by 

reference to the existing definition of 

open-end credit plan under Regulation 

Z, with modifications to conform to the 

differences in scope between 

Regulations C and Z, because the 

Bureau believes that definition is clear 

and is understood by industry. 

However, the Bureau solicits feedback 

regarding whether this proposed 

definition is appropriate and whether 

there are other clarifications that would 

facilitate compliance. Finally, as 

discussed in the section-by-section 

analysis to proposed § 1003.4(c)(3) 

below, the Bureau is also proposing 

modifications to § 1003.4(c)(3) to 

conform to the proposed modifications 

in this section. 

During the Small Business Review 

Panel process, several small entity 

representatives expressed concerns 

about requiring mandatory reporting of 

home-equity lines of credit,253 and 

about requiring reporting of dwellingsecured commercial credit.254 The 

Small Business Review Panel 

recommended that the Bureau solicit 

public comment on whether any types 

of dwelling-secured loans should be 

excluded from Regulation C’s data 

collection and reporting requirements 

and, if so, which types of loans should 

be excluded.255 Based on this feedback 

and consistent with the Small Business 

Review Panel’s recommendation, the 

Bureau solicits feedback regarding 

whether any types of dwelling-secured 

loans or lines of credit should be 

excluded from the requirements of the 

regulation, and which types of loans or 

lines of credit should be excluded. 

Proposed § 1003.2(o) is issued 

pursuant to the Bureau’s authority 

under section 305(a) of HMDA. For the 

reasons given above, the Bureau 

believes that including dwellingsecured lines of credit within the scope 

of the regulation is a reasonable 

interpretation of HMDA section 303(2), 

which defines ‘‘mortgage loan’’ to mean 

a loan which is secured by residential 

real property or a home improvement 

loan. The Bureau interprets that term to 

include dwelling-secured lines of credit, 

as those transactions are secured by 

residential real property, and they may 

be used for home improvement. As 

discussed above, information on homeequity lines of credit and dwellingsecured commercial lines of credit 

would have helped the public 

understand the risks posed to 

communities prior to the mortgage 

crisis. In addition, information on these 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51759 

256See Lisa Prevost, Retiring on the House: 

Reverse Mortgages for Baby Boomers, N.Y. Times, 

Feb. 13, 2014, at RE5, available at http://

www.nytimes.com/2014/02/16/realestate/reversemortgages-for-baby-boomers.html?_r=0. 

257See Consumer Fin. Prot. Bureau, Report to 

Congress on Reverse Mortgages 110–145 (June 28, 

2012), available at http://

files.consumerfinance.gov/a/assets/documents/

201206_cfpb_Reverse_Mortgage_Report.pdf. 

258 In July 2011, 8.1 percent of active Home 

Equity Conversion Mortgage loans were in default. 

By February 2012, the proportion in default had 

increased to 9.4 percent. See HUD Presentation, 

Nat’l Reverse Mortgage Lenders Ass’n Eastern 

Regional Meeting (Mar. 26, 2012). 

259See supra note 83. 

260See Susan Taylor Martin, Complexities of 

Reverse Mortgages Snag Homeowners, Tampa Bay 

Times, May 30, 2014; Kevin Burbach & Sharon 

Schmickle, As State Ages, Minnesota Braces for 

Problems With Risky Reverse-Mortgages, MinnPost 

(April 5, 2013), http://www.minnpost.com/

business/2013/04/state-ages-minnesota-bracesproblems-risky-reverse-mortgages. 

261See e.g., Press Release, Illinois Attorney 

General, Madigan Sues Two Reverse Mortgage 

Brokers For Using Deceptive Marketing to Target 

Continued 

types of transactions would have been 

helpful for public officials developing 

programs intended to mitigate the 

effects of delinquency, default, and 

foreclosure in many areas throughout 

the country. Thus, this information will 

enable the people and public officials of 

the United States to determine whether 

depository institutions are filling their 

obligations to serve the housing needs of 

the communities and neighborhoods in 

which they are located and to assist 

public officials in their determination of 

the distribution of public sector 

investments in a manner designed to 

improve the private investment 

environment. 

In addition, pursuant to section 305(a) 

of HMDA, the Bureau believes that this 

proposed requirement is necessary and 

proper to effectuate the purposes of 

HMDA and to prevent circumvention or 

evasion thereof. For the reasons given 

above, by requiring all financial 

institutions to report information 

regarding home-equity lines of credit 

and dwelling-secured commercial lines 

of credit, this proposed modification 

would ensure that the citizens and 

public officials of the United States are 

provided with sufficient information to 

enable them to determine whether 

depository institutions are filling their 

obligations to serve the housing needs of 

the communities and neighborhoods in 

which they are located. In addition, this 

proposed modification would assist 

public officials in their determination of 

the distribution of public sector 

investments in a manner designed to 

improve the private investment 

environment. Furthermore, as homeequity lines of credit and dwellingsecured commercial lines of credit are a 

common method of obtaining credit, 

this proposed modification would assist 

in identifying possible discriminatory 

lending patterns and enforcing 

antidiscrimination statutes. 

2(p) Refinancing 

HMDA does not expressly define 

‘‘refinancing.’’ Regulation C currently 

defines ‘‘refinancing’’ to mean a new 

obligation that satisfies and replaces an 

existing obligation by the same 

borrower, subject to two qualifications. 

In the first qualification, for coverage 

purposes, the existing obligation is a 

home purchase loan (as determined by 

the lender, for example, by reference to 

available documents; or as stated by the 

applicant), and both the existing 

obligation and the new obligation are 

secured by first liens on dwellings. In 

the second qualification, for reporting 

purposes, both the existing obligation 

and the new obligation are secured by 

liens on dwellings. For the reasons 

discussed below, the Bureau is 

proposing several modifications to 

clarify and simplify this definition. 

The Bureau has received feedback 

indicating that the current definition of 

refinancing should be clarified or 

modified to reduce burden and facilitate 

compliance. Comments received in 

response to the 2011 Regulation C 

Restatement argued that the definition 

of refinancing in Regulation C should be 

aligned with the definition in 

Regulation Z to streamline the 

regulatory requirements and reduce 

compliance burden. Other feedback 

suggests that the current two pronged 

definition of refinancing—one prong for 

institutional coverage and one prong for 

reporting—is also a source of confusion. 

While the FFIEC published several 

frequently asked questions to address 

some of these issues, it appears that 

some confusion remains. 

The Bureau believes that these issues 

would be best addressed by simplifying 

the definition and adding clarifying 

commentary. While financial 

institutions may often refer to the 

regulation to determine whether a 

reportable transaction is considered a 

refinancing, the Bureau does not believe 

that financial institutions often 

reevaluate institutional coverage. When 

an entity needs to evaluate institutional 

coverage, it currently needs to refer to 

the definition of refinancing and 

financial institution. The Bureau 

believes that moving the coverage prong 

to the definition of financial institution 

would simplify the regulation by 

placing the information needed to 

determine institutional coverage in one 

location. Thus, the Bureau is proposing 

§ 1003.2(p), which defines a refinancing 

to mean a covered loan in which a new 

debt obligation satisfies and replaces an 

existing debt obligation by the same 

borrower, in which both the existing 

debt obligation and the new debt 

obligation are secured by liens on 

dwellings. The Bureau solicits feedback 

regarding whether these proposed 

modifications are appropriate, and 

whether additional clarification is 

necessary. 

Proposed comment 2(p)–1 discusses 

the definition in § 1003.2(p) and 

provides illustrative examples of the 

definition. This proposed comment also 

clarifies that, if a borrower enters into a 

new debt obligation that modifies that 

terms of the existing debt obligation, but 

does not satisfy and replace the existing 

debt obligation, the new debt obligation 

is not a refinancing for purposes of 

§ 1003.2(p). Proposed comment 2(p)–2 

explains that, for purposes of 

determining whether the transaction is 

a refinancing under § 1003.2(p), both the 

new debt obligation and the existing 

debt obligation must be secured by liens 

on dwellings, and provides several 

illustrative examples. Proposed 

comment 2(p)–3 clarifies that the 

existing and new obligation must both 

be by the same borrower. This proposed 

comment provides examples of common 

scenarios that illustrate this proposed 

definition. 

2(q) Reverse Mortgage 

Currently, neither HMDA nor 

Regulation C expressly addresses 

reverse mortgages. However, reverse 

mortgages that are home purchase loans, 

home improvement loans, or 

refinancings under the current 

definitions in § 1003.2 are subject to the 

data collection and reporting 

requirements of Regulation C. 

Reverse mortgages became 

increasingly popular in the past decade, 

and many expect these products to 

become more popular in the coming 

years.256 While reverse mortgages may 

provide important benefits to 

homeowners, several concerns exist 

about the reverse mortgage market.257

For example, in recent years a 

substantial number of homeowners with 

reverse mortgages have defaulted.258 As 

discussed in part II.A above, many 

communities are struggling with the 

effects of foreclosure and default, which 

often contribute to a downward spiral in 

neighborhood property values.259 These 

struggles may be especially acute in 

communities with sizeable populations 

of homeowners eligible for reverse 

mortgage programs,260 and many State 

officials are focusing on harmful 

practices associated with reverse 

mortgage lending.261 Thus, information 


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51760 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

Seniors (Feb. 8, 2010), http://

www.illinoisattorneygeneral.gov/pressroom/2010_

02/20100208.html; Press Release, Washington State 

Office of the Attorney General, Ferguson Files 

Complaint Against Bellevue Insurance Agent and 

His Company for Targeting Elderly Widows (July 29, 

2013), http://www.atg.wa.gov/

pressrelease.aspx?id=31312. 262 ‘‘[R]everse mortgages constitute a product 

geared toward a specific protected class, the elderly. 

Thus, reporting them, (assuming an institution 

chooses to report them at all), as refinance or 

HELOC loans may mask discriminatory or abusive 

practices that are occurring to harm the elderly.’’ 

New York State Banking Department comment 

letter, Board of Governors of the Fed. Reserve 

System docket no. OP–1388, p. 5, submitted Aug. 

6, 2010. See also San Francisco Hearing, supra note 

133 (Remarks of Preston DuFauchard, 

Commissioner of the California Department of 

Corporations). 

on all reverse mortgages, regardless of 

purpose, would help communities 

understand the risks posed to local 

housing markets, thereby providing the 

citizens and public officials of the 

United States with sufficient 

information to enable them to determine 

whether financial institutions are filling 

their obligations to serve the housing 

needs of the communities and 

neighborhoods in which they are 

located. Furthermore, private 

institutions and nonprofit organizations, 

as well as local, State, and Federal 

programs, traditionally have facilitated 

or engaged in reverse mortgage lending. 

However, the proprietary market for 

reverse mortgages has substantially 

declined in recent years. Thus, requiring 

improved information regarding all 

reverse mortgages would assist public 

officials in their determination of the 

distribution of public sector investments 

in a manner designed to improve the 

private investment environment. In 

addition, State officials provided 

feedback during the 2010 Board 

Hearings that expanding the 

transactional coverage of Regulation C 

to include all reverse mortgages would 

assist in the identification of 

discriminatory and other potentially 

harmful practices.262 Thus, improved 

reverse mortgage data would assist in 

identifying possible discriminatory 

lending patterns and enforcing 

antidiscrimination statutes. 

Furthermore, the Bureau believes that 

the current applicability of Regulation C 

to reverse mortgages is a source of 

confusion and presents a compliance 

burden. For example, financial 

institutions are required to report 

information on a reverse mortgage that 

is a home purchase loan, home 

improvement loan, or a refinancing, but 

if the reverse mortgage is also a homeequity line of credit, the financial 

institution may report the information, 

but is not required to do so. In addition, 

the Bureau has received feedback that 

overlapping or inapplicable provisions 

in the current regulation contribute to 

this confusion. For example, a financial 

institution is required to report ratespread information under 

§ 1003.4(a)(12)(i) for a reverse mortgage 

that is a home purchase loan or a 

refinancing, but is not required to report 

this information for a reverse mortgage 

that also meets the definition of homeequity line of credit under § 1003.2, 

because home-equity lines of credit are 

exempt from the sections of Regulation 

Z related to the rate-spread calculation. 

Similarly, financial institutions are not 

required to report HOEPA status under 

§ 1003.4(a)(13) for reverse mortgages, 

because reverse mortgages are exempt 

from HOEPA. While the FFIEC has 

published FAQs to address much of this 

confusion, simplifying the applicability 

of Regulation C to reverse mortgages 

would further facilitate compliance. 

The Bureau believes that all of the 

concerns discussed above would be 

addressed by expanding the scope of 

reportable transactions to include all 

reverse mortgages, regardless of 

purpose, and by adding a new definition 

for reverse mortgages in § 1003.2. As 

part of the Bureau’s efforts to reduce 

regulatory burden by aligning to existing 

industry or regulatory standards, it may 

be appropriate to define reverse 

mortgages by reference to the existing 

Regulation Z definition because the 

Bureau believes that definition is clear 

and is understood by industry. 

Accordingly, the Bureau is proposing 

§ 1003.2(q), which would define reverse 

mortgage as a transaction that is a 

reverse mortgage transaction as defined 

in § 1026.33(a) of Regulation Z and that 

is not excluded from Regulation C 

pursuant to § 1003.3(c). The Bureau 

solicits feedback regarding whether this 

proposed definition is appropriate. 

Although the Bureau is not proposing 

commentary to this proposed definition, 

the Bureau solicits feedback regarding 

whether illustrative examples would 

help clarify the proposed definition or 

facilitate compliance. 

Proposed § 1003.2(q) is issued 

pursuant to the Bureau’s authority 

under section 305(a) of HMDA. For the 

reasons given above, the Bureau 

believes that including reverse 

mortgages within the scope of the 

regulation is a reasonable interpretation 

of HMDA section 303(2), which defines 

‘‘mortgage loan’’ to mean a loan which 

is secured by residential real property or 

a home improvement loan. The Bureau 

interprets that term to include reverse 

mortgages, as those transactions are 

secured by residential real property, and 

they may be used for home 

improvement. In addition, pursuant to 

its authority under section 305(a) of 

HMDA, the Bureau believes that this 

proposed adjustment is necessary and 

proper to effectuate the purposes of 

HMDA, to prevent circumvention or 

evasion thereof, and to facilitate 

compliance therewith. For the reasons 

given above, by requiring all financial 

institutions to report information 

regarding reverse mortgages, this 

proposed modification would ensure 

that the citizens and public officials of 

the United States are provided with 

sufficient information to enable them to 

determine whether depository 

institutions are filling their obligations 

to serve the housing needs of the 

communities and neighborhoods in 

which they are located. Furthermore, as 

reverse mortgages are a common method 

of obtaining credit, this proposed 

modification would assist in identifying 

possible discriminatory lending patterns 

and enforcing antidiscrimination 

statutes. 

Section 1003.3 Exempt Institutions 

and Excluded Transactions 

As part of the efforts to streamline and 

reduce burden, the Bureau proposes 

some limited reorganization of and 

modifications to Regulation C. As 

discussed below, the Bureau proposes to 

move and consolidate all excluded 

transactions into proposed § 1003.3(c). 

The Bureau proposes to modify the 

heading of § 1003.3 to reflect the 

addition of excluded transactions listed 

below. 

3(c) Excluded Transactions 

Regulation C currently excludes 

certain transactions from the 

requirements to collect and report data 

under HMDA. These exclusions are 

found in the regulation, appendix A, 

and commentary. Specifically, 

§ 1003.4(d) lists six types of transactions 

that are excluded from reporting 

requirements, including loans the 

financial institution originated or 

purchased when acting in a fiduciary 

capacity, such as a trustee; loans on 

unimproved land; temporary financing; 

the purchase of an interest in a pool of 

loans; the purchase solely of the right to 

service loans; and loans acquired as part 

of a merger or acquisition, or as part of 

the acquisition of all of the assets and 

liabilities of a branch office. In addition, 

section I.A.7 of appendix A instructs 

financial institutions not to report loans 

with a loan amount less than $500. 

Comment 1(c)–8 explains that an 

institution that purchases a partial 

interest in a loan does not report the 

transaction. Finally, comment Home 

purchase loan-3 explains that a loan to 

purchase property used primarily for 


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263See Small Business Review Panel Report at 42. 

264 Id. at 33 and 42. 

265 Id. 

266 Id. at 33. 

267 Id. 

268 Id. at 33 and 42. 

269 Id. 

agricultural purposes is not considered 

a home purchase loan. 

The Bureau proposes to consolidate 

the list of the excluded transactions in 

§ 1003.3(c). Commentary to the existing 

provisions would also be consolidated 

under § 1003.3(c). In addition to 

consolidating exclusions in one section, 

the Bureau also proposes additional 

guidance about the exclusions of loans 

secured by a lien on unimproved land 

and of temporary financing. 

Loans Secured by a Lien on 

Unimproved Land 

Industry stakeholders have expressed 

confusion over the exclusion of a loan 

secured by a lien on unimproved land. 

The Bureau proposes new comment 

3(c)(2)–1 to clarify whether a loan is 

secured by a lien on unimproved land. 

The proposed comment clarifies that a 

loan that is secured by vacant land 

under Regulation X § 1024.5(b)(4) is also 

considered a loan secured by a lien on 

unimproved land under Regulation C. 

The proposed comment explains that a 

loan is not secured by a lien on 

unimproved land if the financial 

institution knows or reasonably believes 

that within two years after the loan 

closes, a dwelling will be constructed or 

placed on the land using the loan 

proceeds. The Bureau solicits feedback 

on whether this comment is appropriate 

generally. 

Temporary Financing 

Industry stakeholders have requested 

additional guidance about the meaning 

of temporary financing that is excluded 

from HMDA data. The Bureau proposes 

new comments 3(c)(3)–1 and –2 to 

clarify the meaning of temporary 

financing. Proposed comment 3(c)(3)–1 

provides that a loan that is considered 

temporary financing under Regulation X 

§ 1024.5(b)(3) is also considered 

temporary financing under Regulation 

C. Proposed comment 3(c)(3)–1 explains 

that temporary financing refers to loans 

that are designed to be replaced by 

permanent financing at a later time. For 

example, a bridge loan or swing loan is 

considered temporary financing. A 

construction loan with a term of two 

years or more to construct a new 

dwelling, other than a loan to a bona 

fide builder (a person who regularly 

constructs dwellings for sale or lease), is 

not considered temporary financing. 

Questions have also been raised about 

permanent financing of construction 

activities. Proposed comment 3(c)(3)–2 

explains that a loan that is designed to 

be converted to permanent financing by 

the same financial institution or a loan 

that is used to finance transfer of title to 

the first user is not temporary financing. 

Proposed comment 3(c)(3)–2 clarifies 

that if an institution issues a 

commitment for permanent financing, 

with or without conditions, the loan is 

not considered temporary financing. 

The Bureau solicits feedback on 

whether this commentary is appropriate 

generally. 

As part of the reorganization 

discussed above, the Bureau is also 

proposing to move comment 4(d)–1 to 

proposed comment 3(c)(6)–1, comment 

1(c)–8 to proposed comment 3(c)(8)–1, 

and comment Home purchase loan-3 to 

comment 3(c)(9)–1. The Bureau is also 

proposing nonsubstantive modifications 

to the comments. The Bureau is also 

proposing new comment 3(c)(1)–1 to 

provide examples of what is meant by 

a financial institution acting in a 

fiduciary capacity and new comment 

3(c)(4)–1 to provide examples of what is 

meant by the purchase of an interest in 

a pool of loans. The examples in 

proposed comments 3(c)(1)–1 and 

3(c)(4)–1 are currently included in 

§ 1003.4(d)(1) and (4), respectively. The 

Bureau solicits feedback on whether the 

proposed reorganization and 

modifications are appropriate generally. 

Section 1003.4 Compilation of 

Reportable Data 

4(a) Data Format and Itemization 

Section 1003.4(a) requires financial 

institutions to collect and record 

specific information about covered 

loans, applications for covered loans, 

and purchases of covered loans. As 

discussed in detail below, the Bureau 

proposes several changes to § 1003.4(a) 

to implement the Dodd-Frank Act 

amendments to HMDA. In addition, the 

Bureau proposes modifications to 

Regulation C to reduce redundancy, 

provide greater clarity, and make the 

data more useful. 

The proposed expanded HMDA data 

would provide more fulsome 

information about underwriting, 

pricing, loan features, and the property 

securing each reported loan and 

application. The additional information 

would enable the public and public 

officials to better evaluate whether 

financial institutions are serving the 

housing needs of their communities and 

better identify neighborhoods that could 

benefit from public or private sector 

investment. More detail might also shed 

light on the demand for certain types of 

loans in certain areas, and whether that 

demand is being met. In addition, the 

expanded data would assist in 

identifying possible discriminatory 

lending patterns and facilitate fair 

lending analysis. It may also assist the 

public and public officials in identifying 

problematic trends in the mortgage 

market. The proposal also would make 

technical improvements that would 

facilitate reporting by better aligning the 

information collected pursuant to 

HMDA with financial institutions’ 

business practices and with other 

regulatory requirements. The Bureau 

solicits feedback on whether the 

proposed additions to HMDA data are 

appropriate. The Bureau also seeks 

comment on whether including 

additional or different information in 

the HMDA data, such as an indication 

of whether the loan is subject to 

mortgage insurance, would better 

effectuate HMDA’s purposes. 

As discussed in part II.B above, the 

Bureau is proposing alignment of the 

HMDA data requirements, to the extent 

practicable, with MISMO/ULDD data 

standards. During the Small Business 

Review Panel process, the small entity 

representatives’ feedback on adopting 

an industry data standard depended on 

whether the small entity representative 

sells loans in the secondary market, or 

whether their Loan Origination System 

vendor’s system is aligned with industry 

data standards.263 For example, the 

small entity representatives whose 

financial institutions participate in the 

secondary market or have more 

automated processes generally stated 

that the adoption of a data standard 

would help keep costs low and allow for 

more efficient collection of data.264 On 

the other hand, other small entity 

representatives were not familiar with 

MISMO and expressed concern that the 

adoption of a new data standard would 

require additional employee training 

and other process adjustments to come 

into compliance, resulting in increased 

costs.265 A few small entity 

representatives indicated that they 

would continue to collect and maintain 

the data manually and would realize 

few benefits of the proposed data 

standard.266 In addition, some small 

entity representatives expressed 

concerns regarding implementation of 

the data standard.267 For example, a few 

small entity representatives expressed 

concern that there would be challenges 

in adapting MISMO to business and 

commercial loans, and potential 

penalties for errors.268 One small entity 

representative recommended making 

adoption of MISMO optional.269 The 

Small Business Review Panel 


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270 Id. at 43. 

271Also see part II.C. above for a discussion of the 

Bureau’s approach to protecting applicant and 

borrower privacy in HMDA data made available to 

the public while fulfilling the public disclosure 

purposes of the statute. 

272FFIEC, CRA/HMDA Reporter 5 (Dec. 2010), 

http://www.ffiec.gov/hmda/pdf/10news.pdf. 

273 12 U.S.C. 2803(b)(6)(G). 

recommended that the Bureau seek 

comment in the proposed rule from 

small financial institutions about 

whether they, or their vendors, use 

MISMO-compliant data definitions and 

standards, and the potential effect on 

small financial institutions of alignment 

of the HMDA data requirements with 

MISMO data standards.270 Consistent 

with the Small Business Review Panel’s 

recommendations, the Bureau solicits 

feedback on these issues. 

As discussed above in Part II.C, in 

considering proposed changes to data 

required to be collected under 

§ 1003.4(a), the Bureau assessed the 

potential impacts of the proposals on 

the privacy interests of applicants and 

borrowers.271 The Bureau has 

considered applicant and borrower 

privacy in developing its proposals to 

implement the Dodd-Frank amendments 

and the additional data points and 

modifications to existing data points 

proposed. The Bureau’s proposals are 

intended to ensure that data compiled 

and reported by financial institutions 

fulfill HMDA’s purposes while 

appropriately protecting applicant and 

borrower privacy. 

The Bureau proposes modifications to 

§ 1003.4(a), comment 4(a)–1, and new 

commentary to clarify the reporting 

requirements. In particular, as discussed 

below, the proposed modifications 

address a financial institution’s 

responsibilities when reporting a single 

transaction involving more than one 

institution and reporting repurchased 

loans. In addition, the proposed 

modifications reflect substantive 

changes concerning reporting requests 

for preapproval discussed below in the 

section-by-section analysis of proposed 

§ 1003.4(c)(2). As discussed in the 

section-by-section analysis to each 

proposed data point below, the Bureau 

is also proposing to modify and 

reorganize the current instructions in 

part I of appendix A to provide new 

technical instructions for each data 

point to facilitate compliance. 

Reporting Transactions Involving More 

Than One Institution 

Currently, commentary to § 1003.1(c) 

describes the ‘‘broker rule,’’ which 

explains a financial institution’s 

reporting responsibilities when a single 

transaction involves more than one 

institution. Industry representatives 

have expressed confusion about this 

commentary and urged the Bureau to 

clarify the reporting responsibilities 

when more than one institution is 

involved in a transaction. To address 

these concerns, the Bureau proposes 

amendments to § 1003.4(a) and its 

commentary. In particular, the proposed 

amendments clarify that only one 

financial institution should report each 

transaction as an origination or 

application. The proposed amendments 

clarify that the financial institution that 

makes the credit decision prior to 

closing, or prior to when the loan would 

have closed if the application does not 

result in an origination, reports the 

transaction as an origination or 

application, respectively. 

Accordingly, the Bureau proposes to 

modify § 1003.4(a) to specify that a 

financial institution shall collect data 

regarding originations of covered loans 

on which it makes a credit decision. In 

addition, the Bureau proposes new 

comments 4(a)–4 and –5 to provide 

further clarification about the reporting 

responsibilities when more than one 

institution is involved in a transaction. 

The proposed amendments modify and 

consolidate current comments 1(c)–2 

through 7, 4(a)(1)–iii, and 4(a)(1)–iv. 

Proposed comment 4(a)–4 explains that 

each origination and application is only 

reported by one financial institution as 

an origination or application. If more 

than one institution was involved in an 

origination of or application for a 

covered loan, the financial institution 

that made the credit decision before the 

loan closed or would have closed 

reports the origination. In the case of an 

application for a covered loan that did 

not result in an origination, the financial 

institution that made the credit decision 

or that was reviewing the application 

when the application was withdrawn or 

closed for incompleteness reports the 

application. In certain circumstances, 

one financial institution would report 

the transaction as an origination and 

another financial institution would 

report the transaction as a purchase. 

Whether the loan closed or would have 

closed in the institution’s name is not 

relevant for HMDA reporting. Proposed 

comment 4(a)–4 provides several 

illustrative examples. Proposed 

comment 4(a)–5 discusses reporting 

responsibilities when a financial 

institution makes a credit decision 

through the actions of an agent and 

provides an illustrative example. The 

Bureau solicits feedback on whether the 

proposed amendments to § 1003.4(a) 

and associated commentary are 

appropriate generally. 

Repurchased Loans 

The proposal would add new 

comments 4(a)(8)–4 and 4(a)–6 to 

provide guidance on reporting 

repurchased loans. The Bureau 

understands that there has been 

confusion about whether the repurchase 

of a loan that a financial institution 

originally sold to another financial 

institution or secondary market entity, 

such as when the investor requires the 

financial institution to buy back the 

loan because it does not meet certain 

conditions, is reportable under 

Regulation C. An FFIEC publication in 

2010 noted that repurchases qualify as 

purchases for Regulation C, and 

provided guidance on how and when to 

report such purchases.272 Proposed 

comments 4(a)(8)–4 and 4(a)–6 would 

provide that when a covered loan that 

a financial institution initially 

originated and sold to another financial 

institution or secondary market entity is 

repurchased by the originating financial 

institution within the same calendar 

year as it was originated, the originating 

financial institution should not report it 

as sold, and the purchasing financial 

institution should not report it as 

purchased. It would also provide that if 

the repurchase happens in a subsequent 

calendar year, the purchase and 

repurchase should be reported in their 

respective calendar years. It would also 

provide additional guidance for 

financial institutions who would be 

required to report on a quarterly basis 

under proposed § 1003.5(a)(1)(ii). It 

would also provide several illustrative 

examples. The Bureau solicits feedback 

generally on how repurchases should be 

treated for purposes of Regulation C. 

Specifically, the Bureau solicits 

feedback on whether repurchases 

should be reported under Regulation C, 

and how they should be handled for 

financial institutions required to report 

on a quarterly basis. 

4(a)(1)(i) 

As amended by section 1094(3)(A)(iv) 

of the Dodd-Frank Act, HMDA section 

304(b)(6)(G) authorizes the Bureau to 

require a universal loan identifier, as it 

may determine to be appropriate.273

Existing § 1003.4(a)(1) requires financial 

institutions to report an identifying 

number for each loan or loan 

application reported. Pursuant to 

existing comment 4(a)(1)–4, the number 

must be unique within the institution, 

and financial institutions are strongly 

encouraged not to use the applicant’s or 

borrower’s name or Social Security 

number. According to the instructions 

in appendix A, the loan identifier can be 

any alphanumeric combination of the 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51763 

274A paper by Linda F. Powell and John A. 

Bottega discussing the Legal Entity Identifier 

describes a framework for the attributes of a robust 

identifier that may also be useful in discussing loan 

identifiers; the attributes that they identified 

include uniqueness, extensibility, reliability, 

coverage, persistence, and neutrality. John A. 

Bottega & Linda F. Powell, Creating a Linchpin for 

Financial Data: Toward a Universal Legal Entity 

Identifier (2011), http://www.federalreserve.gov/

pubs/feds/2011/201107/201107pap.pdf. 275MISMO, Unique Loan Identifier Development 

Workgroup White Paper (2013), http:// 

www.mismo.org/files/BrochuresandPresentations/

DWGUniqueLoanIDWhitePaper2.pdf. 276 Id. at 5. 277Matthew McCormick & Lynn Calahan, U.S. 

Dep’t of Treas. Office of Fin. Research, Common 

Ground: The Need for a Universal Mortgage Loan 

Identifier (Dec. 5, 2013), http://www.treasury.gov/ 

initiatives/ofr/research/Documents/OFRwp0012_

McCormickCalahan_CommonGround

NeedforUniversalMortgageIdentifier.pdf. 

278 Id. at 14–15. 

279 Id. at 2–11. 

280 Id. 

281Under the Bureau’s proposal, new 

§ 1003.4(a)(1)(i) would address the universal loan 

identifier, while new § 1003.4(a)(1)(ii) would 

address the date of application, which is discussed 

below. 

institution’s choosing, up to 25 

characters. The Bureau proposes to 

replace Regulation C’s existing loan 

identifier with a new self-assigned loan 

or application identifier that would be 

unique within the industry, would be 

used by all financial institutions that 

report on the loan or application for 

HMDA purposes, and could not be used 

to directly identify the applicant or 

borrower. Although the term 

‘‘universal’’ can be interpreted in many 

ways, the Bureau believes that this 

identifier would be a ‘‘universal loan 

identifier’’ within the meaning of 

HMDA section 304(b)(6) because it 

would be unique within the industry 

and would be used throughout the life 

of the loan. 

The flexibility of § 1003.4(a)(1)’s 

current identifier requirement has raised 

concerns. To the extent that financial 

institutions include Social Security 

numbers or other personal identifiers in 

their loan identifiers, they may be 

unnecessarily revealing sensitive 

applicant or borrower information. 

Although the commentary instructs 

financial institutions to select ‘‘unique’’ 

identifiers, it does not provide guidance 

on how this should be done. Some 

financial institutions may, for example, 

be recycling identifiers from year to 

year. 

Because § 1003.4(a)(1) allows 

financial institutions that purchase 

previously reported loans to assign a 

new identifier to the loan, data users 

cannot link HMDA data that different 

financial institutions report for the same 

loan. Different identifiers may be 

assigned to the same mortgage loan by 

the financial institution that initially 

reports it at origination and a financial 

institution that subsequently reports it 

as a purchased loan. Even a single 

financial institution may assign 

different identifiers to the same loan for 

different purposes, such as for 

origination, sale of the loan, and 

reporting HMDA data. At present, there 

is no system or process to synchronize 

those identifiers with respect to each 

loan. This makes it difficult to track an 

application or loan over its life and to 

accurately identify lending patterns. 

In developing this proposal, the 

Bureau has consulted with a variety of 

stakeholders that have been considering 

these issues and the need for a more 

robust mortgage loan identifier.274 In 

September 2012, MISMO created a 

Unique Loan Identification Data 

Working Group, which released a 2013 

white paper that discusses possibilities 

for a unique loan identifier.275 The 

group considered a number of options, 

including using an existing loan 

identification number, developing a 

new identifier from loan information 

such as lien priority and loan type, and 

attempting to standardize the syntax 

and format of loan identifiers.276

In December 2013, the U.S. 

Department of the Treasury’s Office of 

Financial Research (OFR) released a 

working paper discussing the need for a 

universal mortgage identifier.277 OFR 

strongly supports the establishment of a 

single, cradle-to-grave, universal 

mortgage identifier that cannot be 

linked to individuals using publicly 

available data.278 OFR’s working paper 

explains that such an identifier would 

allow for better integration of the 

fragmented data produced by the U.S. 

mortgage finance system, resulting in 

significant benefits to regulators and 

researchers.279 OFR recognizes that 

there are significant challenges to 

designing a universal identifier, 

including privacy concerns and 

questions about the timing of 

assignment, the structure and 

governance of any entities issuing 

identifiers or coordinating them, what 

parties should have access to the 

identifier, the documents that should or 

could carry the identifier, how to ensure 

use of the identifier throughout the 

mortgage life cycle, how to ensure 

identifier integrity, and how to develop 

mechanisms to link simultaneous or 

sequential liens.280

The Bureau is encouraged by the 

progress that is being made in this 

complex area and will continue to work 

with industry and other agencies and 

stakeholders to assess how the HMDA 

loan identifier relates to broader 

mortgage identification needs. Many of 

the mortgage identification options 

considered by MISMO and OFR would 

require significant investment of time 

and money and substantial coordination 

among all relevant stakeholders to 

develop. Although the Bureau is not 

proposing or seeking comment on a 

mortgage registry or vault at this time, 

the Bureau will continue to collaborate 

with industry groups and other 

government offices that are considering 

these possibilities, which could 

potentially serve a range of purposes. 

To address the need for a unique loan 

identifier that can be used for HMDA 

reporting throughout the life of the loan, 

the Bureau proposes to strengthen 

Regulation C’s self-assigned loan 

identifier by substituting proposed 

§ 1003.4(a)(1)(i) for the identification 

requirement in existing 

§ 1003.4(a)(1).281 Proposed 

§ 1003.4(a)(1)(i) requires entities to 

provide a universal loan identifier (ULI) 

for each covered loan or application that 

can be used to retrieve the covered loan 

or application file. For covered loans or 

applications for which any financial 

institution has previously reported a 

ULI under this part, proposed 

§ 1003.4(a)(1)(i) provides that the ULI 

shall consist of the ULI that was 

previously reported. For all other 

covered loans and applications, 

proposed § 1003.4(a)(1)(i)(A) provides 

that the ULI shall begin with the 

financial institution’s Legal Entity 

Identifier described in § 1003.5(a)(3). 

Proposed § 1003.4(a)(1)(i)(B) provides 

that the ULI shall follow that Legal 

Entity Identifier with up to 25 

additional characters to identify the 

covered loan or application, which (1) 

may be letters, numerals, symbols, or a 

combination of any of these; (2) must be 

unique within the financial institution; 

and (3) must not include any 

information that could be used to 

directly identify the applicant or 

borrower. 

Two proposed comments to 

§ 1003.4(a)(1)(i) would replace existing 

comment 4(a)(1)–4. Proposed comment 

4(a)(1)(i)–1 explains the uniqueness 

requirement in proposed 

§ 1003.4(a)(1)(i)(B). Only one ULI 

should be assigned to any particular 

application or covered loan, and each 

ULI should correspond to a single 

application and, if the application is 

approved and a loan is originated, the 

ensuing loan. A financial institution 

shall use a ULI that was reported 

previously to refer only to the same loan 

or application for which the ULI was 

used previously or to a loan that ensues 

from an application for which the ULI 


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51764 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

282See Small Business Review Panel Report at 39. 

283 Id. 

284See id. 

285Announcing Draft Federal Information 

Processing Standard (FIPS) 202, SHA–3 Standard, 

79 FR 30549 (May 28, 2014). Additional 

information on secure hash algorithms is available 

on the NIST Web site at http://csrc.nist.gov/groups/ 

ST/toolkit/secure_hashing.html. 

286See generally Meltem So ̈nmez Turan et al., 

NIST Special Publication 800–132: 

Recommendation for Password-Based Key 

Derivation, Part 1: Storage Applications (Dec. 2010), 

available at http://csrc.nist.gov/publications/

nistpubs/800-132/nist-sp800-132.pdf; RSA 

Laboratories, PKCS #5 v.2.1: Password-Based 

Cryptography Standard (Oct. 5, 2006), ftp://

ftp.rsasecurity.com/pub/pkcs/pkcs-5v2/pkcs5v2_

1.pdf. 

was used previously. For example, if a 

loan origination was previously 

reported for HMDA purposes with a 

ULI, a financial institution would report 

the later purchase of the loan using the 

same ULI. A financial institution may 

not, however, report an application for 

a covered loan in 2030 using a ULI that 

was reported for a covered loan that was 

originated in 2020. Similarly, 

refinancings or applications for 

refinancing should be assigned a 

different ULI than the loan that is being 

refinanced. A financial institution with 

multiple branches must ensure that its 

branches do not use a single ULI to refer 

to multiple covered loans or 

applications. 

Proposed comment 4(a)(1)(i)–2 

explains that information that could be 

used to directly identify the applicant or 

borrower includes but is not limited to 

the applicant’s or borrower’s name, date 

of birth, Social Security number, official 

government-issued driver’s license or 

identification number, alien registration 

number, government passport number, 

or employer or taxpayer identification 

number. Pursuant to proposed 

§ 1003.4(a)(1)(i)(B)(3), a financial 

institution may not include information 

of this nature in the identifier that it 

assigns for a covered loan or 

application. 

The Bureau believes that these 

changes would strengthen the existing 

identifier in three significant ways. 

First, by providing additional 

instructions relating to uniqueness and 

combining the financial institution’s 

loan-specific identifier with its Legal 

Entity Identifier, the proposed rule 

would ensure that the resulting ULI is 

unique in the entire universe of HMDA 

loans and applications. Second, by 

requiring financial institutions that 

purchase loans to report the ULI that 

was previously reported, the proposed 

rule would allow the Bureau and other 

regulators to track HMDA reporting that 

is done over time by different financial 

institutions for a single loan, furthering 

all of HMDA’s purposes. Third, to 

protect the privacy of borrowers and 

applicants, the proposal replaces the 

commentary that discourages using 

Social Security numbers and names in 

identifiers with regulation text that 

prohibits using information that could 

be used to directly identify the borrower 

or applicant. This is consistent with the 

recommendations of the Small Business 

Review Panel, which specifically urged 

the Bureau to consider and seek 

comment on prohibiting the use of 

information that could be used to 

directly identify an applicant or 

borrower as any component of a loan 

identifier.282 Because the identifier is 

self-assigned, the Bureau believes that 

the burden associated with these 

changes would be fairly minimal. 

The Bureau solicits feedback on 

whether the proposed changes to the 

loan or application identifier used for 

HMDA reporting purposes are 

appropriate, as well as feedback on 

other possible approaches to identifying 

loans and applications in HMDA 

reporting. This solicitation of feedback 

is consistent with the Small Business 

Review Panel’s recommendation that 

the Bureau seek comment on each of the 

unique identifiers under consideration 

that were included in the Dodd-Frank 

Act.283 Consistent with the Small 

Business Review Panel’s 

recommendations, the Bureau 

specifically solicits comments on 

whether the privacy limitations 

provided in § 1003.4(a)(1)(i)(B) and 

explained in proposed comment 

4(a)(1)(i)–2 are sufficient to protect 

applicant and borrower privacy, and 

whether the identifier should be 

required for all entries on the loan 

application register (as under existing 

§ 1003.4(a)(1) and as proposed here) or 

only for loan originations and 

purchases.284 The Bureau also seeks 

comment on whether 25 characters is 

the appropriate maximum number of 

characters for financial institutions to 

use in identifying the covered loan or 

application. 

One alternative that the Bureau is 

considering is requiring financial 

institutions to use a secure hash 

algorithm to encrypt their ULIs prior to 

submission to the Bureau or the 

appropriate Federal agency. A hash 

function is any algorithm that maps data 

of arbitrary length to data of a fixed 

length. A secure hash algorithm is 

designed to provide a measure of 

encryption by being non-invertible 

(meaning that the original value cannot 

be derived from the hash) and to resist 

‘‘collisions’’ (meaning that two different 

values will not hash to the same result). 

The Bureau could, for example, require 

use of Secure Hash Algorithm (SHA) 3– 

224 as specified by the National 

Institute of Standards and Technology 

(NIST) in Federal Information 

Processing Standard 202 285 or another 

hash algorithm specified by the NIST, 

such as SHA–224. Each of these 

algorithms is a one-way hash function 

that can process a message (in this case, 

the institution’s Legal Entity Identifier 

merged with an identifier for the loan or 

application) to produce a representation 

called a message digest. Requiring 

financial institutions to report the 

resulting message digest could ensure 

that the identifier produced is a 

consistent length and could also mask 

any residual information about the loan 

or borrower that might be embedded in 

the underlying identifier. 

If the Bureau were to require hashing, 

it could provide tools that financial 

institutions could use to do the hashing, 

as well as details that financial 

institutions or their service providers 

could use should they wish to integrate 

the hash algorithm into their own 

systems. The Bureau invites comment 

on whether the Bureau should require 

financial institutions to apply a secure 

hash algorithm to their Legal Entity 

Identifier plus the identifier for the loan 

or application and then report the 

resulting message digest as the ULI, in 

lieu of reporting an unhashed ULI. If 

hashing is recommended, the Bureau 

also invites comment on how such 

hashing should be done, including 

whether a random value should be 

added prior to hashing through a 

technique called ‘‘salting’’ to enhance 

the encryption.286

4(a)(1)(ii) 

The Bureau is proposing technical 

corrections and minor wording changes 

to § 1003.4(a)(1), which requires 

reporting of the date the application was 

received. Regulation C requires 

institutions to report the date the 

application was received, and comment 

4(a)(1)–1 clarifies that institutions may 

report either the date of receipt or the 

date shown on the application form to 

provide greater flexibility for financial 

institutions but maintain reliable 

application date data. 

The proposal moves the requirement 

regarding reporting of the date the 

application was received to new 

§ 1003.4(a)(1)(ii) to provide a separate 

citation from loan identifier, which is 

discussed above. Proposed 

§ 1003.4(a)(1)(ii) provides for reporting 

of the date the application was received 

or the date shown on the application 

form, consistent with comment 4(a)(1)– 


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287See Small Business Review Panel Report at 39. 

288Small Business Review Panel Report at 40. 289See 41 FR 23931 (June 14, 1976). 

290Sen. Robert Taft, Jr.’s amendment to the draft 

bill addressed the requirement to collect home 

improvement loan data: ‘‘The importance of these 

loans to a neighborhood’s health and survival is 

obvious, particularly since many of the 

neighborhoods in question have a larger number of 

older homes in need to repair.’’ 121 Cong. Rec. 

S1281, 13192 (daily ed. July 21, 1975) (statement of 

Sen. Robert Taft, Jr.). 

291See Randy E. Ryker, Louis G. Pol, & Rebecca 

F . Guy, Racial Discrimination as a Determinant of 

Home Improvement Loans, 21 Urban Studies 177, 

179 (May 1984). 

292 ‘‘The average rejection rate for home 

improvement loan applications is much higher than 

that for home purchase loans—30% versus 15%. 

Also applicants for home improvement loans have 

lower incomes and live in census tracts with lower 

housing values than applicants for home purchase 

loans.’’ Emily Y. Lin & Michelle J. White, 

Bankruptcy and the Market for Mortgage and Home 

Improvement Loans, 50 Journal Of Urban 

Economics 138, 153 (July 2001). 

1 and instructions in appendix A. 

Existing comments 4(a)(1)–1, –2, –3, and 

–5 related to application date would be 

renumbered as comments 4(a)(1)(ii)–1 

through –4. Comment 4(a)(1)–2 related 

to applications received from brokers 

would be revised to use terminology 

consistent with proposed comment 

4(a)–4 and the requirement to report 

application channel information under 

§ 1003.4(a)(33). Finally, the proposal 

makes technical corrections and minor 

wording changes to appendix A. 

Proposed instruction 4(a)(1)(ii)–1 

provides for reporting the date the 

application was received or the date 

shown on the application form by year, 

month, and day. 

After the Bureau’s 2011 Regulation C 

Restatement was published, the Bureau 

received a comment from a stakeholder 

requesting more flexibility in reporting 

the date the application was received. 

The stakeholder asserted that 

differences in definitions of application 

under various regulations create 

difficulty with determining an exact 

date for purposes of Regulation C. 

During the Small Business Review Panel 

process, small entity representatives 

expressed concern about reporting 

application date for commercial 

loans.287 The Small Business Review 

Panel recommended that the Bureau 

consider seeking public comment on 

providing additional guidance on how 

HMDA reporters may determine the 

application date.288 Based on this 

feedback and consistent with the 

recommendation of the Small Business 

Review Panel, the Bureau solicits 

feedback on whether additional 

guidance should be provided on how 

HMDA reporters may determine the 

application date. 

4(a)(2) 

HMDA section 304(b)(1) requires 

financial institutions to report ‘‘the 

number and dollar amount of mortgage 

loans which are insured under Title II 

of the National Housing Act or under 

Title V of the Housing Act of 1949 or 

which are guaranteed under chapter 37 

of Title 38.’’ Section 1003.4(a)(2) 

currently implements this requirement 

by requiring financial institutions to 

report the type of loan or application. 

Paragraph I.A.3 in appendix A further 

instructs lenders to identify the type of 

loan or application as conventional, 

FHA-insured, VA-guaranteed, or FSA/

RHS-guaranteed. The Bureau’s proposal 

retains the current reporting 

requirement, but incorporates the text of 

the statutory provision, with conforming 

modifications, directly into Regulation 

C. 

Regulation C has always required 

financial institutions to report 

information regarding the type of loan 

or application.289 Section 1003.4 itself 

does not, however, expressly 

incorporate the loan types provided for 

in the statute. The Bureau believes that 

reflecting the statutory text in § 1003.4 

will facilitate future modifications to the 

instructions in appendix A, which in 

turn will add clarity and reduce burden. 

As explained above, the Bureau is also 

proposing a new term, ‘‘covered loan,’’ 

that includes all types of loans subject 

to Regulation C in order to simplify the 

regulation and clarify its requirements. 

The proposal revises section 

1003.4(a)(2) to conform to the use of this 

term. Accordingly, the Bureau’s revised 

§ 1003.4(a)(2) provides for reporting 

whether the covered loan or application 

is insured under title II of the National 

Housing Act, is insured under title V of 

the Housing Act of 1949, or is 

guaranteed under chapter 37 of title 38 

of the United States Code. The Bureau 

solicits feedback regarding whether its 

proposed modifications are appropriate. 

The Bureau is proposing to revise the 

technical instructions related to 

§ 1003.4(a)(2) in appendix A. Proposed 

instruction 4(a)(2)–1 provides that a 

financial institution completing the loan 

application register must select from 

among four codes to indicate the type of 

covered loan or application, depending 

on whether the loan is conventional 

(Code 1), FHA (Code 2), VA (Code 3), or 

USDA Rural Development (Code 4). 

Proposed instruction 4(a)(2)–1.a 

specifies that Code 2 must be used if the 

covered loan or application is insured 

under title II of the National Housing 

Act. Proposed instruction 4(a)(2)–1.b 

specifies that Code 3 must be used if the 

covered loan or application is 

guaranteed under chapter 37 of title 38 

of the United States Code. Proposed 

instruction 4(a)(2)–1.c specifies that 

Code 4 must be used if the covered loan 

or application is insured under title V 

of the Housing Act of 1949. Finally, 

proposed instruction 4(a)(2)–1.d 

specifies that Code 1 must be used if the 

covered loan or application is not 

insured under title II of the National 

Housing Act, not insured under title V 

of the Housing Act of 1949, and not 

guaranteed under chapter 37 of title 38 

of the United States Code. 

4(a)(3) 

HMDA section 304(b) requires the 

disclosure of the number and dollar 

amount of mortgage loans and home 

improvement loans, among other things. 

Section 1003.4(a)(3) of Regulation C 

requires financial institutions to record 

the purpose of the loan or application. 

Appendix A to Regulation C paragraph 

I.A.5 instructs financial institutions to 

identify the purpose of a loan or 

application as either for home purchase, 

home improvement, or refinancing. The 

Dodd-Frank Act did not amend the 

sections of HMDA relevant to the loan 

purpose reporting requirement. While 

the Bureau is only proposing technical 

modifications to § 1003.4(a)(3) to 

conform to the addition of closed-end 

mortgage loans, the Bureau is seeking 

comment regarding whether the loan 

purpose reporting requirement should 

be modified with respect to home 

improvement loans and cash-out 

refinancings. 

Home Improvement Loans 

The Bureau has received feedback 

indicating that the current requirement 

to identify whether a loan or application 

is for home improvement purposes is a 

substantial compliance burden. As 

discussed in part II.A above, the 

inability to obtain credit to repair and 

maintain homes was one of the major 

factors driving urban deterioration in 

the 1970s. As a result, Congress was 

particularly concerned about access to 

home improvement credit when HMDA 

was enacted.290 Home improvement 

loans were traditionally used for older 

properties, and community groups and 

public officials needed data on a 

neighborhood’s ability to maintain the 

quality of existing housing stock.291

Issues in this subset of the market have 

remained over time, as some studies 

suggest that home improvement lending 

practices may be a concern in certain 

neighborhoods and for certain 

borrowers.292

Although home improvement data 

was a central concern when HMDA was 


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293See Fed. Reserve Bulletin, Changes in Family 

Finances from 1983 to 1989: Evidence from the 

Survey of Consumer Finances 13 (Jan. 1992). See 

also David Evans & Richard Schnakebsee, Paying 

With Plastic, Massachusetts Institute of Technology 

Press 98–100 (1991). 

294See Fed. Reverse Bulletin, Changes in Family 

Finances from 1983 to 1989: Evidence from the 

Survey of Consumer Finances 13 (Jan. 1992); Fed. 

Reserve Bulletin, Changes in Family Finances from 

1989 to 1992: Evidence from the Survey of 

Consumer Finances 874–875 (Oct. 1994). 

295 In 2012, out of 18,691,551 total HMDA 

records, only 814,857 had a home improvement 

purpose. 

296See, e.g., Chicago Hearing, supra note 137. 

297See Small Business Review Panel Report at 24. 

298See id. at 40. 

299See e.g., San Francisco hearing, supra note 

133; Chicago Hearing, supra note 137. 

300See Chris Mayer & Karen Pence, Subprime 

Mortgages: What, Where, and to Whom?, Bd. of 

Governors of the Fed. Reserve Sys., Finance and 

Economics Discussion Series 2008–29 at 10 (2008). 

301For example, a recent study suggests that 

Texas’s strict restrictions on cash-out home-equity 

lending helped protect Texas homeowners from 

several of the harms stemming from the mortgage 

crisis. See Anil Kumar & Edward C. Skelton, Did 

Home Equity Restrictions Help Keep Texas 

Mortgages from Going Underwater?, Fed. Reserve 

Bank of Dallas (Third Quarter 2013). 

302See Fannie Mae, Fannie Mae Single-Family 

Selling Guide, Sections B2–1.2–02 and B2–1.2–03 

(June 24, 2014), https://www.fanniemae.com/

content/guide/sel062414.pdf. See Freddie Mac, 

Single-Family Seller/Servicer Guide, Vol. I, 

Chapters 24.6 and 24.7, http://

www.freddiemac.com/sell/guide/. 

originally enacted, it may be the case 

that these data are no longer useful. 

While consumers routinely resorted to 

local banks for home improvement 

loans in the 1970s, after the widespread 

adoption of credit cards began in the 

1980s consumers had alternative means 

of obtaining credit to repair or improve 

their homes.293 This trend may have 

accelerated during the 1980s and early 

1990s, when home-equity lines of credit 

became an increasingly popular form of 

credit.294 In today’s market, statistics 

suggest that HMDA provides the public 

with relatively little data about home 

improvement loans. For example, in 

2012 home improvement loans 

comprised only approximately 4.4 

percent of all HMDA records.295

Testimony provided during the Board 

HMDA Hearings supports the argument 

that home improvement loan data are of 

limited value.296 Thus, the consumer 

financial market may have evolved to 

the point where relatively few 

consumers use secured home 

improvement loans to repair, renovate, 

or otherwise improve their homes, and 

the data provided through HMDA may 

no longer be useful. The Bureau is 

concerned about this potential 

reduction in usefulness, considering 

that financial institutions frequently 

state that home improvement reporting 

is a substantial burden. 

As discussed in the section-by-section 

analysis to § 1003.2(i) above, the Bureau 

is proposing to exclude unsecured home 

improvement loans from the scope of 

Regulation C. While the Bureau believes 

that this proposed exclusion will 

address many of the concerns that have 

been asserted with regard to home 

improvement loan reporting, it may be 

the case that the public no longer finds 

home improvement data useful. For 

these reasons, the Bureau solicits 

feedback regarding whether 

§ 1003.4(a)(3) should be modified so 

that financial institutions would not be 

required to identify covered loans for 

the purposes of home improvement. The 

Bureau requests comment regarding the 

current utility of these data, whether 

there are ways to lessen the costs 

associated with reporting secured home 

improvement loans, and whether there 

are ways to improve the usefulness of 

these data. Finally, the Bureau 

specifically solicits information related 

to financial institutions’ current cost of 

reporting secured home improvement 

loans. 

During the Small Business Review 

Panel process, several small entity 

representatives expressed concern about 

the challenges, compliance costs, and 

examination burdens associated with 

reporting home improvement loans.297

The Small Business Review Panel 

recommended that the Bureau seek 

comment on any costs and other 

burdens associated with existing or 

potential HMDA requirements related to 

home improvement loans.298 Consistent 

with the Small Business Review Panel’s 

recommendation, the Bureau solicits 

feedback regarding any costs and 

burdens associated with the current 

loan purpose requirements related to 

home improvement loans, as well as the 

costs and burdens generally associated 

with Regulation C requirements related 

to home improvement loans. 

Cash-Out Refinancings 

The Bureau has received feedback 

indicating that requiring financial 

institutions to identify whether a loan or 

application is for a cash-out refinancing 

would improve the usefulness of the 

reported data. Several participants 

during the 2010 Board Hearings argued 

that cash-out refinancings should be 

separately identified in the HMDA 

data.299 Studies suggest that cash-out 

refinancings were commonly offered in 

the subprime market which, as 

discussed in part II.A above, was and 

remains a particular area of concern for 

many communities.300 Furthermore, 

public officials may find information on 

cash-out refinancings useful for 

developing programs intended to 

promote stable homeownership.301

Thus, requiring financial institutions to 

identify cash-out refinancings may make 

the HMDA data more useful. 

However, the Bureau is concerned 

about the potential burdens associated 

with requiring financial institutions to 

separately identify cash-out 

refinancings, and whether such burdens 

would outweigh the benefit of these 

additional data. First, the mortgage 

market does not currently employ a 

single definition of cash-out refinance. 

For example, secondary market 

investors often provide different 

definitions based on the terms of the 

transaction.302 Furthermore, MISMO 

does not currently provide any 

definition for cash-out refinancing. In 

addition, the Bureau has received 

feedback that financial institutions 

encounter compliance challenges when 

determining the purpose of the loan for 

the existing Regulation C requirements. 

The Bureau is concerned that adding 

another purpose-based requirement 

would further increase the existing 

burden associated with the reporting 

requirements. 

For these reasons, the Bureau is 

considering requiring financial 

institutions to report whether a covered 

loan or application is for a cash-out 

refinancing, but wishes to obtain 

additional information to determine 

whether such a requirement is 

appropriate. The Bureau solicits 

feedback regarding whether 

§ 1003.4(a)(3) should be modified to 

require financial institutions to identify 

separately rate-and-term refinancings 

from cash-out refinancings. The Bureau 

specifically solicits feedback on whether 

there is a clear and bright-line definition 

of cash-out refinancing that would 

ensure the public is provided with 

useful data while minimizing the 

compliance burden associated with this 

potential reporting requirement. The 

Bureau specifically requests comment 

regarding whether this information 

would assist community groups and 

consumers in determining whether 

financial institutions were meeting the 

housing needs of communities, whether 

public officials would use this 

information to develop housing 

investment programs, and information 

regarding whether financial institutions 

are providing cash-out refinancings in a 

discriminatory manner. The Bureau also 

seeks feedback regarding the extent to 

which financial institutions currently 

differentiate between rate-and-term 

refinancings and cash-out refinancings 

and, for those that do not differentiate 


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303See Small Business Review Panel Report at 24. 

304Atlanta Hearing, supra note 131; FFIEC FAQs. 

305See MISMO, Version 3.3 of the Residential 

Reference Model (Construction Method Type and 

Financed Unit Count); Fannie Mae, Fannie Mae 

Implementation Guide for Loan Delivery Data, 

Appendix A (Oct. 29, 2013), https://

www.fanniemae.com/content/technology_

requirements/uldd-implementation-guideappendix-a.pdf. Freddie Mac, Freddie Mac 

Implementation Guide for Loan Delivery Data, 

Appendix A (Jan. 29, 2014), http://

www.freddiemac.com/singlefamily/sell/docs/FRE_

IG_selling_system_appendix_a_data_

requirements.pdf. 

between them, the projected cost of 

upgrading policies, procedures, and 

systems to make this differentiation. 

The Bureau’s Proposal 

In addition to the requests for 

feedback regarding home improvement 

loans and cash-out refinancings 

addressed above, the Bureau is 

proposing changes to the loan purpose 

reporting requirement to conform to the 

proposed extension of coverage to all 

dwelling-secured mortgage loans, as 

discussed above. Accordingly, the 

Bureau is proposing to modify 

§ 1003.4(a)(3) to provide that financial 

institutions shall report whether the 

covered loan is, or the application is for, 

a home purchase loan, a home 

improvement loan, a refinancing, or for 

a purpose other than home purchase, 

home improvement, or refinancing. The 

Bureau solicits feedback regarding 

whether this proposed requirement is 

appropriate, regarding the costs and 

benefits associated with this proposed 

requirements, and regarding whether 

any additional modifications would be 

appropriate. 

During the Small Business Review 

Panel process, some small entity 

representatives expressed concern about 

the applying the HMDA requirements to 

commercial loans.303 The Bureau is 

soliciting feedback regarding whether it 

would be appropriate to modify the 

proposed requirements for commercial 

transactions, or to exclude commercial 

transactions from HMDA, in the sectionby-section analysis to proposed 

§ 1003.2(d) and (o) and elsewhere in this 

proposed rule. Should the Bureau 

determine that an exemption for 

commercial loans is not appropriate, the 

Bureau solicits feedback regarding 

whether it would be appropriate to add 

a loan purpose requirement applicable 

to commercial loans or some other 

method of uniquely identifying 

commercial loans in the HMDA data. 

The Bureau is also proposing to 

modify comment 4(a)(3)–2 to clarify that 

§ 1003.4(a)(3) requires a financial 

institution to report the purpose of a 

covered loan or application and also 

specifies the order of importance if a 

covered loan or application is for more 

than one purpose. For example, if a 

covered loan is a home purchase loan as 

well as a home improvement loan or a 

refinancing, § 1003.3(a)(3) requires the 

institution to report the loan as a home 

purchase loan. This proposed comment 

clarifies that, if a covered loan is a home 

improvement loan as well as a 

refinancing, but the covered loan is not 

a home purchase loan, § 1003.4(a)(3) 

requires the institution to report the 

covered loan as a home improvement 

loan; and further clarifies that, if a 

covered loan is a refinancing as well as 

for another purpose, such as for the 

purpose of paying educational expenses, 

but the covered loan is not a home 

purchase loan or a home improvement 

loan, § 1003.4(a)(3) requires the 

institution to report the covered loan as 

a refinancing. 

Proposed comment 4(a)(3)–3 clarifies 

that, if a covered loan is not a home 

purchase loan, a home improvement 

loan, or a refinancing, § 1003.4(a)(3) 

requires a financial institution to report 

the covered loan as for a purpose other 

than home purchase, home 

improvement, or refinancing. For 

example, if a covered loan is for the 

purpose of paying educational expenses, 

the financial institution complies with 

§ 1003.4(a)(3) by reporting the covered 

loan as for a purpose other than home 

purchase, home improvement, or 

refinancing. Under appendix A, 

proposed instruction 4(a)(3)–1 provides 

technical instructions regarding how to 

enter the covered loan or application 

purpose on the loan application register. 

4(a)(4) 

Current § 1003.4(a)(4) requires 

financial institutions to identify 

whether the application is a request for 

a covered preapproval. The Bureau is 

proposing to revise the technical 

instructions related to paragraph 4(a)(4) 

in appendix A. Proposed instruction 

4(a)(4)–1.a would provide instructions 

for reporting preapprovals requested. 

The proposed instruction refers to the 

definition of a preapproval program in 

§ 1003.2(b)(2) and specifies that the 

code should not be used for 

withdrawals or requests for 

preapprovals that are closed for 

incompleteness, as these preapprovals 

are not reportable under Regulation C. 

These instructions would also be 

specified in the instructions for 

reporting action taken under paragraph 

4(a)(8) and would be added to the 

instructions for paragraph 4(a)(4) merely 

for clarity and completeness. Current 

instruction I.A.8(a) would be 

renumbered and revised as instruction 

4(a)(4)–1.b, which would incorporate a 

reference to the proposed definition in 

§ 1003.2(b)(2). Current instruction 

I.A.8(b) would be renumbered and 

revised as instruction 4(a)(4)–1.c, which 

would include technical revisions. 

Current instruction I.A.8(c) would be 

renumbered and revised as instruction 

4(a)(4)–1.d, which would specify that 

the category of not applicable should be 

reported for applications for or 

originations of home improvement 

loans, open-end lines of credit, homeequity lines of credit, reverse mortgages, 

and for purchased loans. 

The proposal would also delete the 

language in § 1003.4(a)(4) relating to 

whether the request for preapproval was 

denied or resulted in an origination 

because it is redundant with 

requirements under §§ 1003.4(a) and 

1003.4(a)(8). The requirement to report 

action taken on preapprovals is 

currently contained in the reporting 

requirement for action taken under 

§ 1003.4(a)(8) and the associated 

instructions in appendix A. This would 

continue under the proposal. Proposed 

§ 1003.4(a)(4) and the associated 

instructions in appendix A would focus 

solely on whether the application was a 

request for a preapproval for a home 

purchase loan. 

4(a)(5) 

Section 1003.4(a)(5) of Regulation C 

requires financial institutions to report 

the property type of the dwelling to 

which a loan or application relates. 

Appendix A instructions provide that 

property type be reported as either a 

one-to-four-family dwelling (other than 

manufactured housing), manufactured 

housing, or a multifamily dwelling. 

The Bureau has received feedback 

that the current reporting requirement 

has led to questions about how to report 

modular homes, which are factory-built 

but meet local building codes instead of 

the HUD standards for manufactured 

housing.304 In addition, the current 

reporting requirement for property type 

does not correspond to commonly used 

industry data standards and 

recordkeeping because it conflates two 

distinct concepts, the property’s 

construction method and the number of 

units in the property.305

Proposed § 1003.4(a)(5) replaces the 

requirement to report property type 

with the requirement to report the 

construction method for the dwelling 

related to the property identified in 

§ 1003.4(a)(9). The Bureau believes this 

change in Regulation C’s 

implementation of HMDA may more 

effectively carry out HMDA’s purposes 

and facilitate compliance therewith, by 


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306See Small Business Review Panel Report at 80. 

307FFIEC, CRA/HMDA Reporter 3 (Dec. 2010) (‘‘It 

is a common misconception that the purchase of an 

entire mobile home park (e.g., the purchase of five 

or more individual mobile homes) should be 

reported as a multifamily property type. Because 

each mobile home falls within the definition of an 

individual unit, the property type should be 

reported as manufactured housing.’’), http://

www.ffiec.gov/hmda/pdf/10news.pdf. 

308Atlanta Hearing, supra note 131. 

309See MISMO, Version 3.3 of the MISMO 

Residential Reference Model (Construction Method 

Type). 

310See Fannie Mae, Fannie Mae Single Family 

Selling Guide § B2–3–02 (June 24, 2014) (defining 

any dwelling unit built on a permanent chassis as 

a manufactured home and requiring manufactured 

homes to meet HUD manufactured home 

construction standards), http://

www.fanniemae.com/content/guide/sel062414.pdf. 

311Fannie Mae, Fannie Mae Implementation 

Guide for Loan Delivery Data, Appendix A (Oct. 29, 

2013), https://www.fanniemae.com/content/

technology_requirements/uldd-implementationguide-appendix-a.pdf; Freddie Mac, Freddie Mac 

Implementation Guide for Loan Delivery Data, 

Appendix A (Jan. 29, 2014), http://

www.freddiemac.com/singlefamily/sell/docs/FRE_

IG_selling_system_appendix_a_data_

requirements.pdf. 

312See e.g., Home Mortgage Disclosure Act of 

1975, S. Rep. 94–187, p. 279 (June 6, 1975); Home 

Mortgage Disclosure Act of 1975, H. Rep. 94–561, 

p. 117 (Oct. 19, 1975). 

providing more detail regarding whether 

institutions are serving the housing 

needs of their communities and by 

better aligning reporting to industry 

standards. This proposal is also 

authorized by the Bureau’s authority 

pursuant to HMDA sections 305(a) and 

304(b)(6)(J). A financial institution 

would report the construction method 

of the dwelling as site-built or 

manufactured housing with the 

proposed instructions in appendix A. 

During the Small Business Review Panel 

process, one small entity representative 

requested definitions and examples of 

types of construction method.306 The 

proposal revises the instructions in 

appendix A and adds new instructions 

providing the technical details for 

reporting these data fields. The Bureau 

believes that replacing the current 

property type reporting requirement 

with construction method will enhance 

data collected under this part and better 

align it with industry practice. 

As discussed below, the Bureau is 

also proposing to require financial 

institutions to report the total number of 

dwelling units related to the property 

under § 1003.4(a)(31). The data reported 

under proposed § 1003.4(a)(31), 

combined with the proposed definition 

of multifamily dwelling discussed 

above, replace the enumeration for 

multifamily dwellings under 

§ 1003.4(a)(5). The Bureau believes that 

separating these concepts may have 

benefits for analyzing HMDA data. For 

example, the Bureau understands that 

there has been confusion over reporting 

home purchase loans that are secured by 

a manufactured home park and multiple 

manufactured homes on-site, because 

manufactured housing and multifamily 

dwelling are enumerations of the same 

data point.307 Under the proposal, 

construction method of the dwelling 

could be identified under proposed 

§ 1003.4(a)(5) and the number of 

manufactured homes could be identified 

under proposed § 1003.4(a)(31). 

The proposed instructions in 

appendix A provide that modular 

housing should be reported as site built. 

The Bureau understands that appraisals 

do not always distinguish between a 

modular home and a site built home, 

and that for many purposes modular 

homes are treated like site built 

homes.308 There has been confusion as 

to how to report modular housing under 

current Regulation C, and the proposal 

is intended to facilitate compliance in 

this area. The proposed instructions 

under appendix A also provide that the 

use of prefabricated components for 

construction should be reported as site 

built. 

The Bureau is proposing to add a new 

comment under § 1003.4(a)(5). Proposed 

comment 4(a)(5)–1 would provide 

additional guidance on identifying and 

reporting modular homes. Modular 

homes are distinct from manufactured 

homes, and the Bureau believes the 

comment will facilitate compliance by 

describing and providing guidance on 

reporting modular homes. The comment 

notes that modular homes are built to 

local or other recognized building codes 

instead of the HUD manufactured home 

standards and that they do not bear the 

identifying markers for a manufactured 

home. The comment also distinguishes 

between on-frame modular homes 

(which are built on permanent metal 

chassis similar to manufactured homes) 

and off-frame modular homes (which do 

not have metal chassis). The MISMO 

data standard treats on-frame and offframe modular home as separate 

construction method types.309 The 

Bureau understands that there are 

secondary market implications affecting 

the salability of loans secured by onframe modular homes.310 The ULDD 

implementation of the MISMO data 

standard treats all modular homes as 

site built for purposes of construction 

method, consistent with the proposal.311

The Bureau also proposes comment 

4(a)(5)–2 to clarify how to report 

construction method where a covered 

loan is secured by more than one 

property. As discussed in the sectionby-section analysis of proposed 

§ 1003.4(a)(9) and in proposed comment 

4(a)(9)–2, if more than one property is 

taken, or in the case of an application, 

proposed to be taken as security for a 

single covered loan or application, a 

financial institution may either report 

one of the properties in a single entry 

on its loan application register or report 

all of the properties using multiple 

entries on its loan application register. 

Regardless of whether the financial 

institution elects to report the 

transaction in one entry or more than 

one entry, the information required by 

§ 1003.4(a)(5) should relate to the 

property identified under paragraph 

4(a)(9). The Bureau solicits feedback 

generally on whether the proposed 

revisions are appropriate or whether 

more detailed enumerations for 

construction method would be 

appropriate. 

4(a)(6) 

HMDA section 304(b)(2) requires the 

disclosure of the number and dollar 

amount of mortgage loans made to 

mortgagors who did not, at the time of 

execution of the mortgage, intend to 

reside in the property securing the 

mortgage loan. Section 1003.4(a)(6) of 

Regulation C requires financial 

institutions to record the owneroccupancy status of the property to 

which the loan or application relates. 

Appendix A to Regulation C paragraph 

I.A.6 instructs financial institutions to 

identify the owner-occupancy status as 

either owner-occupied as a principal 

dwelling, not owner-occupied as a 

principal dwelling, or not applicable. 

While the Dodd-Frank Act did not 

amend the sections of HMDA relevant to 

the owner-occupancy status reporting 

requirement, section 1094(3)(A)(iv) of 

the Dodd-Frank Act amended section 

304(b) of HMDA to permit the 

disclosure of such other information as 

the Bureau may require. For the reasons 

discussed below, the Bureau is 

proposing to require financial 

institutions to report whether a property 

will be used as a principal residence, as 

a second residence, or as an investment 

property. 

As discussed in part II.A above, 

providing the public with data related to 

whether properties were occupied by an 

owner was one of Congress’s primary 

goals when HMDA was originally 

enacted. Information about the number 

of homeowners, absentee landlords, and 

real estate speculators was viewed as 

necessary to help communities stabilize 

and improve their neighborhoods.312 To 

address these concerns, the Board 

interpreted HMDA section 304(b)(2) to 


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313See 41 FR 23933 (June 14, 1976). 314Financial institutions were originally required 

to report occupancy data indirectly, by identifying 

the number of loans secured by owner-occupied 

dwellings separately from non-owner occupied 

dwellings, in a column-based format. Id. When the 

Board adopted the register reporting format, 

financial institutions were required to report 

occupancy status on a record-by-record basis. See 

54 FR 51356 (Dec. 15, 1989). Additional 

instructions and commentary were added over time 

to clarify and refine the requirement. See e.g., 60 

FR 63393, 63399 (Dec. 11 1995) (adopting relevant 

commentary); 67 FR 7222, 7239 (Feb. 15, 2002) 

(adding additional instructions). 

315See Deborah Halliday, You Can’t Eat the View: 

The Loss of Housing Affordability in the West, The 

Rural Collaborative pp. 9–10 (2003), available at 

http://www.theruralcollaborative.org/files/

you%20can’t%20eat%20the%20view.pdf. 

316See Linda Venturoni, The Economic and 

Social Effects of Second Homes—Executive 

Summary, Northwest Colorado Council of 

Governments pp. 4–5 (June 2004) (stating that as the 

number of second homes in a community increases, 

the more the local economy will shift towards 

serving the needs of the second homes). 

317See Andrew Haughwout, Donghoon Lee, 

Joseph Tracy, and Wilbert van der Klaauw, Real 

Estate Investors, the Leverage Cycle, and the 

Housing Market Crisis, Fed. Reserve Bank of New 

York Staff Report No.514 p. 21 (Sept. 2011). 

318See e.g. Allan Mallach, Investors and Housing 

Markets in Las Vegas: A Case Study, Urban Institute 

pp. 32–34 (June 2013) (discussing that foreign real 

estate investors in Las Vegas are crowding out 

potential domestic purchasers); Robert D. Cruz and 

Ebony Johnson, Research Notes on Economic 

Issues: Impact of Real Estate Investors on Local 

Buyers, Miami-Dade County Regulatory and 

Economic Resources Dept. (Sept. 2013) (analyzing 

how domestic first-time home purchasers are at a 

competitive disadvantage compared to foreign real 

estate investors); Kathleen M. Howley, Families 

Blocked by Investors from Buying U.S. Homes, 

Bloomberg, Oct. 24, 2013 (discussing that the rise 

of all-cash purchases, among other things, has 

prevented many potential homeowners from 

purchasing homes). 

319See e.g., Fannie Mae, Fannie Mae SingleFamily Selling Guide, Chapter B2–3 (October 22, 

2013), https://www.fanniemae.com/content/guide/ 

sel102213.pdf; Freddie Mac, Freddie Mac SingleFamily Seller/Servicer Guide, Vol. I, Chapters 22.22 

and 22.22.1, available at http:// 

www.freddiemac.com/sell/guide/. 

320See e.g., Fannie Mae, Fannie Mae SingleFamily Selling Guide, Chapter B2–1.2–02 and B2– 

1.2–03 (October 22, 2013), available athttps:// 

www.fanniemae.com/content/guide/sel102213.pdf. 

321See Small Business Review Panel Report at 33, 

42, and 100. 

322See id. at 42. 

require financial institutions to 

differentiate between loans secured by a 

property intended to be used as a 

principal or non-principal dwelling.313

Although this requirement has been 

refined over time, the core 

requirement—whether or not the 

property is used as a principal 

dwelling—remains to this day.314

While the current requirement 

historically has furthered the purposes 

of HMDA, several considerations 

suggest that more granular information 

related to non-principal dwellings may 

be necessary. First, over the past several 

years the increasing popularity of 

vacation and investment properties has 

affected the housing supply and 

economies of many communities. 

Evidence suggests that the increasing 

popularity of vacation homes has 

contributed to a lack of affordable 

housing in several areas.315 In addition 

to affecting housing affordability, the 

economic effect of vacation home 

purchases is often complex, which 

presents local governments with unique 

challenges.316 While the prevalence of 

vacation homes presents communities 

with several unique economic issues, 

the purchase of homes by investors (i.e., 

persons who do not occupy purchased 

properties, even as vacation homes) 

presents communities with an entirely 

different set of challenges. Recent 

studies have demonstrated that the 

speculative purchase of homes by 

investors contributed to the housing 

bubble that preceded the financial 

crisis, especially in the States that were 

most affected by the downturn.317 These 

investor purchases may be a concern for 

urban areas, many of which are 

experiencing a sharp increase in such 

purchases.318 Thus, information related 

to second homes and investment 

properties may help communities and 

local officials develop policies tailored 

to the unique characteristics associated 

with these separate segments of the 

mortgage market. 

Furthermore, the mortgage market has 

evolved to the point where lending 

policies and procedures differentiate 

between principal dwellings, second 

homes, and investment properties. 

Financial institutions and investors 

often apply underwriting criteria 

tailored to each property type.319

Furthermore, large and small lenders 

often use marketing specifically 

targeting potential purchasers of 

vacation or investment properties, and 

many institutions specialize in this type 

of lending. In addition, mortgage loan 

pricing often varies based on whether 

the property will be used as a principal, 

second, or investment property.320

Thus, updating the reporting 

requirements related to second or 

investment properties may be necessary 

to ensure that the reported data is a 

useful reflection of the current mortgage 

market. 

When these considerations are taken 

together, it appears that the concerns 

that motivated the original distinction 

between principal and non-principal 

dwellings now exist with respect to 

second homes and investment 

properties. For these reasons, to 

implement section 304(b)(2) of HMDA 

and pursuant to its authority under 

sections 305(a) and 304(b)(6)(J) of 

HMDA, the Bureau is proposing to 

modify § 1003.4(a)(6) to provide that a 

financial institution shall report 

whether the property identified in 

§ 1003.4(a)(9) is or will be used by the 

applicant or borrower as a principal 

residence, as a second residence, or as 

an investment property. The Bureau 

solicits feedback regarding whether this 

proposed modification is appropriate. 

While the Bureau believes that financial 

institutions currently differentiate 

between principal, second, and 

investment properties for underwriting, 

pricing, and other purposes, the Bureau 

solicits feedback regarding whether, and 

the extent to which, financial 

institutions do not recognize this 

differentiation, and whether financial 

institutions would encounter unique 

costs or burdens associated with this 

proposed requirement. 

During the Small Business Review 

Panel process, some small entity 

representatives expressed concerns 

about differentiating between principal, 

second, and investment properties for 

reporting purposes.321 The Small 

Business Review Panel recommended 

that the Bureau solicit public comment 

on the challenges associated with 

requiring financial institutions to report 

owner-occupancy status as including 

reporting second home and investment 

uses, rather than just principal 

residence occupancy.322 Consistent with 

the Small Business Review Panel’s 

recommendation, the Bureau requests 

feedback regarding the challenges small 

financial institutions currently face 

when reporting owner-occupancy 

status, and the additional costs and 

burdens that small financial institutions 

would face if the current reporting 

requirement were modified to require 

reporting of whether a property is or 

will be used by the applicant or 

borrower as a second residence or 

investment property. 

Proposed comment 4(a)(6)–2 clarifies 

that, for purposes of § 1003.4(a)(6), an 

applicant or borrower can have only one 

principal residence at a time. Thus, a 

vacation or other second home would 

not be a principal residence. However, 

if an applicant or borrower buys or 

builds a new dwelling that will become 

the applicant’s or borrower’s principal 

residence within a year or upon the 

completion of construction, the new 

dwelling is considered the principal 

residence for purposes of applying this 

definition to a particular transaction. 

Proposed comment 4(a)(6)–3 explains 

that, for purposes of § 1003.4(a)(6), a 

property is an applicant’s or borrower’s 

second residence if the property is or 

will be occupied by the applicant or 


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323 12 U.S.C. 2803(a), (b). 

borrower for a portion of the year and 

is not the applicant’s or borrower’s 

principal residence. For example, if a 

person purchases a property, occupies 

the property for a portion of the year, 

and rents the property for the remainder 

of the year, the property is a second 

residence for purposes of § 1003.4(a)(6). 

Similarly, if a couple occupies a 

property near their place of employment 

on weekdays, but the couple returns to 

their principal residence on weekends, 

the property near the couple’s place of 

employment is a second residence for 

purposes of § 1003.4(a)(6). 

Proposed comment 4(a)(6)–4 clarifies 

that, for purposes of § 1003.4(a)(6), a 

property is an investment property if the 

owner does not occupy the property. 

Similarly, if a person purchases a 

property, does not occupy the property, 

and does not generate income by renting 

the property, but intends to generate 

income by selling the property at some 

point in time, the property is an 

investment property for purposes of 

§ 1003.4(a)(6). Section 1003.4(a)(6) 

requires a financial institution to 

identify a property as an investment 

property if the owner does not occupy 

the property, even if the owner does not 

consider the property as owned for 

investment purposes. Proposed 

comment 4(a)(6)–4 also provides several 

illustrative examples. Under appendix 

A, proposed instruction 4(a)(6)–1 

provides technical instructions 

regarding how to enter the occupancy 

type on the loan application register by 

stating that financial institutions should 

enter one of four codes, and identifying 

which codes are applicable to the 

covered loan or application. 

As discussed in the section-by-section 

analysis to proposed § 1003.4(a)(9) and 

in proposed comment 4(a)(9)–2, if more 

than one property is taken, or in the 

case of an application, proposed to be 

taken as security for a single covered 

loan or application, a financial 

institution may report one of the 

properties in a single entry on its loan 

application register or report all of the 

properties using multiple entries on its 

loan application register. Regardless of 

whether the financial institution elects 

to report the transaction in one entry or 

more than one entry, the information 

required by § 1003.4(a)(6) should relate 

to the property identified under 

§ 1003.4(a)(9). The Bureau is also 

proposing comment 4(a)(6)–5 to clarify 

how to report the information required 

by proposed a covered loan secured by, 

or in the case of an application, 

proposed to be secured by, more than 

one property. The Bureau solicits 

feedback generally on whether the 

proposed revisions are appropriate or 

whether more detailed enumerations for 

construction method would be 

appropriate. 

As discussed in part II.B above, one 

of the Bureau’s objectives in this 

proposed rule is to reduce the fixed and 

ongoing costs associated with reporting 

HMDA data by aligning to the extent 

practicable to MISMO. MISMO version 

3.3 currently defines an investment 

property by reference to whether the 

property will generate rental income. 

The Bureau is concerned that MISMO’s 

definition does not encompass all 

properties that commonly would be 

considered investment properties. For 

example, a person that purchases a 

property for a family member to reside 

in, with the expectation of generating 

income upon the sale of the property in 

the future, may consider the property an 

investment property. Similarly, a person 

that purchases a property to renovate 

and sell, but does not reside in the 

property, may also view the property as 

an investment property. However, the 

properties described in these scenarios 

would not be considered investment 

properties under the definition in 

MISMO version 3.3. As a result, to 

provide clear reporting rules while 

aligning to MISMO, proposed 

instruction 4(a)(6)–1 provides one 

instruction for reporting investment 

properties that generate income by the 

rental of the property, and another 

instruction for reporting investment 

properties that do not generate income 

by the rental of the property. The 

Bureau believes that this proposed 

instruction will align to MISMO while 

accommodating financial institutions 

that are reporting investment properties 

that are not recognized as such under 

MISMO, but solicits feedback on this 

proposed approach, and solicits 

feedback regarding whether any 

additional clarifications or changes are 

needed to facilitate compliance. 

Section 1003.4(a)(6) is proposed to 

implement section 304(b)(2) of HMDA, 

and is also proposed pursuant to the 

Bureau’s authority under sections 305(a) 

and 304(b)(6)(J) of HMDA. The Bureau 

believes requiring this level of detail 

about residency status is a reasonable 

interpretation of HMDA section 

304(b)(2). Furthermore, for the reasons 

given above, the Bureau believes this 

change is necessary and proper to 

effectuate HMDA’s purpose, because 

this information will help determine 

whether financial institutions are 

serving the housing needs of their 

communities and will assist in 

decisions regarding the distribution of 

public sector investments. This proposal 

may also facilitate compliance with 

HMDA, by aligning to the extent 

practicable to MISMO standards, 

thereby reducing costs associated with 

HMDA reporting. 

4(a)(7) 

Section 304(a) and (b) of HMDA 

requires the disclosure of the dollar 

amount of loans and applications 

subject to the statute.323 Section 

1003.4(a)(7) of Regulation C requires 

financial institutions to report the 

amount of the loan or the amount 

applied for. Paragraph I.A.7 in appendix 

A instructs financial institutions to 

report loan amount rounded to the 

nearest thousand and clarifies how to 

determine and report loan amount with 

respect to various types of transactions. 

Comments 4(a)(7)–1 through –4 provide 

additional explanation concerning how 

loan amount is to be determined and 

reported. 

The Bureau is proposing several 

technical, conforming, and clarifying 

modifications to § 1003.4(a)(7) and its 

corresponding instructions and 

comments. These proposals include 

moving into the text of § 1003.4(a)(7) 

several requirements currently found in 

instructions and comments, and moving 

into the commentary several 

explanations and clarifications currently 

found in appendix A. The Bureau is also 

proposing to modify the amount 

reported for an open-end line of credit 

and clarify what amount should be 

reported for a reverse mortgage. Finally, 

the Bureau is proposing that loan 

amount be reported in dollars rather 

than rounded to the nearest thousand. 

Proposed § 1003.4(a)(7) requires 

financial institutions to report the 

amount of the covered loan or the 

amount applied for, as applicable. 

Proposed § 1003.4(a)(7)(i) provides that 

for a closed-end mortgage loan, other 

than a purchased loan or an assumption, 

a financial institution shall report the 

amount to be repaid as disclosed on the 

legal obligation. Proposed 

§ 1003.4(a)(7)(i) further provides that, 

for a purchased closed-end mortgage 

loan or an assumption of a closed-end 

mortgage loan, the financial institution 

shall report the unpaid principal 

balance at the time of purchase or 

assumption. Proposed § 1003.4(a)(7)(i) 

incorporates requirements currently set 

forth in paragraph I.A.7(a) and (b) of 

appendix A and comment 4(a)(7)–4. 

Proposed § 1003.4(a)(7)(ii) provides 

that for an open-end line of credit, 

including a purchased open-end line of 

credit or an assumption of an open-end 

line of credit, a financial institution 

shall report the amount of credit 

available to the borrower under the 


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324 60 FR 63393, 63396 (Dec. 11, 1995). 

325FFIEC FAQs. 

326See Washington Hearing, supra note 130. 

terms of the plan. The Bureau proposes 

to collect the full line, rather than only 

the portion intended for home purchase 

or improvement, as is currently required 

by paragraph I.A.7(d) of appendix A and 

comment 4(a)(7)–3. The Bureau believes 

that this modification will produce 

more consistent and reliable data on 

open-end lines of credit and will reduce 

burdens on financial institutions 

associated with determining the 

purposes of open-end lines of credit. 

This proposed provision also clarifies 

how loan amount should be determined 

for purchases and assumptions of openend lines of credit. 

Proposed § 1003.4(a)(7)(iii) provides 

that, for a reverse mortgage, the amount 

of the covered loan is the initial 

principal limit, as determined pursuant 

to section 255 of the National Housing 

Act (12 U.S.C. 1715z–20) and 

implementing regulations and 

mortgagee letters prescribed by HUD. 

Regulation C is currently silent as to 

how loan amount should be determined 

for a reverse mortgage. The Bureau 

believes that industry is familiar with 

HUD’s Home Equity Conversion 

Mortgage Insurance Program and its 

implementing regulations and 

mortgagee letters and that this 

modification will produce more 

consistent and reliable data on reverse 

mortgages. The Bureau solicits feedback 

regarding whether this proposed 

modification is appropriate and 

specifically solicits feedback on the 

determination of loan amount for nonfederally insured reverse mortgages. 

Proposed instruction 4(a)(7)–1 

provides that the amount of the covered 

loan or the amount applied for, as 

applicable, shall be reported in dollars. 

Currently, loan amount is reported 

rounded to the nearest thousand. The 

Dodd-Frank Act requirement that 

financial institutions report property 

value will allow the calculation of loanto-value ratio, an important 

underwriting variable, but rounded loan 

amount will render these calculations 

less precise, undermining their utility to 

analyses for HMDA purposes. 

Accordingly, the Bureau proposes that 

loan amount be reported in dollars. The 

Bureau solicits feedback on these 

proposals. 

The Bureau proposes to delete 

paragraph I.A.7(a) and (b) in appendix 

A and comment 4(a)(7)–4 because these 

requirements have been incorporated 

into proposed § 1003.4(a)(7)(i). The 

Bureau proposes to delete the remainder 

of the instructions set forth in appendix 

A relating to paragraph 4(a)(7) and 

incorporate them into proposed new 

comments, as discussed below. 

The Bureau is proposing technical 

changes and minor wording changes to 

comment 4(a)(7)–1 to conform the 

comment to proposed changes in 

§ 1003.4(a)(7). Proposed comment 

4(a)(7)–2 explains how loan amount is 

to be determined for an application that 

was denied or withdrawn and 

incorporates, with minor wording 

changes, paragraph I.A.7(f) of appendix 

A. Proposed comment 4(a)(7)–3 explains 

how loan amount is to be determined 

for a multi-purpose loan and is 

renumbered from current comment 

4(a)(7)–2, modified to conform to 

proposed changes concerning reporting 

loan amount for home-equity lines of 

credit. Proposed comment 4(a)(7)–4 is 

renumbered from current comment 

4(a)(7)–3 and incorporates paragraph 

I.A.7(d) of appendix A, modified to 

conform to proposed changes 

concerning reporting loan amount for 

home-equity lines of credit. Proposed 

comment 4(a)(7)–5 describes how to 

determine loan amount for a refinancing 

and incorporates with some 

modifications paragraph I.A.7(e) of 

appendix A. Proposed comment 4(a)(7)– 

6 describes how to determine loan 

amount for a home improvement loan 

and incorporates with some 

modifications paragraph I.A.7(c) of 

appendix A. 

4(a)(8) 

Regulation C § 1003.4(a)(8) requires 

financial institutions to report the action 

taken on applications covered by HMDA 

and the date the action was taken. The 

proposal would revise the commentary 

under § 1003.4(a)(8) with respect to 

rescinded loans, repurchased loans, 

conditional approvals, and applications 

received by third parties. The proposal 

also makes technical corrections and 

minor wording changes to the 

instructions in appendix A to use 

terminology consistent with other 

changes in the proposal. 

Rescinded Loans 

Regulation Z provides for a right to 

rescind certain credit transactions in 

which a security interest will be 

retained or acquired in a consumer’s 

principal dwelling. 12 CFR 1026.15(a), 

1026.23(a). Comment 4(a)(8)–2 permits 

institutions to report action taken for 

rescinded transactions as either an 

origination or an application approved 

but not accepted. The Board adopted 

this comment in 1995, noting that it 

believed a strict requirement was not 

warranted in light of the small number 

of loans rescinded.324 The proposal 

would revise the comment to require 

institutions to report rescinded 

transactions as applications approved 

but not accepted if a borrower rescinds 

a transaction after closing and before a 

financial institution is required to 

submit its loan application register 

containing the information for the 

transaction under § 1003.5(a). The 

Bureau believes that approved but not 

accepted more accurately reflects the 

outcome of a rescinded transaction, that 

having all such transactions reported 

with the same action taken will improve 

data consistency, and that a bright-line 

rule provides clear guidance to financial 

institutions. The Bureau solicits 

feedback on how frequently rescission is 

exercised and whether the proposed 

change is appropriate. 

Conditional Approvals 

Current comment 4(a)(8)–4 describes 

how institutions should report action 

taken for conditional approvals that are 

issued to applicants. The commentary 

generally provides that financial 

institutions should report loans 

approved subject to underwriting 

conditions which are not met should be 

reported as a denial, but it also provides 

that certain customary loan commitment 

or loan-closing conditions are not 

underwriting conditions. Additional 

guidance on this topic had been 

published in the FFIEC FAQs.325

A participant at the Board’s 2010 

Board HMDA Hearings stated that 

existing guidance on how to report 

action taken for conditional approvals 

was not sufficiently clear and current 

business practices often involve issuing 

conditional approvals based on an 

automated underwriting system result 

subject to several conditions.326 The 

Bureau has also received feedback that 

financial institutions experience 

compliance burden in attempting to 

determine whether certain conditions 

are underwriting conditions or 

customary commitment or closing 

conditions, and in turn what the 

appropriate action taken code is for 

reporting purposes. 

The proposal would renumber current 

comment 4(a)(8)–4 as 4(a)(8)–5 and 

revise it to expand the examples of 

conditions that are considered 

customary commitment or closing 

conditions and those that are considered 

underwriting or creditworthiness 

conditions. The proposal also revises 

the comment to provide examples of 

scenarios when conditionally approved 

applications could be reported as 

withdrawn, closed for incompleteness, 

and approved but not accepted. The 


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327See § 1003.4(a)(9). 

328 Dodd-Frank Act section 1094(6); 12 U.S.C. 

2806(a)(1). 

329See § 1003.4(a)(9). 

330HMDA section 304(b)(6)(H) authorizes the 

Bureau to include in the HMDA data collection ‘‘the 

parcel number that corresponds to the real property 

pledged or proposed to be pledged as collateral.’’ 

12 U.S.C. 2803(b)(6)(H). 

Bureau believes that the revised 

comment will provide more clarity on 

reporting action taken for loans and 

applications that involve conditional 

approvals. 

Proposed comment 4(a)(8)–5 would 

add several examples of how to report 

action taken when a conditional 

approval is issued. If the approval is 

conditioned on satisfying underwriting 

or creditworthiness conditions and they 

are not met, the institution reports the 

action taken as a denial. If, however, the 

conditions involve submitting 

additional information about 

creditworthiness that the institution 

needs to make the credit decision, and 

the institution has sent a written notice 

of incompleteness under Regulation B 

and the applicant did not respond 

within the period of time specified in 

the notice, the institution reports the 

action taken as file closed for 

incompleteness. If the conditions are 

solely customary commitment or closing 

conditions and the conditions are not 

met, the institution would report the 

action taken as approved but not 

accepted. If all the conditions 

(underwriting, creditworthiness, or 

customary commitment or closing 

conditions) are satisfied and the 

institution agrees to extend credit but 

the covered loan is not originated, the 

institution would report the action 

taken as application approved but not 

accepted. If the applicant expressly 

withdraws before satisfying all 

underwriting or creditworthiness 

conditions and before the institution 

denies the application or closes the file 

for incompleteness, the institution 

reports the action taken as application 

withdrawn. If all underwriting and 

creditworthiness conditions have been 

met, and the conditions are solely 

customary commitment or closing 

conditions and the applicant expressly 

withdraws before the covered loan is 

originated, the institution would report 

the action taken as application approved 

but not accepted. 

Proposed comment 4(a)(8)–5 would 

provide additional examples of 

customary commitment or closing 

conditions. These examples include: 

acceptable title insurance binder; clear 

termite inspection; a subordination 

agreement from another lienholder; and 

where the applicant plans to use the 

proceeds from the sale of one home to 

purchase another; a settlement 

statement showing adequate proceeds 

from the sale. The existing examples of 

a clear-title requirement and acceptable 

property survey are retained. 

Proposed comment 4(a)(8)–5 would 

also provide examples of underwriting 

or creditworthiness conditions. These 

examples include: conditions that 

constitute a counter-offer; satisfactory 

debt-to-income ratio or loan-to-value 

ratio; determination of the need for 

private mortgage insurance; satisfactory 

appraisal requirement; or verification or 

confirmation that an applicant meets 

underwriting conditions; including 

documentation of income or assets. 

These additions in proposed comment 

4(a)(8)–5 are adapted and developed 

from the FFIEC FAQs, as well as from 

feedback received by the Bureau. The 

Bureau believes these additions are 

appropriate, but solicits feedback on 

this conclusion and whether any other 

examples would be appropriate. 

Applications Received by Third Parties 

The proposal adds comment 4(a)(8)– 

6 to provide guidance on how financial 

institutions should report applications 

involving more than one institution. 

The comment cross-references comment 

4(a)–4 regarding such applications. 

Other Revisions 

The proposal makes technical 

corrections and minor wording changes 

to several comments. Current comments 

4(a)(8)–5, –6, and –7 are renumbered as 

comments 4(a)(8)–7, –8, and –9, 

respectively, and are revised to use 

terminology consistent with other 

changes in the proposal. Proposed 

comment 4(a)(8)–4 directs financial 

institutions to refer to proposed 

comment 4(a)–6 regarding reporting 

requirements when a covered loan is 

repurchased by the originating financial 

institution. 

4(a)(9) 

As discussed in detail below, HMDA, 

as implemented through Regulation C, 

requires financial institutions to report 

certain information about the location of 

the property related to most reported 

loans and applications. Specifically, 

Regulation C requires financial 

institutions to report the MSA or MD, 

State, county, and census tract of the 

property related to most reported loans 

or applications.327

Section 1094(3)(A)(iv) of the DoddFrank Act amended HMDA to authorize 

the Bureau, as it may determine to be 

appropriate, to collect the parcel 

number that corresponds to the real 

property pledged or proposed to be 

pledged as collateral. This parcel 

number would specifically identify the 

property securing or, in the case of an 

application, proposed to secure each 

covered loan. As amended by the DoddFrank Act, HMDA also directs the 

Bureau, with the assistance of certain 

other agencies and persons as the 

Bureau deems appropriate, to ‘‘develop 

or assist in the improvement of, 

methods of matching addresses and 

census tracts to facilitate compliance by 

depository institutions in as economical 

a manner as possible with the 

requirements of [HMDA].’’328 The 

Bureau proposes to implement the 

Dodd-Frank Act authorization to collect 

a parcel number as discussed below. 

4(a)(9)(i) 

Currently, Regulation C does not 

require financial institutions to report 

information specifically identifying the 

property securing or, in the case of an 

application, proposed to secure the 

covered loan. Rather, as discussed in 

detail below, Regulation C requires 

financial institutions to report the MSA 

or MD, State, county, and census tract 

of the property related to most reported 

loans or applications.329 The DoddFrank Act amended HMDA to authorize 

the Bureau to collect the ‘‘parcel 

number that corresponds to the real 

property’’ securing the covered loan or, 

in the case of an application, proposed 

to secure the covered loan.330 As 

discussed below, there is no universal 

parcel number system; therefore, the 

Bureau believes it is reasonable to 

interpret the Dodd-Frank Act 

amendment to refer to information that 

uniquely identifies a dwelling pledged 

or proposed to be pledged as collateral 

(parcel identifier). Proposed 

§ 1003.4(a)(9)(i) is also authorized 

pursuant to the Bureau’s HMDA section 

305(a) authority to provide for 

adjustments because, for the reasons 

given below, the Bureau believes the 

proposal is necessary and proper to 

effectuate HMDA’s purposes and 

facilitate compliance therewith. For the 

reasons discussed below, the Bureau 

proposes to require financial 

institutions to report the postal address 

of the property securing the covered 

loan or, in the case of an application, 

proposed to secure the covered loan. 

The Bureau also is exploring operational 

improvements that it can achieve using 

the reported postal address to reduce 

financial institutions’ property-location 

reporting burden. 

Including a parcel identifier in the 

HMDA data would provide many 

benefits that would further HMDA’s 

purposes. Researchers and community 


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331See, e.g., Washington Hearing, supra note 130 

(remarks of Lisa Rice, Vice President, National Fair 

Housing Alliance). 

332See, e.g., United States Census Bureau, 

Geographic Terms and Concepts-Census Tract, 

http://www.census.gov/geo/reference/gtc/gtc_

ct.html. 

333For discussion of the Bureau’s approach to 

protecting applicant and borrower privacy in light 

of the goals of HMDA, see part II.C, above. As 

discussed in part II.C, the Bureau’s assessment of 

the risks to privacy interests created by the 

disclosure of HMDA data and the benefits of such 

disclosure under its balancing test is ongoing. 

Because property address can be used to directly 

identify individual borrowers, however, the Bureau 

anticipates that property address would not be 

made available to the general public. 

advocates urged the Board to adopt a 

parcel identifier during the Board’s 2010 

Hearings.331 Collecting a parcel 

identifier linked to the property’s 

location, like postal address, may 

address many of the challenges 

associated with the current property 

location information reported in HMDA. 

Currently, census tract is the most 

granular property location information 

reported in HMDA. Census tract 

information enables public officials and 

members of the public to identify 

lending trends in geographic areas. 

Census tracts, however, present 

challenges as a unit of analysis because 

they vary in geographic size and may 

change every ten years.332 In addition, 

analysts are not able to evaluate the 

HMDA data using geographic divisions 

other than those reported in HMDA 

(e.g., census tract block) and, as a result, 

experience difficulty identifying more 

localized lending trends. 

With more specific information about 

the location of a property, the Bureau 

and other agencies would be able to 

evaluate and, for example, issue 

publicly available summary reports 

evaluating HMDA data based on 

different geographic divisions than 

census tract. These data and reports may 

facilitate a better understanding of 

lending trends in geographic divisions 

smaller than census tract. Geographic 

areas that would benefit from special 

public or private sector investment may 

be identified with greater precision. 

These data and reports may also enable 

more precise analysis of lending 

patterns to identify potential fair 

lending redlining concerns. 

Including a parcel identifier linked to 

the location of a property, like postal 

address, in the HMDA data may also 

present opportunities for the Bureau to 

reduce the burden for financial 

institutions associated with the current 

property location reporting. The Bureau 

understands from industry feedback that 

‘‘geocoding,’’ (i.e., providing the census 

tract, MSA or MD, county and State of 

a property) is a challenging and costly 

aspect of HMDA reporting. Financial 

institutions report frequent examination 

errors relating to geocoding. The Bureau 

believes that the Dodd-Frank Act’s 

authorization to collect a parcel 

identifier and directive to facilitate 

economical compliance with matching 

addresses and census tracts may provide 

a unique opportunity to improve the 

reporting process. The Bureau is 

exploring operational changes that it 

may achieve using the reported postal 

address that would reduce the burden 

associated with geocoding. For example, 

the Bureau may create a system where 

a financial institution reports only the 

postal address and the Bureau provides 

the financial institution with the census 

tract, county, MSA or MD, and State. 

The Bureau believes that these potential 

operational changes, if achieved, would 

be a significant benefit to collecting 

postal address. If the Bureau is not able 

to achieve these operational changes, 

the Bureau may not elect to finalize the 

proposal to collect postal address, but 

likely would finalize the proposal 

discussed below in the section-bysection analysis of proposed 

§ 1003.4(a)(9)(ii) to continue to collect 

the currently required property location 

information (State, MSA or MD, County, 

and census tract). 

In addition, a parcel identifier would 

allow for the identification of multiple 

loans secured by the same property, 

which would allow for better 

understanding of the amount of equity 

retained in that property over time. Had 

these data been available leading up to 

the financial crisis, public officials may 

have been able to see the extent to 

which borrowers used up their equity 

through rapid refinancings. In addition, 

they would have been able to identify 

which financial institutions were 

offering these refinancings, which were 

often unsound. 

Collecting a parcel identifier presents 

a number of practical challenges. 

Currently, no universal standard exists 

for identifying a property so that it can 

be linked to related mortgage data. 

There is no single authoritative source 

that delivers or maintains parcel 

numbering. Parcel data are collected 

and maintained by individual local 

governments with limited State or 

Federal involvement. Local jurisdictions 

do not use a standard way to identify 

properties. In addition, local parcel data 

are not easily linked to the location of 

the property, which, as discussed above, 

substantially amplifies the usefulness of 

a parcel identifier. Both the postal 

address and geospatial coordinates of a 

property are linked to the location of the 

property and uniquely identify most 

properties. However, there may be 

inaccuracies associated with both postal 

address and geospatial coordinates. For 

example, neither the postal address nor 

the geospatial coordinates may be 

available at the time of origination for 

properties located in new 

developments. In addition, both postal 

address and geospatial coordinates 

present standardization issues. 

Financial institutions may not collect 

and record postal address in the same 

format. Likewise, financial institutions 

may not use the same methods for 

collecting and recording geospatial 

coordinates. The Bureau understands 

that financial institutions currently 

collect postal address during the 

mortgage origination and application 

process if the postal address is available, 

but that not all financial institutions 

collect geospatial coordinates. 

In addition to the practical challenges 

discussed above, the Bureau recognizes 

that including a parcel identifier in the 

HMDA data raises privacy concerns 

because a parcel identifier, like a postal 

address, can easily be used to identify 

a borrower. The Bureau is sensitive to 

the privacy implications of including 

postal address in the HMDA data and 

has considered these implications 

carefully.333

The Bureau believes that it may be 

appropriate to collect a parcel identifier 

linked to the location of a property, 

given the potential benefits of such 

information to the purposes of HMDA. 

Collecting postal address may be the 

least burdensome way to obtain a parcel 

identifier because financial institutions 

generally collect postal addresses during 

the application and origination process. 

Accordingly, pursuant to its authority 

under HMDA sections 305(a) and 

304(b)(6)(H), the Bureau proposes 

§ 1003.4(a)(9)(i), which provides that a 

financial institution is required to report 

the postal address of the property 

securing or, in the case of an 

application, proposed to the covered 

loan. Proposed § 1003.4(a)(9)(i) applies 

to all reported covered loans and 

applications secured by or, in the case 

of an application, proposed to be 

secured by any type of manufactured 

housing. As the Bureau explains further 

in the section-by-section analysis of 

proposed § 1003.4(a)(29), the Bureau 

believes that it is reasonable to 

implement HMDA through Regulation C 

to treat mortgage loans secured by all 

manufactured homes, regardless of the 

dwelling’s legal classification under 

State law, consistently. The Bureau 

further believes that collecting the 

postal address of all covered loan 

secured by (and applications for covered 

loans proposed to be secured by) any 


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334See, e.g., Small Business Review Panel Report 

at 39. 

335 Id. 

336See Section 1003.4(a)(9); HMDA section 

304(a)(2). A for-profit mortgage-lending institution 

is deemed to have a branch office in an MSA or MD 

if in the preceding calendar year it received 

applications for, originated, or purchased five or 

more home purchases loans, home improvement 

loans, or refinancings related to property located in 

that MSA or MD, respectively. See Section 1003.2 

(definition of branch office). 

337See Small Business Review Panel Report at 34. 

338See id. 339See id. 

manufactured home is necessary and 

proper to effectuate HMDA’s purposes 

and facilitate compliance therewith. The 

Bureau solicits feedback regarding 

whether to collect a parcel identifier 

generally and whether postal address is 

the appropriate way to collect a parcel 

identifier. 

During the Small Business Review 

Panel process, small entity 

representatives expressed concerns 

about the challenges of implementing a 

parcel identifier for entries that do not 

result in an origination.334 Consistent 

with that feedback, the Bureau proposes 

instructions in appendix A that allow a 

financial institution to omit certain of 

the required data fields if aspects of the 

property’s postal address are not known. 

The Small Business Review Panel 

recommended that the Bureau solicit 

feedback on whether to require 

reporting of a parcel identifier for all 

entries or only for originations and 

purchases.335 Consistent with that 

recommendation, the Bureau solicits 

feedback on whether to require 

reporting of a parcel identifier for all 

entries. 

4(a)(9)(ii) 

Under HMDA and Regulation C, a 

financial institution is required to report 

the location of the property to which the 

covered loan or application relates by 

MSA or MD; State; county; and census 

tract if the loan is related to a property 

in an MSA or MD in which the financial 

institution has a home or branch 

office.336 In addition, § 1003.4(e) 

requires banks and savings associations 

that are required to report data on small 

business, small farm, and community 

development lending under regulations 

that implement the CRA to collect the 

location of property located outside 

MSAs and MDs in which the institution 

has a home or branch office or outside 

of any MSA. Section I.C.3 of appendix 

A directs financial institutions to enter 

‘‘not applicable’’ for census tract if the 

property is located in a county with a 

population of 30,000 or less. The Bureau 

proposes to renumber existing 

§ 1003.4(a)(9) as § 1003.4(a)(9)(ii) and to 

make certain nonsubstantive technical 

modifications for clarification. The 

Bureau does not propose any changes to 

§ 1003.4(e). The Bureau solicits 

feedback on whether the proposal is 

appropriate generally and on the 

benefits and burdens of the proposal. 

The Bureau has received feedback 

from industry that reporting property 

location information is a challenging 

and costly aspect of HMDA reporting. 

As discussed above, the Bureau is 

exploring ways that it can reduce the 

burden associated with geocoding, such 

as operational changes that may enable 

the Bureau to perform geocoding for 

financial institutions. For example, the 

Bureau may create a system where a 

financial institution reports only the 

postal address and the Bureau provides 

the financial institution with the census 

tract, county, MSA or MD, and State. As 

discussed above, if the Bureau is not 

able to achieve these operational 

changes, the Bureau may not elect to 

finalize the proposal to collect postal 

address, but likely would finalize the 

proposal to continue to collect the 

currently required property location 

information (census tract, county, MSA 

or MD, and State). 

In addition, the Bureau understands 

that this potential operational change 

raises questions. Such questions include 

whether a financial institution would be 

responsible for the accuracy of the 

information provided by the Bureau and 

whether a financial institution would be 

responsible for geocoding an entry if the 

Bureau’s geocoding system returned an 

error. The Bureau solicits feedback on 

whether such an operational change 

would alleviate burden and on whether 

such an operational change is 

appropriate generally. 

During the Small Business Review 

Panel, small entity representatives 

discussed the potential operational 

change related to geocoding.337 Small 

entity representatives generally 

supported the idea of shifting some of 

the burden of geocoding to the Bureau 

or other Federal agencies. Several small 

entity representatives stated that 

geocoding was not problematic for 

them. Some small entity representatives 

shared their thoughts on the type of 

loans or properties that present 

challenges in geocoding, including 

open-end lines of credit, new 

construction properties, and rural 

properties. One small entity 

representative stated that geocoding is 

the largest source of its reporting errors. 

Small entity representatives also raised 

questions about whether the financial 

institution or the Bureau would be 

responsible for errors if the Bureau 

geocoded the loans.338 The Panel 

supported the Bureau’s suggested 

operational changes related to 

geocoding.339

Covered Loans Related to Multiple 

Properties 

Comments 4(a)(9)–1 and –2 clarify a 

financial institution’s responsibilities 

when reporting a loan that relates to 

more than one property. Comment 

4(a)(9)–1 discusses how to report a 

home improvement loan or a 

refinancing of a home improvement 

loan that relates to more than one 

property. Comment 4(a)(9)–2 discusses 

how to report a home purchase loan or 

a refinancing of a home purchase loan 

that relates to more than one property. 

In light of the Bureau’s proposal to 

expand the types of transactions subject 

to Regulation C by including all 

mortgage loans secured by a dwelling 

(discussed above in the section-bysection analysis of proposed § 1003.2(d) 

and (o)), the Bureau believes that it may 

be appropriate to revise comments 

4(a)(9)–1 and –2 to provide a single 

framework clarifying how to report a 

covered loan related to multiple 

properties. 

Proposed comment 4(a)(9)–1 explains 

that if a covered loan relates to more 

than one property and only one 

property is taken as or, in the case of an 

application, proposed to be taken as 

security, a financial institution reports 

the information required by 

§ 1003.4(a)(9) for the property taken as 

or, in the case of an application, 

proposed to be taken as security. The 

comment also provides an illustrative 

example. 

Proposed comment 4(a)(9)–2 clarifies 

that if more than one property is taken 

or, in the case of an application, 

proposed to be taken as security for a 

single covered loan, a financial 

institution may report one of the 

properties using one entry on its loan 

application register or report all of the 

properties using multiple entries on its 

loan application register. Proposed 

comment 4(a)(9)–2 further explains that, 

if a financial institution opts to report 

all of the properties, the multiple entries 

should be identical with the exception 

of required information that is related to 

the property identified in § 1003.4(a)(9). 

If an institution is required to report 

specific information about the property 

identified in § 1003.4(a)(9), the 

institution should report the 

information that relates to the property 

identified in § 1003.4(a)(9) in that entry. 

The proposed comment provides an 

illustrative example. 


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340 12 U.S.C. 2803(b)(4). The collection and 

reporting of this information was not a part of 

HMDA as originally enacted in 1975. See supra 

note 36. Originally, HMDA required lenders to 

collect and report data only on loan originations 

and only according to census tract and income. See 

Former 12 U.S.C. 2803(a)(1)–(a)(2) (1988). In order 

to help identify lending discrimination and enforce 

antidiscrimination laws, Congress amended HMDA 

to require the collection and reporting of the racial 

characteristics, gender, and income of loan 

applicants and borrowers (FIRREA). See supra note 

58. In 2002, the Board amended Regulation C to 

improve the quality, consistency, and usefulness of 

the data being collected by financial institutions, 

including adding ethnicity as a new field for 

collection of information about an applicant. See 

supra note 75. 

Proposed comment 4(a)(9)–3 

discusses reporting multifamily 

properties with more than one postal 

address. The proposed comment 

explains that for the purposes of 

§ 1003.4(a)(9), a financial institution 

reports the information required by 

§ 1003.4(a)(9) for a multifamily dwelling 

with more than one postal address in 

the same manner described in proposed 

comment 4(a)(9)–2. The proposed 

comment also explains that regardless of 

whether the financial institution elects 

to report the covered loan using a single 

entry or multiple entries, the 

information required by § 1003.4(a)(31) 

and (32) should refer to the total number 

of applicable units in the property or 

properties securing or, in the case of an 

application, proposed to secure the 

covered loan. The Bureau solicits 

feedback on whether the proposed 

comments are appropriate generally. 

The Bureau is also proposing to 

renumber current comments 4(a)(9)–3 

and –4 as proposed comments 4(a)(9)– 

4 and –5, respectively, and to make 

certain technical changes to align the 

comments with proposed § 1003.4(a)(9). 

In accordance with the changes 

discussed above, the Bureau proposes 

technical instructions in appendix A 

regarding how to enter the data on the 

loan application register. 

4(a)(10)(i) 

Ethnicity, Race, and Sex 

HMDA section 304(b)(4) requires the 

reporting of racial characteristics and 

gender for borrowers and applicants.340

Section 1003.4(a)(10) of Regulation C 

requires a financial institution to collect 

the ethnicity, race, and sex of the 

applicant or borrower for applications 

and loan originations for each calendar 

year. The Bureau’s proposal renumbers 

§ 1003.4(a)(10) and moves the 

requirement to collect the ethnicity, 

race, and sex of the applicant or 

borrower to § 1003.4(a)(10)(i). The new 

numbering is intended only for ease of 

reference and is not a substantive 

change. 

The Bureau proposes to modify 

instruction I.D.1.b of appendix A, which 

requires that a financial institution use 

Code ‘‘not applicable’’ if the borrower or 

applicant is not a natural person, for 

example, a corporation or partnership. 

The Bureau provides this clarification in 

response to feedback from financial 

institutions expressing uncertainty as to 

whether a trust is a non-natural person. 

For a transaction involving a trust, the 

financial institution should report ‘‘not 

applicable’’ for the government 

monitoring information if the trust is the 

borrower or applicant. On the other 

hand, if the applicant or borrower is a 

natural person, and is the beneficiary of 

a trust, the financial institution should 

collect the government monitoring 

information pursuant to 

§ 1003.4(a)(10)(i). 

As part of the Bureau’s efforts to 

streamline and clarify Regulation C, the 

Bureau is also proposing several 

technical modifications to the appendix 

A instructions for applicant 

information. The Bureau believes these 

modifications will help financial 

institutions comply with Regulation C 

by providing clearer instructions for 

completion of the applicant information 

in the loan application register. The 

Bureau is proposing to remove I.D.2 of 

appendix A because the instructions are 

either found elsewhere in the I.D. 

instructions or are duplicative of 

instructions in appendix B. For 

example, instruction I.D.2 provides that 

all loan applications, including 

applications taken by mail, internet, or 

telephone must use a collection form 

similar to that shown in appendix B 

regarding ethnicity, race, and sex. This 

instruction further provides that for 

applications taken by telephone, the 

information in the collection form must 

be stated orally by the lender, except for 

information that pertains uniquely to 

applications taken in writing. These 

instructions are also found in appendix 

B. The Bureau does not believe these 

instructions should appear twice and 

thus is proposing to remove the 

instructions from appendix A. 

In addition, the Bureau is proposing 

to remove the I.D.2 instruction that 

provides if the applicant does not 

provide these data in an application 

taken by mail or telephone or on the 

internet, enter the Code for ‘‘information 

not provided by applicant in mail, 

internet, or telephone application’’ 

specified in paragraphs I.D.3., 4., and 5. 

of this appendix. As the instruction 

itself points out, paragraphs I.D.3., 4., 

and 5. of appendix A instruct a financial 

institution to enter the Code for 

‘‘information not provided by applicant 

in mail, internet, or telephone 

application’’ and the Bureau does not 

believe there is a need to repeat that 

instruction in I.D.2. Therefore, the 

Bureau is proposing to remove this 

instruction from I.D.2 and is proposing 

to modify paragraph I.D.4. by adding a 

new subparagraph ‘‘b,’’ redesignated as 

4(a)(10)(i)–2.b, which would instruct 

financial institutions to ‘‘Use Code 3 (for 

ethnicity) and Code 6 (for race) if the 

applicant or co-applicant does not 

provide the information in an 

application taken by mail, internet, or 

telephone’’ and is proposing to modify 

paragraph I.D.5. by adding a new 

subparagraph ‘‘a,’’ redesignated as 

4(a)(10)(i)–3.a, which would instruct 

financial institutions to use ‘‘Use Code 

3 if the applicant or co-applicant does 

not provide the information in an 

application taken by mail, internet, or 

telephone.’’ 

As part of the Bureau’s efforts to 

streamline and clarify Regulation C, the 

Bureau is proposing to renumber 

current instructions I.D.3, I.D.4, and 

I.D.5. The instructions are renumbered 

as 4(a)(10)(i)–1, 4(a)(10)(i)–2, and 

4(a)(10)(i)–3. In line with the proposed 

renumbering to appendix A, the Bureau 

is proposing to renumber comments 

4(a)(10)–1, 4(a)(10)–2, 4(a)(10)–3, 

4(a)(10)–4, and 4(a)(10)–5. The 

comments are renumbered as comments 

4(a)(10)(i)–1, 4(a)(10)(i)–2, 4(a)(10)(i)–3, 

4(a)(10)(i)–4, and 4(a)(10)(i)–5. 

Appendix B provides instructions on 

the collection of the ethnicity, race, and 

sex of applicants. Appendix B instructs 

financial institutions to inform 

applicants that the Federal government 

requests the information in order to 

monitor compliance with Federal 

statutes that prohibit lenders from 

discriminating against applicants on 

these bases. Appendix B also provides 

that financial institutions must ask for 

the information but cannot require 

applicants to provide it. Questions 

requesting the government monitoring 

information can be listed on the loan 

application form or on a separate form 

that refers to the application, and 

appendix B provides a sample form. 

Financial institutions must offer an 

applicant the option of selecting one or 

more racial designations. For telephone 

applications, the information in the 

collection form must be stated orally by 

the financial institution. When an 

application is taken in person and the 

applicant does not provide the 

information, the financial institution is 

instructed to note this on the form, 

inform the applicant that it is required 

to collect the information based on 

visual observation and surname, and 


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51776 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

341E.g., Atlanta Hearing, supra note 131; San 

Francisco Hearing, supra note 133; Chicago 

Hearing, supra note 137. 342See Small Business Review Panel Report at 28. 343 Id. 344 Id. 

345 12 U.S.C. 2803(b)(4). 

346See Version 3.3 of the MISMO Residential 

Reference Model (Construction Method Type and 

Financed Unit Count), Fannie Mae, Fannie Mae 

Implementation Guide for Loan Delivery Data, 

Appendix A (Oct. 29, 2013) (https://

www.fanniemae.com/content/technology_

requirements/uldd-implementation-guideappendix-a.pdf), Freddie Mac, Freddie Mac 

Implementation Guide for Loan Delivery Data, 

Appendix A (Jan. 29, 2014) (http://

www.freddiemac.com/singlefamily/sell/docs/FRE_

IG_selling_system_appendix_a_data_

requirements.pdf. 

347See part II.C above for a discussion of the 

Bureau’s approach to protecting applicant and 

borrower privacy in light of the goals of HMDA. 

348Regulation B § 1002.13(a)(1)(iv). Age has been 

a protected category under ECOA and Regulation B 

since 1976, and a creditor may not discriminate 

against an applicant on the basis of age regarding 

any aspect of a credit transaction, including home 

mortgage lending. See Regulation B §§ 1002.1(b), 

1002.4(a)(b), 15 U.S.C. 1691(a)(1). Under Regulation 

B, ‘‘age’’ refers ‘‘only to the age of natural persons 

and means the number of fully elapsed years from 

the date of an applicant’s birth.’’ Regulation B 

§ 1002.2(d). 

349See Small Business Review Panel Report at 27 

and 40. The Dodd-Frank amendments to HMDA 

added new provisions directing the Bureau to 

develop regulations that ‘‘modify or require 

modification of itemized information, for the 

purpose of protecting the privacy interests of the 

mortgage applicants or mortgagors, that is or will be 

available to the public,’’ and identified age as a new 

data point that may raise privacy concerns. HMDA 

sections 304(h)(1)(E), (h)(3)(A)(ii). See part II.C 

above for a discussion of the feedback the Bureau 

received from the small entity representatives about 

privacy concerns relating to this proposed data 

point and the Bureau’s approach to protecting 

applicant and borrower privacy in light of the goals 

of HMDA. 

350See Small Business Review Panel Report at 27. 

351 Id. 

352 Id. 

353 Id. 

then collect it on that basis to the extent 

possible. In a mail, telephone, or 

internet application, the government 

monitoring information need not be 

provided if the applicant declines to 

answer the questions requesting the 

information or fails to provide the 

information. In such a case, the 

financial institution should indicate that 

the application was received by mail, 

telephone, or internet, if that fact is not 

otherwise evident on the face of the 

application. 

Feedback provided during the Board’s 

2010 Hearings addressed the reluctance 

of applicants to provide demographic 

information and the challenges financial 

institutions face in collecting the 

information.341 The Bureau solicits 

feedback regarding the challenges faced 

by both applicants and financial 

institutions by the data collection 

instructions prescribed in appendix B 

and specifically solicits comment on 

ways to improve the data collection of 

the ethnicity, race, and sex of applicants 

and borrowers. 

During the Small Business Review 

Panel process, one small entity 

representative urged the Bureau to 

eliminate the requirement to record 

government monitoring information for 

in-person applications when the 

customer declines to specify the 

information.342 The small entity 

representative noted that while the 

government monitoring information 

data are vital to HMDA’s utility, 

recording the information on the basis 

of visual observation is highly 

subjective and puts financial 

institutions in the position of overriding 

the wishes of applicants who choose not 

to provide this information.343 The 

small entity representative also stated 

that staff at the financial institution 

spend an average of three hours 

following up with loan officers when 

these data are not reported in the 

files.344 While the Small Business 

Review Panel did not make a 

recommendation in response to these 

comments, as discussed above, the 

Bureau is aware that there may be ways 

to improve the collection of the 

government monitoring information and 

specifically solicits feedback on this 

issue. 

Age 

Section 1094(3)(A)(i) of the DoddFrank Act amended HMDA section 

304(b)(4) to require financial 

institutions to report an applicant’s or 

borrower’s age.345 For the reasons 

discussed below, the Bureau is 

proposing to implement the requirement 

to collect and report age by adding this 

characteristic to the information listed 

in proposed § 1003.4(a)(10)(i). 

The MISMO/ULDD data standards for 

age include both the date of birth 

(YYYY–MM–DD format) and the age of 

the borrower in years at the time of 

application.346 In light of potential 

applicant and borrower privacy 

concerns related to reporting date of 

birth, the Bureau proposes that financial 

institutions enter the age of the 

applicant or borrower, as of the date of 

application, in number of years as 

derived from the date of birth as shown 

on the application form.347 The 

Bureau’s Regulation B requires, as part 

of the application for credit, a creditor 

to request the age of an applicant for 

credit primarily for the purchase or 

refinancing of a dwelling occupied or to 

be occupied by the applicant as a 

principal dwelling, where the credit 

will be secured by the dwelling.348 The 

proposed requirement would align with 

the MISMO/ULDD data standard for age 

as well as with the definition of age 

under Regulation B. The Bureau solicits 

feedback regarding whether the 

collection of the age of the applicant or 

borrower, as of the date of application, 

in number of years as derived from the 

date of birth as shown on the 

application form is an appropriate 

manner of collecting such demographic 

information. The Bureau specifically 

solicits feedback regarding whether 

there is a less burdensome way for 

financial institutions to collect such 

information for purposes of HMDA. 

During the Small Business Review 

Panel process, the small entity 

representatives generally expressed 

concern about the burden of reporting 

additional borrower data with respect to 

age.349 Some small entity 

representatives recommended that the 

Bureau further clarify the age data 

point.350 In particular, some small entity 

representatives noted that the date of 

birth of an applicant is already collected 

on application forms, but converting it 

to age would require additional work 

and increase the possibility of errors.351

Some small entity representatives 

suggested that the Bureau clarify at 

which point in the mortgage loan 

process age would be determined.352

One small entity representative 

suggested that the applicant’s age at the 

time of application be reported.353 The 

Bureau’s proposed comments and 

proposed instructions in appendix A 

provide clarity as to how a financial 

institution collects and reports age. 

A requirement to collect and report 

the age of applicants or borrowers may 

impose some burden on financial 

institutions. However, the Bureau 

believes that the potential costs would 

be justified by the potential benefits to 

the public and public officials, and the 

Bureau believes that reporting of this 

information is an appropriate method of 

implementing HMDA section 304(b)(4) 

and carrying out HMDA’s purposes. The 

Bureau believes this information will 

assist in identifying whether financial 

institutions are serving the housing 

needs of their communities, identifying 

possible discriminatory lending 

patterns, and enforcing 

antidiscrimination statutes. 

Proposed instruction 4(a)(10)(i)–4 in 

appendix A provides technical 

instructions regarding how to enter the 

age of the applicant or borrower on the 

loan application register. Proposed 

instruction 4(a)(10)(i)–4 directs financial 

institutions to enter the age of the 

applicant or borrower, as of the date of 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51777 

354Fannie Mae Form 1003 or Freddie Mac Form 

65 7/05 (rev. 6/09). 

355Fannie Mae, Fannie Mae Single Family Selling 

Guide § B3–3.1, (June 24, 2014) available at http:// 

www.fanniemae.com/content/guide/sel062414.pdf; 

Freddie Mac, Freddie Mac Single Family Selling 

Guide § 37.13, (June 24, 2014) available at http:// 

www.freddiemac.com/singlefamily/guide/bulletins/

pdf/062414Guide.pdf; HUD, HUD Handbook 4155.1 

§ 4.D.4.a, http://portal.hud.gov/hudportal/

HUD?src=/program_offices/administration/

hudclips/handbooks/hsgh/4155.1. 

356See MISMO, Version 3.3 of the MISMO 

Residential Reference Model (Total Monthly Income 

Amount and Borrower Qualifying Income); Fannie 

Mae, Fannie Mae Implementation Guide for Loan 

Continued 

application, in number of years as 

derived from the date of birth as shown 

on the application form. The Bureau 

recognizes that this proposed 

instruction would require financial 

institutions to calculate the age of an 

applicant or borrower in number of 

years by referring to the date of birth as 

shown on the application form and that 

such calculation has the potential for 

errors. However, the Bureau believes the 

application forms used by financial 

institutions, such as the Uniform 

Residential Loan Application form,354

currently collect the date of birth of the 

applicant and any co-applicant and that 

requiring the calculation of age from 

this existing data source is not a 

significant burden. The Bureau believes 

that financial institutions will have to 

manage the risk of an error in 

calculating an applicant’s age to ensure 

HMDA compliance. 

Similar to the existing technical 

instructions applicable to the ethnicity, 

race, and sex of an applicant or 

borrower, proposed instruction 

4(a)(10)(i)–4 directs financial 

institutions to enter ‘‘not applicable’’ for 

age only when the applicant or coapplicant is not a natural person or 

when applicant or co-applicant 

information is unavailable because the 

covered loan has been purchased by the 

institution. In addition, similar to the 

existing instructions applicable to the 

ethnicity, race, and sex of an applicant 

or borrower, proposed instruction 

4(a)(10)(i)–4 directs financial 

institutions to provide the age only for 

the first co-applicant listed on the 

application form when there is more 

than one co-applicant, and if there are 

no co-applicants or co-borrowers, to 

report ‘‘no co-applicant’’ in the coapplicant column. 

Proposed comment 4(a)(10)(i)–1 

discusses the requirement that a 

financial institution report the age of the 

applicant or borrower, as of the date of 

application, in number of years as 

derived from the date of birth as shown 

on the application form and provides an 

illustrative example. Proposed comment 

4(a)(10)(i)–2 clarifies that a financial 

institution reports the age of the 

applicant or borrower, as of the date of 

application, in number of years as 

derived from the date of birth as shown 

on the application form and does not 

report age on the basis of visual 

observation or surname as is required 

with respect to the ethnicity, race, and 

sex of an applicant when the applicant 

fails to provide the requested 

information for an application taken in 

person. The Bureau also is proposing 

technical modifications to comments 

4(a)(10)(i)–3, 4(a)(10)(i)–4, and 

4(a)(10)(i)–5. 

4(a)(10)(ii) 

HMDA section 304(b)(4) requires the 

reporting of income level for borrowers 

and applicants. Section 1003.4(a)(10) of 

Regulation C implements this 

requirement by requiring collection and 

reporting of the gross annual income 

relied on in processing the application 

for applicants and borrowers. The 

proposal moves this requirement to 

§ 1003.4(a)(10)(ii) and revises it to 

require the reporting of gross annual 

income relied on in making the credit 

decision requiring consideration of 

income or, if a credit decision requiring 

consideration of income was not made, 

the gross annual income collected as 

part of the application process. The 

Bureau has received feedback that the 

current income reporting requirement is 

confusing and unclear, and the new 

language is intended to facilitate 

compliance by clarifying and providing 

more specificity on when income is to 

be reported and what income should be 

reported. 

The proposal revises the instructions 

in appendix A to be consistent with 

proposed § 1003.4(a)(10)(ii) and to 

provide additional guidance. Instruction 

4(a)(10)(ii)–1 provides that the financial 

institution should report the gross 

annual income that it relied on in 

making the credit decision requiring 

consideration of income or, if the 

application was denied or withdrawn or 

the file was closed for incompleteness 

before a credit decision requiring 

consideration of income was made, the 

gross annual income collected as part of 

the application process. Instruction 

4(a)(10)(ii)–1.a provides, consistent with 

the current instructions, that all dollar 

amounts should be rounded to the 

nearest thousand and shown in 

thousands. Instruction 4(a)(10)(ii)–1.b 

provides, consistent with the current 

instructions, that an institution would 

report ‘‘NA’’ for a covered loan or 

application related to a multifamily 

dwelling. Instruction 4(a)(10)(ii)–1.c 

provides that if no income information 

is collected as part of the application 

process, or if the covered loan applied 

for would not or did not require 

consideration of income, the institution 

would report ‘‘NA.’’ Instruction 

4(a)(10)(ii)–1.d provides that if the 

applicant or co-applicant is not a 

natural person, or if the applicant or coapplicant information is unavailable 

because the covered loan has been 

purchased by the institution, the 

institution would report ‘‘NA.’’ 

The proposal revises and renumbers 

existing comments, and adds new 

comments. Specifically, the proposal 

renumbers current comments 4(a)(10)–6, 

–7, and –8 as comments 4(a)(10)(ii)–1, 

–2, and –3 and revises them clarification 

and to make minor wording changes. 

The proposal adds new comment 

4(a)(10)(ii)–4, which provides that 

amounts derived from asset depletion or 

annuitization to determine repayment 

ability are not part of gross annual 

income relied on for purposes of 

§ 1003.4(a)(10)(ii). The proposal also 

adds new comment 4(a)(10)(ii)–5, which 

provides an example of reporting 

income information collected as part of 

the application process if the 

application is denied or withdrawn or 

the file is closed for incompleteness 

before a credit decision requiring 

consideration of income is made. The 

example provides that a financial 

institution would report the income 

collected if an applicant withdraws an 

application before a credit decision 

requiring consideration of income is 

made, or if an institution denied such 

an application or closed the file for 

incompleteness. 

The proposal renumbers existing 

comment 4(a)(10)–6 as new comment 

4(a)(10)(ii)–1 and revises it to make 

technical corrections and minor 

wording changes, and to provide an 

additional example of income relied on. 

The additional example provides that if 

an institution applied lender or investor 

guidelines to exclude commission 

income earned for less than 12 months, 

the institution would not include that 

income in the income reported. The 

Bureau understands that financial 

institutions frequently apply lender or 

investor guidelines when calculating 

income for purposes of making a credit 

decision. For example, the GSEs and the 

FHA have guidelines for determining 

and verifying borrower income for loans 

that financial institutions intend to sell 

to or insure with those entities.355 The 

MISMO/ULDD data standard for 

borrower qualifying income also refers 

to application of borrower or investor 

guidelines.356 The example better aligns 


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51778 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

Delivery Data, Appendix A (Oct. 29, 2013), https:// 

www.fanniemae.com/content/technology_

requirements/uldd-implementation-guideappendix-a.pdf; Freddie Mac, Freddie Mac 

Implementation Guide for Loan Delivery Data, 

Appendix A (Jan. 29, 2014), http://

www.freddiemac.com/singlefamily/sell/docs/FRE_

IG_selling_system_appendix_a_data_

requirements.pdf. 

357See Small Business Review Panel Report at 51, 

83. 

358See Small Business Review Panel Report at 28, 

60. 

359 12 U.S.C. 2803(h)(1)(C). 

360See FFIEC FAQs. 

the proposed § 1003.4(a)(10)(ii) 

reporting requirement with these 

commonly used industry data 

standards. The Bureau solicits feedback 

on whether financial institutions believe 

there are any discrepancies between 

income that would be recorded under 

the MISMO/ULDD data standard and 

the income reported for HMDA 

purposes under proposed 

§ 1003.4(a)(10)(ii) and if additional 

guidance or clarification is needed. 

The proposal adds new comment 

4(a)(10)(ii)–6, which provides guidance 

on credit decisions requiring 

consideration of income and credit 

decisions that did not or would not have 

required consideration of income. The 

comment provides that an institution 

does not report income if the 

application did not or would not have 

required a credit decision requiring 

consideration of income under the 

policies and practices of the financial 

institution and provides an example of 

a streamlined refinance program. Small 

entity representatives raised concerns 

about compliance difficulties where 

certain programs that do not require 

analysis or verification of borrower 

income are involved.357 The Bureau 

believes this comment may address 

these concerns and facilitate 

compliance. 

During the Small Business Review 

Panel process, small entity 

representatives noted difficulties in 

reporting income relied on for certain 

loans, especially commercial loans 

because of technical differences 

between income and cash flow.358 The 

Small Business Review Panel 

recommended that the Bureau consider 

clarifying requirements to report the 

income relied upon for commercial 

loans. Consistent with the 

recommendation of the Small Business 

Review Panel, the Bureau has 

considered whether additional guidance 

can be provided for reporting income 

relied on for commercial purpose loans. 

The Bureau notes that under the 

proposal, income would not be reported 

for loans or applications related to 

multifamily dwellings, loans or 

applications where the applicant or 

borrower is not a natural person (such 

as a corporation), where no income 

information is collected, or where a 

credit decision requiring consideration 

of income was not or would not have 

been required. Therefore, the Bureau 

believes that these reporting difficulties 

for income should be limited only to 

covered loans to natural persons for 

properties with less than five individual 

units where institutions ask for and rely 

on income for underwriting purposes. 

The Bureau believes that more specific 

feedback on this subset of covered loans 

and applications is necessary in order to 

consider developing appropriate 

guidance on this topic. Therefore, the 

Bureau solicits feedback on difficulties 

financial institutions experience in 

reporting income relied on for covered 

loans and applications not related to 

multifamily dwellings that are made to 

individual applicants or borrowers for a 

commercial purpose. Specifically, the 

Bureau solicits feedback on how 

consideration of income differs for such 

loans from consumer- or household 

purpose-loans, and on how financial 

institutions distinguish between income 

and cash flow analysis and whether 

financial institutions have different 

procedures for considering them. 

4(a)(11) 

Current § 1003.4(a)(11) requires 

financial institutions to report the type 

of entity purchasing a loan that the 

financial institution originates or 

purchases and then sells within the 

same calendar year, and provides that 

this information need not be included in 

quarterly updates.359 In conjunction 

with the Bureau’s proposal to require 

quarterly data reporting by certain 

financial institutions as described 

further below in the section-by-section 

analysis of proposed § 1003.5(a)(1)(ii), 

the Bureau is proposing to modify 

§ 1003.4(a)(11) by deleting the statement 

that the information about the type of 

purchaser need not be included in 

quarterly updates. 

The Bureau is proposing technical 

modifications to current comments 

4(a)(11)–1 and 4(a)(11)–2. The Bureau is 

also proposing to add six new 

comments to provide additional 

guidance regarding the type of 

purchaser reporting requirement. 

Additional guidance on this topic had 

been published in the FFIEC FAQs.360

The Bureau believes it is appropriate to 

place this additional guidance in the 

commentary to Regulation C to assist 

financial institutions with HMDA 

compliance. Proposed comment 

4(a)(11)–3 clarifies when a financial 

institution should report the code for 

‘‘affiliate institution’’ by providing a 

definition of the term ‘‘affiliate’’ and 

clarifies that for purposes of proposed 

§ 1003.4(a)(11), the term ‘‘affiliate’’ 

means any company that controls, is 

controlled by, or is under common 

control with, another company, as set 

forth in the Bank Holding Company Act 

of 1956 (12 U.S.C. 1841 et seq.). 

Proposed comment 4(a)(11)–4 

incorporates, with modifications, an 

FFIEC FAQ that clarified when a 

financial institution would report the 

code for ‘‘private securitization’’ and 

provides an illustrative example. 

Proposed comment 4(a)(11)–5 

incorporates, with modifications, an 

FFIEC FAQ that clarified the meaning of 

a mortgage bank for purposes of 

§ 1003.4(a)(11). Proposed comment 

4(a)(11)–6 incorporates, with 

modifications, an FFIEC FAQ that 

clarified the type of purchaser to report 

when a covered loan is sold to a 

subsidiary of the seller institution. 

Proposed comment 4(a)(11)–7 

incorporates, with modifications, an 

FFIEC FAQ that clarified the type of 

purchaser to report when the 

purchasing entity is a bank holding 

company or thrift holding company. 

Proposed comment 4(a)(11)–8 directs 

financial institutions to refer to 

proposed comment 4(a)–6 regarding 

reporting requirements when a covered 

loan is repurchased by the originating 

financial institution. The Bureau solicits 

feedback regarding whether these 

proposed comments are appropriate and 

specifically solicits feedback regarding 

whether additional clarifications would 

assist financial institutions in 

complying with proposed 

§ 1003.4(a)(11). 

The Bureau is proposing to modify 

the instructions in appendix A to ensure 

that they align with the proposed 

comments as well as with the Bureau’s 

proposal to require quarterly data 

reporting by certain financial 

institutions pursuant to 

§ 1003.5(a)(1)(ii), including the type of 

purchaser information. In addition to 

technical modifications and removing a 

parenthetical stating that the 

information need not be included in 

quarterly updates, the Bureau is 

proposing to modify instruction I.E.b in 

appendix A, to be renumbered as 

4(a)(11)–1.b, to provide that for 

purposes of recording the type of 

purchaser within 30 calendar days after 

the end of the calendar quarter pursuant 

to proposed § 1003.4(f), a financial 

institution should record Code 0 if the 

institution originated or purchased a 

covered loan and did not sell it during 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51779 

361See 67 FR 7222, 7229 (Feb. 15, 2002) (adopting 

thresholds of 3 percentage points for first-lien loans 

and 5 percentage points for subordinate-lien loans); 

73 FR 63329, 63330, (Oct. 24, 2008) (revising the 

thresholds to 1.5 percentage points for first-lien 

loans and 3.5 percentage points for subordinate-lien 

loans). 

362Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended HMDA by adding section 304(b)(5)(B), 

which expanded the rate spread reporting 

requirement beyond higher-priced mortgage loans. 

363H.R. Rep. No. 111–702, at 191 (2011). 

364See Atlanta Hearing, supra note 131; Chicago 

Hearing, supra note 137; see also Neil Bhutta and 

Glenn B. Canner, Mortgage Market Conditions and 

Borrower Outcomes: Evidence from the 2012 HMDA 

Data and Matched HMDA-Credit Record Data, 99 

Fed. Reserve Bulletin 1, at 31–32 (2013) (noting that 

gaps in the rate spread data limit its current 

usefulness for assessing fair lending compliance). 

365 GAO, Fair Lending: Data Limitations and the 

Fragmented U.S. Financial Regulatory Structure 

Challenge Federal Oversight and Enforcement 

Efforts, GAO–09–704, at 18 (July 2009), http://

www.gao.gov/new.items/d09704.pdf. 

366See Complaint, United States v. First United 

Security Bank, (S.D. Ala., Sept. 30, 2009), No. 09– 

0644 available at http://www.justice.gov/crt/about/ 

hce/documents/fusbcomp.pdf; San Francisco 

Hearing, supra note 133. 

367See Small Business Review Panel Report at 

126. 

368See Regulation Z §§ 1026.32, 1026.35, 

1026.43. 

the calendar quarter for which the 

institution is recording the data. If the 

financial institution sells the covered 

loan in a subsequent quarter of the same 

calendar year, the institution should 

record the appropriate code for the type 

of purchaser on its loan application 

register for the quarter in which the 

covered loan was sold. 

The Bureau is also proposing to 

provide clarification as to when a 

financial institution should report Code 

5 for ‘‘private securitization’’ in 

proposed instruction 4(a)(11)–1.d, in 

order to align with proposed comment 

4(a)(11)–4. In addition, in order to align 

with proposed comment 4(a)(11)–3, the 

Bureau is proposing to provide 

clarification as to when a financial 

institution should report Code 8 for 

‘‘affiliate institution’’ in proposed 

instruction 4(a)(11)–1.e by providing a 

definition of the term ‘‘affiliate’’ for 

purposes of § 1003.4(a)(11). The Bureau 

solicits feedback regarding whether the 

proposed modifications to the 

instructions in appendix A are 

appropriate. 

4(a)(12) 

Regulation C currently requires 

financial institutions to report the 

difference between a loan’s APR and the 

average prime offer rate (APOR) for a 

comparable transaction, as of the date 

the interest rate is set, if the difference 

equals or exceeds 1.5 percentage points 

for first-lien loans, or 3.5 percentage 

points for subordinate-lien loans. The 

average prime offer rate is an annual 

percentage rate that is derived from 

average interest rates, points, and other 

loan pricing terms offered to borrowers 

by a representative sample of creditors 

for mortgage loans with low risk pricing 

characteristics and is published weekly 

on the FFIEC Web site. Loans that 

require rate spread reporting are termed 

‘‘higher-priced mortgage loans.’’ The 

Board added the rate spread 

requirement in 2002, and amended it in 

2008, intending to capture price 

information for only the subprime 

market.361 Section 304(b)(5)(B) of 

HMDA requires financial institutions to 

report mortgage loan information, 

grouped according to measurements of 

‘‘the difference between the annual 

percentage rate associated with the loan 

and a benchmark rate or rates for all 

loans.’’ 362 The Bureau proposes to 

implement this provision by requiring 

financial institutions to report, for 

covered loans subject to Regulation Z, 

12 CFR part 1026, other than purchased 

loans and reverse mortgage transactions, 

the difference between the covered 

loan’s annual percentage rate and the 

average prime offer rate for a 

comparable transaction as of the date 

the interest rate is set. 

In amending HMDA to require 

financial institutions to report the 

difference between the annual 

percentage rate associated with the loan 

and a benchmark rate or rates for all 

loans, Congress found that improved 

pricing information would bring greater 

transparency to the market and facilitate 

the enforcement of fair lending laws.363

Feedback received during the Board’s 

2010 Hearings suggested that requiring 

reporting of the rate spread for all loans, 

instead of only for loans considered 

higher-priced mortgages, would better 

serve HMDA’s purposes by providing a 

more complete understanding of the 

mortgage market and improving the 

analysis of loan prices across various 

communities and markets.364 For 

example, a 2009 GAO report found that 

the lack of pricing information limited 

the ability of Federal agencies to ‘‘assess 

the potential for discrimination in the 

prime and government-guaranteed and 

-insured mortgage markets.’’ 365

Similarly, recent enforcement actions by 

the U.S. Department of Justice indicate 

that price discrimination can occur at 

levels that fall below the threshold for 

higher-priced mortgage loans.366 Thus, 

expanded pricing data could reveal 

greater detail about the extent to which 

prime lending is available and 

competitive in all communities. 

Proposed § 1003.4(a)(12) implements 

HMDA section 304(b)(5)(B) by requiring 

financial institutions to report the 

difference between the covered loan’s 

annual percentage rate and the average 

prime offer rate for a comparable 

transaction as of the date the interest 

rate is set. Pursuant to HMDA section 

305(a), the Bureau implements section 

304(b)(5)(B) as applicable only to loans 

subject to the Truth in Lending Act 

(TILA), as implemented by Regulation 

Z. By aligning the scope of the rate 

spread provision to transactions subject 

to Regulation Z, the Bureau excepts 

certain types of loans for which rate 

spread data would be potentially 

misleading or unduly burdensome to 

report, such as business-purpose loans. 

The Bureau also proposes to exempt 

reporting of rate spread date for 

purchased loans, as appendix A 

currently does for rate-spread data on 

higher-priced loans, in order to reduce 

burden. 

The Bureau believes that requiring 

rate spread reporting only for loans 

subject to TILA, as implemented by 

Regulation Z, is necessary and proper to 

effectuate HMDA’s purposes by 

improving the utility of HMDA data and 

facilitating compliance by easing 

reporting burdens. During the Small 

Business Review Panel process, for 

example, one small entity representative 

commented that requiring the rate 

spread for commercial loans would be 

difficult because these loans do not have 

an APR and would require an APR 

substitute.367 Furthermore, the Bureau 

believes that burden will be reduced 

because most financial institutions are 

already calculating the difference 

between APR and APOR in order to 

determine compliance with the highcost, higher-priced, and qualified 

mortgage provisions that apply to loans 

that are subject to Regulation Z.368

Regulation Z § 1026.32(a)(1)(i) and the 

associated commentary, for example, 

already provide guidance on 

determining the correct closest 

comparable transaction for determining 

whether home-equity lines of credit are 

high-cost mortgages. The Bureau solicits 

feedback on the general utility of the 

revised rate spread data and on the costs 

associated with collecting and reporting 

the data. In particular, the Bureau 

solicits feedback on the scope of the rate 

spread reporting requirement, including 

whether the requirement should be 

expanded to cover purchased loans. 

During the Small Business Review 

Panel process, the small entity 

representatives offered differing 

opinions on the burden of adding the 

pricing data points under consideration. 


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51780 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

369See Small Business Review Panel Report at 42. 

The Small Business Review Panel 

recommended that the Bureau seek 

comment in the proposed rule on the 

costs to small financial institutions of 

providing the pricing data and consider 

aligning the requirements of Regulation 

C to the pricing data used in other 

Federal and State mortgage 

disclosures.369 Rate spread is not 

included on Federal or State closing 

disclosures, but the Bureau is soliciting 

feedback on the cost to small financial 

institutions. 

The proposed rule moves parts of 

appendix A to supplement I, modifies 

the existing commentary, and adds 

several clarifying comments. Current 

comment 4(a)(12)(ii)–2 is incorporated 

into proposed comment 4(a)(12)–4. 

Proposed comment 4(a)(12)–2, which 

substantially incorporates current 

comment 4(a)(12)(ii)–3, clarifies that the 

Bureau publishes on the FFIEC’s Web 

site (http://www.ffiec.gov/hmda), in 

tables entitled ‘‘Average Prime Offer 

Rates-Fixed’’ and ‘‘Average Prime Offer 

Rates-Adjustable,’’ current and historic 

average prime offer rates for a wide 

variety of closed-end transaction types. 

The Bureau calculates an annual 

percentage rate, consistent with 

Regulation Z, for each transaction type 

for which pricing terms are available 

from the survey described in comment 

4(a)(12)–1. The Bureau uses loan pricing 

terms available in the survey and other 

information to estimate annual 

percentage rates for other types of 

transactions for which direct survey 

data are not available. The Bureau 

publishes on the FFIEC’s Web site the 

methodology it uses to arrive at these 

estimates. Proposed comment 4(a)(12)–2 

explains that a financial institution may 

either use the average prime offer rates 

published by the Bureau or may 

determine average prime offer rates 

itself by employing the methodology 

published on the FFIEC Web site. A 

financial institution that determines 

average prime offer rates itself, however, 

is responsible for correctly determining 

the rates in accordance with the 

published methodology. 

Proposed comment 4(a)(12)–3 clarifies 

that the requirements of this part refer 

to the covered loan’s annual percentage 

rate. A financial institution complies 

with § 1003.4(a)(12)(i) by relying on the 

annual percentage rate for the covered 

loan, as calculated and disclosed 

pursuant to Regulation Z § 1026.18 

(closed-end credit transactions) or 

1026.40 (open-end credit plans) as 

applicable. 

Proposed comment 4(a)(12)–4 

discusses the fact that the rate spread 

calculation in § 1003.4(a)(12)(i) is 

defined by reference to a comparable 

transaction, which is determined 

according to the covered loan’s 

amortization type (i.e., fixed- or 

variable-rate) and loan term. For openend covered loans, § 1003.4(a)(12)(i) 

requires a financial institution to 

identify the most closely comparable 

closed-end transaction. The tables of 

average prime offer rates published by 

the Bureau (see comment 4(a)(12)–2) 

provide additional detail about how to 

identify the comparable transaction. 

Proposed comment 4(a)(12)–4.i clarifies 

that for fixed-rate covered loans, the 

term for identifying the comparable 

transaction is the transaction’s maturity 

(i.e., the period until the last payment 

will be due under the loan contract or 

open-end credit agreement). If an openend credit plan has a fixed rate but no 

definite plan length, a financial 

institution complies with 

§ 1003.4(a)(12)(i) by using a 30-year 

fixed-rate loan as the most closely 

comparable closed-end transaction. 

Financial institutions may refer to the 

table on the FFIEC Web site entitled 

‘‘Average Prime Offer Rates-Fixed’’ 

when identifying a comparable fixedrate transaction. 

Proposed comment 4(a)(12)–4.ii 

clarifies that for variable-rate covered 

loans, the term for identifying the 

comparable transaction is the initial, 

fixed-rate period (i.e., the period until 

the first scheduled rate adjustment). For 

example, five years is the relevant term 

for a variable-rate transaction with a 

five-year, fixed-rate introductory period 

that is amortized over thirty years. 

Financial institutions may refer to the 

table on the FFIEC Web site entitled 

‘‘Average Prime Offer Rates-Variable’’ 

when identifying a comparable variablerate transaction. If an open-end credit 

plan has a variable rate and an optional, 

fixed-rate feature, a financial institution 

uses the rate table for variable-rate 

transactions. 

Proposed comment 4(a)(12)–4.iii 

explains that when a covered loan’s 

term to maturity (or, for a variable-rate 

transaction, the initial fixed-rate period) 

is not in whole years, the financial 

institution uses the number of whole 

years closest to the actual loan term or, 

if the actual loan term is exactly halfway 

between two whole years, by using the 

shorter loan term. For example, for a 

loan term of ten years and three months, 

the relevant term is ten years; for a loan 

term of ten years and nine months, the 

relevant term is 11 years; for a loan term 

of ten years and six months, the relevant 

term is ten years. If a loan term includes 

an odd number of days, in addition to 

an odd number of months, the financial 

institution rounds to the nearest whole 

month, or rounds down if the number 

of odd days is exactly halfway between 

two months. The financial institution 

rounds to one year any covered loan 

with a term shorter than six months, 

including variable-rate covered loans 

with no initial, fixed-rate periods. For 

example, if an open-end covered loan 

has a rate that varies according to an 

index plus a margin, with no 

introductory, fixed-rate period, the 

transaction term is one year. 

Proposed comment 4(a)(12)–4.iv 

clarifies that if the amortization period 

of a covered loan is longer than the term 

of the transaction to maturity, 

§ 1003.4(a)(12)(i) requires a financial 

institution to use the loan term to 

determine the applicable average prime 

offer rate. For example, assume a 

financial institution originates a closedend, fixed-rate loan that has a term to 

maturity of five years and a thirty-year 

amortization period that results in a 

balloon payment. The financial 

institution complies with 

§ 1003.4(a)(12)(i) by using the five-year 

loan term. 

Proposed comment 4(a)(12)–5 clarifies 

that the relevant date to use to 

determine the average prime offer rate 

for a comparable transaction is the date 

on which the covered loan’s interest rate 

was set by the financial institution for 

the final time before closing or account 

opening. This proposed comment also 

contains several illustrative examples. 

Proposed comment 4(a)(12)–5.i explains 

that if an interest rate is set pursuant to 

a ‘‘lock-in’’ agreement between the 

financial institution and the borrower, 

then the date on which the agreement 

fixes the interest rate is the date the rate 

was set. Except as provided in comment 

4(a)(12)–4.iii, if a rate is reset after a 

lock-in agreement is executed (for 

example, because the borrower exercises 

a float-down option or the agreement 

expires), then the relevant date is the 

date the financial institution exercises 

discretion in setting the rate for the final 

time before closing or account opening. 

The same rule applies when a rate-lock 

agreement is extended and the rate is 

reset at the same rate, regardless of 

whether market rates have increased, 

decreased, or remained the same since 

the initial rate was set. If no lock-in 

agreement is executed, then the relevant 

date is the date on which the institution 

sets the rate for the final time before 

closing or account opening. 

Proposed comment 4(a)(12)–5.ii 

clarifies that if a financial institution 

issues a rate-lock commitment under 

one loan program, the borrower 

subsequently changes to another 

program that is subject to different 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51781 

370Section 1003.4(a)(13). 

371The 2013 HOEPA Final Rule provides for a 

prepayment penalty coverage test in addition to the 

APR and points-and-fees coverage tests. See 78 FR 

6855 (Jan. 31, 2013). However, because the rule 

prohibits prepayment penalties for high-cost 

mortgages, the Bureau’s proposed modifications to 

§ 1003.4(a)(13) omits prepayment penalty from the 

list of possible high-cost mortgage triggers provided 

in appendix A. 

pricing terms, and the financial 

institution changes the rate promised to 

the borrower under the rate-lock 

commitment accordingly, the rate-set 

date is the date of the program change. 

However, if the financial institution 

changes the promised rate to the rate 

that would have been available to the 

borrower under the new program on the 

date of the original rate-lock 

commitment, then that is the date the 

rate is set, provided the financial 

institution consistently follows that 

practice in all such cases or the original 

rate-lock agreement so provided. The 

comment contains several illustrative 

examples. 

Proposed comment 4(a)(12)–5.iii 

clarifies that when a financial 

institution has reporting responsibility 

for a covered loan that it received from 

a broker, as discussed in comment 4(a)– 

4 (e.g., because the financial institution 

makes a credit decision prior to closing 

or account opening), the rate-set date is 

the last date the financial institution set 

the rate with the broker, not the date the 

broker set the borrower’s rate. 

Proposed comment 4(a)(12)–6 

explains that a financial institution is 

required to compare the covered loan’s 

annual percentage rate to the most 

recently available average prime offer 

rate that was in effect for the 

comparable transaction as of the rate-set 

date. Proposed comment 4(a)(12)–6 also 

explains that ‘‘most recently available’’ 

means the average prime offer rate set 

forth in the applicable table with the 

most recent effective date as of the date 

the interest rate was set. However, 

§ 1003.4(a)(12)(i) does not permit a 

financial institution to use an average 

prime offer rate before its effective date. 

Proposed instruction 4(a)(12) in 

appendix A provides technical 

instructions regarding how to enter rate 

spread data on the loan application 

register. Proposed instruction 4(a)(12)–1 

provides technical instructions for 

entering the rate spread. Proposed 

instruction 4(a)(12)–2 provides that a 

financial institution completing the loan 

application register must enter ‘‘NA’’ for 

a loan not subject to Regulation Z, 12 

CFR part 1026, a reverse mortgage, a 

loan that the financial institution 

purchased or assumed, or an application 

that does not result in a loan origination 

or the opening of a line of credit, except 

for applications that have been 

approved but not accepted by the 

applicant. 

4(a)(13) 

Regulation C currently requires 

financial institutions to report whether 

a loan is subject to HOEPA, as 

implemented by Regulation Z 

§ 1026.32.370 The Board found that 

information concerning the HOEPA 

status of a loan would produce more 

useful data about the mortgage market, 

particularly the subprime market. For 

the reasons discussed below, the Bureau 

proposes to require financial 

institutions to report whether the loan is 

a high-cost mortgage because its APR 

exceeds HOEPA’s APR threshold or 

because its points and fees exceed the 

threshold for HOEPA coverage. 

Information regarding the high-cost 

mortgage status of a loan has been 

essential to understanding changes in 

the mortgage market, particularly the 

subprime market, and to assessing fair 

lending concerns related to loan pricing. 

Currently, financial institutions must 

report only whether a loan is or is not 

a high-cost mortgage. The Bureau has 

received feedback suggesting that 

information regarding the reason for a 

loan’s HOEPA status—whether the loan 

is considered a high-cost mortgage 

because of annual percentage rate, 

points and fees, or both—might improve 

the usefulness of the HMDA data.371 For 

example, a loan might be flagged as a 

HOEPA loan despite having a low APR, 

raising questions about the other 

characteristics—such as points and 

fees—of the loan. Similarly, an 

expanded HOEPA flag could enable 

greater insight into which specific 

triggers are most prevalent among highcost mortgages. 

The Bureau believes that the burden 

of the expanded HOEPA status reporting 

requirement will be lessened by the fact 

that financial institutions will likely 

have to determine which, if any, of the 

high-cost mortgage triggers are satisfied 

in order to comply with Regulation Z 

§ 1026.32. But the Bureau also 

recognizes that the level of complexity 

proposed above is not currently present 

in either Regulation C or the MISMO 

definition of the HOEPA status indicator 

as used in the ULDD. Despite the 

potential increased burden described 

above, feedback received pursuant to 

the Bureau’s outreach activities 

indicates that a HOEPA status data 

point that describes the HOEPA status 

trigger may be justified. Accordingly, 

the Bureau proposes to modify 

§ 1003.4(a)(13) and the technical 

instructions to § 1003.4(a)(13) contained 

in appendix A to provide that a 

financial institution shall report, for 

covered loans subject to the Home 

Ownership and Equity Protection Act of 

1994, whether the covered loan is a 

high-cost mortgage under Regulation Z 

§ 1026.32(a), and the reason that the 

covered loan qualifies as a high-cost 

mortgage, if applicable. The Bureau 

seeks comment regarding the general 

utility of the modified data and on the 

costs associated with reporting the data. 

Proposed instruction 4(a)(13) in 

appendix A provides technical 

instructions regarding how to enter the 

high-cost mortgage data on the loan 

application register. Proposed 

instruction 4(a)(13)–1 provides that a 

financial institution must use one of 

four codes to indicate a loan’s HOEPA 

status: Code 1 if the annual percentage 

rate exceeds the high-cost mortgage 

thresholds; Code 2 if the points and fees 

exceed the high-cost mortgage 

thresholds; Code 3 if both the annual 

percentage rate and the points and fees 

for the transaction exceed the high-cost 

mortgage thresholds; and Code 4 for all 

other cases, such as for applications that 

do not result in originations or loans not 

subject to the HOEPA. 

The changes to § 1003.4(a)(13) are 

proposed pursuant to the Bureau’s 

authority under sections 305(a) and 

304(b)(5)(D) of HMDA. The Bureau 

believes these reporting requirements 

are necessary to carry out the purposes 

of HMDA. The mortgage market has 

changed significantly since HMDA was 

enacted and since the Board required 

the reporting of additional loan pricing 

data in 2002, and it continues to evolve. 

For the reasons given above, the 

proposal will improve the usefulness 

and continued utility of HMDA data and 

help the public and public officials 

assess whether financial institutions are 

serving the housing needs of their 

communities. 

4(a)(14) 

Current § 1003.4(a)(14) requires 

financial institutions to report the lien 

status of the loan or application (first 

lien, subordinate lien, or not secured by 

a lien on a dwelling). The technical 

instructions in current appendix A 

provide that, for loans that a financial 

institution originates and for 

applications that do not result in an 

origination, a financial institution shall 

report the lien status as one of the 

following: Secured by a first lien, 

secured by a subordinate lien, not 

secured by a lien, or not applicable 

(purchased loan). 

The Board first promulgated the lien 

status requirement in 2002 because, 

among other reasons, ‘‘[d]ata on lien 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS2
51782 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

372 67 FR 43218, 43220 (June 27, 2002). 

373See Small Business Review Panel Report at 42. 

374 Id. at 43. 

status may help explain some pricing 

disparities, because interest rates, and 

therefore APRs, vary according to lien 

status. Rates on first-lien loans are 

generally lower than rates on 

subordinate-lien or unsecured 

loans.’’ 372 The Bureau agrees with the 

Board’s reasoning and believes that data 

on lien status furthers HMDA’s purpose 

of assisting in understanding loan 

pricing to identify possible 

discriminatory lending patterns. 

Pursuant to the Bureau’s authority 

under sections 305(a) and 304(b)(6)(J) of 

HMDA, the Bureau proposes to modify 

§ 1003.4(a)(14) to require reporting of 

the priority of the lien against the 

subject property that secures or would 

secure the loan. The proposal removes 

the current exclusion of reporting lien 

status on purchased loans. 

Other than amending the reporting 

requirement related to the lien status on 

purchased loans, the proposal is 

substantially similar to the current 

requirement with modifications to 

conform to the MISMO data standard. 

As discussed in part II.B above, the 

Bureau believes that HMDA compliance 

and data submission can be made easier 

by aligning the requirements of 

Regulation C, to the extent practicable, 

to existing industry standards for 

collecting and transmitting mortgage 

data. In furtherance of this proposed 

alignment, the Bureau determined that a 

similar definition for lien status exists 

in MISMO, which specifies the priority 

of the lien against the subject property 

and provides for the following 

enumerations: First lien, second lien, 

third lien, fourth lien, and other. The 

‘‘other’’ enumeration is designed to 

capture the priority of the lien against 

the subject property beyond a fourth 

lien, for example, a fifth lien or sixth 

lien. 

Given that loan terms, including loan 

pricing, vary based on lien status, and 

in light of the Bureau’s proposal to 

require reporting of certain pricing data 

for purchased loans, such as the interest 

rate, the Bureau believes that requiring 

financial institutions to report the lien 

status of purchased loans would further 

enhance the utility of HMDA data 

overall. The liquidity provided by the 

secondary market is a critical 

component of the modern mortgage 

market, and information about the types 

of loans being purchased in a particular 

area, and the pricing terms associated 

with those purchased loans, is needed 

to understand whether the housing 

needs of communities are being 

fulfilled. This information is 

particularly important in many 

communities where neighborhood 

revitalization and affordable housing 

efforts depend on the liquidity provided 

by purchasers of mortgage loans. Thus, 

by requiring additional information on 

subordinate lien lending, the Bureau 

believes that this proposal would ensure 

that the public and public officials are 

provided with sufficient information to 

enable them to determine whether 

financial institutions are fulfilling their 

obligations to serve the housing needs of 

the communities and neighborhoods in 

which they are located. Furthermore, 

local and State housing finance agency 

programs facilitate the mortgage market 

for low- to moderate-income borrowers, 

often by offering programs to purchase 

or insure loans originated by a private 

institution. Since the HMDA data 

reported by financial institutions does 

not include the lien status of purchased 

loans, it is difficult to determine the 

pricing characteristics of the private 

secondary market. Lien status 

information on purchased loans would 

help public entities, such as local and 

State housing finance agencies, 

understand how to complement the 

liquidity provided by the secondary 

market in certain communities, thereby 

maximizing the effectiveness of such 

public programs. Thus, the Bureau 

believes that requiring that such data be 

reported would assist public officials in 

their determination of the distribution 

of public sector investments in a 

manner designed to improve the private 

investment environment. Additionally, 

providing lien status information to 

purchasers is standard industry practice 

and is supported by MISMO. For these 

reasons, the Bureau believes that data 

on the lien status of purchased loans 

will further the purposes of HMDA. 

Modifying the current reporting 

requirement in § 1003.4(a)(14) will 

enhance data collected under 

Regulation C and facilitate compliance 

by better aligning the data collected 

with industry practice. Based on these 

considerations, pursuant to the Bureau’s 

authority under sections 305(a) and 

304(b)(6)(J) of HMDA, the Bureau is 

proposing to modify § 1003.4(a)(14) to 

provide that a financial institution shall 

report the priority of the lien against the 

property identified under § 1003.4(a)(9), 

and is also proposing to require 

reporting of this information for 

purchased loans. The Bureau solicits 

feedback regarding whether this 

proposed modification is appropriate 

generally, and specifically solicits 

feedback regarding the potential 

burdens that may result from this 

proposal to align with the industry data 

standard. The Bureau also solicits 

feedback regarding whether alignment 

with the MISMO industry standard 

would benefit any other business 

operations of a financial institution. 

As discussed in the section-by-section 

analysis of § 1003.4(a), during the Small 

Business Review Panel process, the 

small entity representatives’ feedback 

on adopting an industry data standard 

depended on whether the small entity 

representative sells loans in the 

secondary market, or whether their Loan 

Origination System vendor’s system is 

aligned with industry data standards.373

The Small Business Review Panel 

recommended that the Bureau seek 

comment in the proposed rule from 

small financial institutions about 

whether they, or their vendors, use 

MISMO-compliant data definitions and 

standards, and the potential effect on 

small financial institutions of alignment 

of the HMDA data requirements with 

MISMO data standards.374 Consistent 

with the Small Business Review Panel’s 

recommendations, the Bureau solicits 

feedback on these issues. 

The Bureau is proposing to modify 

the technical instruction in appendix A 

regarding how to enter lien status on the 

loan application register. Like the 

current instruction, proposed 

instruction 4(a)(14)–1 directs financial 

institutions to enter the priority of the 

lien against the property by entering the 

applicable code from a list. Proposed 

instruction 4(a)(14)–1 modifies the 

current instruction in four ways. First, 

the Bureau proposes to remove the 

current instruction for reporting ‘‘not 

applicable’’ for purchased loans and 

proposes instruction 4(a)(14)–1.a, which 

requires that the priority of the lien 

against the property be entered not only 

for covered loans that a financial 

institution originates and for 

applications that do not result in an 

origination, but also for covered loans 

purchased. Second, in an effort to align 

with the industry data standard, 

proposed instruction 4(a)(14)–1 directs 

financial institutions to enter whether 

the priority of the lien against the 

property is a first lien, second lien, third 

lien, fourth lien, or other. Third, as 

discussed above, the Bureau proposes to 

modify Regulation C to require reporting 

only of dwelling-secured transactions 

and proposes to remove reporting of 

unsecured home improvement loans. As 

such, the current option to enter ‘‘not 

secured by a lien’’ would no longer be 

applicable, and the Bureau proposes to 

delete it. Fourth, proposed instruction 

4(a)(14)–1.b requires financial 

institutions to enter Code 5 for ‘‘other’’ 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51783 

375 12 U.S.C. 2803(b)(6)(I). 

376The Dodd-Frank amendments to HMDA added 

new provisions directing the Bureau to develop 

regulations that ‘‘modify or require modification of 

itemized information, for the purpose of protecting 

the privacy interests of the mortgage applicants or 

mortgagors, that is or will be available to the 

public,’’ and identified credit score as a new data 

point that may raise privacy concerns. HMDA 

sections 304(h)(1)(E), (h)(3)(A)(i). See part II.C 

above for discussion of the Bureau’s approach to 

protecting applicant and borrower privacy in light 

of the goals of HMDA. 

377For example, the range for VantageScore 3.0 

scores is 300 to 850, but earlier VantageScore 

models have a range of 501 to 990. See 

VantageScore, How the Scores Range, http://

your.vantagescore.com/interpret_scores. 

when the priority of the lien against the 

property is other than one identified in 

Codes 1 through 4 (for example, secured 

by a fifth lien or sixth lien). 

The Bureau believes that its proposed 

modification to the current reporting 

requirement under § 1003.4(a)(14) is 

appropriate to align with the industry 

data standard. However, the Bureau 

recognizes the potential burdens that 

may result from requiring financial 

institutions to report the lien status of 

the property as a third lien, fourth lien, 

or other lien. The Bureau solicits 

feedback regarding whether the Bureau 

should maintain the current reporting 

requirement (secured by a first lien or 

subordinate lien) modified to conform 

to the proposed removal of unsecured 

home improvement loans, or whether 

financial institutions prefer to report the 

actual priority of the lien against the 

property (secured by a first lien, second 

lien, third lien, fourth lien, or other). 

The Bureau also recognizes that 

requiring the reporting of lien status for 

purchased loans may impose some 

potential burdens on financial 

institutions. However, the Bureau 

believes that such information is 

evident on the face of the loan 

documents and as such the information 

may be readily available to financial 

institutions. The Bureau believes that 

the potential benefits to the public and 

public officials, as discussed above, 

justify potential burdens. The Bureau 

solicits feedback on the general utility of 

lien status data on purchased loans and 

on the unique costs and burdens 

associated with collecting and reporting 

the data that financial institutions may 

face as a result of the proposal. 

In order to conform the commentary 

on lien status to the proposed 

requirement to report the priority of the 

lien, the Bureau is proposing technical 

modifications to comment 4(a)(14)–1. In 

addition, comment 4(a)(14)–1 is 

amended to provide guidance on 

reporting lien status for purchased 

loans; it explains that, for covered loans 

purchased by a financial institution, 

lien status is determined by reference to 

the best information readily available to 

the financial institution at the time of 

purchase. Comment 4(a)(14)–1 is also 

amended to provide additional guidance 

on reporting lien status for applications 

that do not result in originations. The 

amended comment explains that if an 

application does not result in an 

origination and the best information 

readily available to the financial 

institution at the time final action is 

taken indicates that there is a mortgage 

on the property that would not have 

been paid off as part of the transaction, 

but the financial institution is not able 

to determine, based on the best 

information readily available to it, the 

exact lien priority of the loan applied 

for, the financial institution complies 

with proposed § 1003.4(a)(14) by 

reporting that the property would have 

been secured by a second lien. 

As discussed in the section-by-section 

analysis of proposed § 1003.4(a)(9) and 

in proposed comment 4(a)(9)–2, if more 

than one property is taken, or in the 

case of an application, proposed to be 

taken as security for a single covered 

loan or application, a financial 

institution may report one of the 

properties in a single entry on its loan 

application register or report all of the 

properties using multiple entries on its 

loan application register. Regardless of 

whether a financial institution elects to 

report the transaction in one entry or 

more than one entry, the information 

required by proposed § 1003.4(a)(14) 

should relate to the property identified 

under paragraph 4(a)(9). The Bureau 

proposes to add new comment 4(a)(14)– 

2 which directs financial institutions to 

refer to proposed comment 4(a)(9)–2 

regarding transactions involving 

multiple properties and clarifies that a 

financial institution complies with 

§ 1003.4(a)(14) by reporting lien status 

in a manner consistent with the 

property reported under § 1003.4(a)(9). 

4(a)(15) 

Although credit scores are often a 

critically important factor in 

underwriting and pricing loans, neither 

HMDA nor Regulation C historically has 

required reporting of information 

relating to an applicant’s or borrower’s 

credit score. Section 1094(3)(A)(iv) of 

the Dodd-Frank Act amended section 

304(b) of HMDA to require financial 

institutions to report ‘‘the credit score of 

mortgage applicants and mortgagors, in 

such form as the Bureau may 

prescribe.’’ 375 The Bureau is proposing 

to add new § 1003.4(a)(15) to implement 

this requirement.376

Except for purchased covered loans, 

proposed § 1003.4(a)(15)(i) requires 

financial institutions to report the credit 

score or scores relied on in making the 

credit decision and the name and 

version of the scoring model used to 

generate each credit score. The Bureau 

believes this interpretation of HMDA 

section 304(b)(6)(I) is reasonable 

because the name and version of the 

scoring model are necessary to 

understand any credit scores that would 

be reported, as different models are 

associated with different scoring ranges 

and some models may even have 

different ranges depending on the 

version used.377 This proposal is also 

authorized by HMDA sections 305(a) 

and 304(b)(6)(J), and is necessary and 

proper to effectuate the purposes of 

HMDA, because, among other reasons, it 

facilitates accurate analyses of whether 

financial institutions are serving the 

housing needs of their communities by 

providing adequate home financing to 

qualified applicants. 

The Bureau believes that financial 

institutions that rely on credit scores in 

making credit decisions will be able to 

easily identify the credit score or scores 

they have relied on in making the credit 

decision and the name and version of 

the scoring model used to generate each 

credit score. However, to facilitate 

compliance pursuant to HMDA section 

305(a), the Bureau has excluded 

purchased covered loans from the 

requirements of proposed 

§ 1003.4(a)(15)(i) because the Bureau 

anticipates that it could be burdensome 

for financial institutions that purchase 

loans to identify the credit score or 

scores relied on in making the 

underlying credit decision and the name 

and version of the scoring model used 

to generate each credit score. The 

Bureau solicits feedback on whether this 

exception is appropriate. 

As an alternative to requiring the 

scoring model name and version, the 

Bureau is considering requiring 

financial institutions to indicate the 

range of possible scores for the scoring 

model used. However, the Bureau is 

concerned that the significance of a 

particular score may vary depending on 

the model or version used even for 

models and versions that have identical 

ranges. The Bureau invites comment on 

whether it is appropriate to request the 

name and version of the scoring model 

and whether the Bureau should require 

any other related information to assist in 

interpreting credit score data, such as 

the date on which the credit score was 

created. 

The Bureau is proposing in 

§ 1003.4(a)(15)(ii) to interpret ‘‘credit 

score’’ to have the same meaning as in 

section 609(f)(2)(A) of the Fair Credit 


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51784 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

378According to Regulation B, a credit scoring 

system is ‘‘a system that evaluates an applicant’s 

creditworthiness mechanically, based on key 

attributes of the applicant and aspects of the 

transaction, and that determines, alone or in 

conjunction with an evaluation of additional 

information about the applicant, whether an 

applicant is deemed creditworthy.’’ Regulation B 

§ 1002.2(p)(1). The four-part definition of an 

‘‘empirically derived, demonstrably and statistically 

sound, credit scoring system’’ in Regulation B 

§ 1002.2(p)(1) establishes the criteria that a credit 

system must meet in order to use age as a predictive 

factor. Regulation B comment 2(p)–1. 

379FDIC Assessments, Large Bank Pricing, 77 FR 

66000 (Oct. 31, 2012). 

Reporting Act (FCRA), 15 U.S.C. 

1681g(f)(2)(A). The Dodd-Frank Act 

amendments to HMDA do not provide 

a definition of ‘‘credit score.’’ To 

provide clarity, proposed 

§ 1003.4(a)(15)(ii) incorporates by 

reference the definition in FCRA section 

609(f)(2)(A), which is the only 

definition of ‘‘credit score’’ that appears 

in the FCRA or Regulation V. This 

definition applies for purposes of the 

credit score disclosure requirements in 

FCRA sections 609(f) and 615 and is 

incorporated by reference into the 

Bureau’s risk-based pricing rule by 

Regulation V § 1022.71(l). FCRA section 

609(f)(2)(A) provides: 

The term ‘‘credit score’’— 

(i) Means a numerical value or a 

categorization derived from a statistical 

tool or modeling system used by a 

person who makes or arranges a loan to 

predict the likelihood of certain credit 

behaviors, including default (and the 

numerical value or the categorization 

derived from such analysis may also be 

referred to as a ‘‘risk predictor’’ or ‘‘risk 

score’’); and 

(ii) does not include— 

(I) Any mortgage score or rating of an 

automated underwriting system that 

considers one or more factors in 

addition to credit information, 

including the loan to value ratio, the 

amount of down payment, or the 

financial assets of a consumer; or 

(II) any other elements of the 

underwriting process or underwriting 

decision. 

The Bureau believes that FCRA 

section 609(f)(2)(A) provides a 

reasonable definition of ‘‘credit score’’ 

that is broadly familiar to financial 

institutions that are already subject to 

FCRA and Regulation V requirements. 

Alternatively, the Bureau could define 

‘‘credit score’’ based on the Regulation 

B definitions of ‘‘credit scoring system’’ 

or ‘‘empirically derived, demonstrably 

and statistically sound, credit scoring 

system.’’ 378 Another alternative would 

be to interpret credit score to mean the 

probability of default, using a concept 

similar to the probability of default 

metric that the FDIC uses in 

determining assessment rates for large 

and highly complex insured depository 

institutions.379 The Bureau believes that 

the FCRA section 609(f)(2)(A) definition 

is the most appropriate because it 

provides a general purpose definition 

that is familiar to industry, but the 

Bureau solicits feedback on whether 

Regulation C should instead use a 

different definition of ‘‘credit score.’’ 

Proposed comment 4(a)(15)–1 

explains that a financial institution 

relies on a credit score in making the 

credit decision if the credit score was a 

factor in the credit decision even if it 

was not a dispositive factor. For 

example, if a credit score is one of 

multiple factors in a financial 

institution’s credit decision, the 

financial institution has relied on the 

credit score even if the financial 

institution denies the application 

because one or more underwriting 

requirements other than the credit score 

are not satisfied. 

Proposed comment 4(a)(15)–2 

addresses circumstances where a 

financial institution obtains or creates 

multiple credit scores for a single 

applicant or borrower. It explains that, 

when a financial institution obtains or 

creates two or more credit scores for a 

single applicant or borrower but relies 

on only one score in making the credit 

decision, the financial institution 

complies with proposed § 1003.4(a)(15) 

by reporting that credit score and 

information about the scoring model 

used. For example, a financial 

institution that relies on the middle of 

the scores reported would report the 

middle score, and a financial institution 

that relies on the average of all of the 

scores reported would report the 

average score. 

Proposed comment 4(a)(15)–2 also 

addresses circumstances in which a 

financial institution relies on multiple 

scores for the applicant or borrower in 

making the credit decision. It explains 

that in such circumstances proposed 

§ 1003.4(a)(15) requires the institution 

to report one of the credit scores for the 

borrower or applicant that was relied on 

in making the credit decision. In 

choosing which credit score to report in 

this circumstance, a financial institution 

need not use the same approach for its 

entire HMDA submission but should be 

generally consistent. For example, a 

financial institution could routinely use 

one approach within a particular 

division of the institution or for a 

category of covered loans. The proposed 

comment also indicates that in instances 

such as these, the financial institution 

should report the name and version of 

the credit scoring model for the score 

reported. 

Proposed comment 4(a)(15)–3 

addresses situations involving credit 

scores for multiple applicants or 

borrowers. In a transaction involving 

two or more applicants or borrowers for 

which the financial institution relies on 

a single credit score in making the credit 

decision for the transaction, the 

institution complies with proposed 

§ 1003.4(a)(15) by reporting that credit 

score. Otherwise, a financial institution 

complies with proposed § 1003.4(a)(15) 

by reporting a credit score for the 

applicant or borrower that it relied on 

in making the credit decision, if any, 

and a credit score for the first coapplicant or co-borrower that it relied 

on in making the credit decision, if any. 

To illustrate, assume a transaction 

involves one applicant and one coapplicant and that the financial 

institution obtains or creates two credit 

scores for the applicant and two credit 

scores for the co-applicant. Assume 

further that the financial institution 

relies on the lowest, highest, most 

recent, or average of all of the credit 

scores obtained or created to make the 

credit decision for the transaction. The 

financial institution would comply with 

proposed § 1003.4(a)(15) by reporting 

that credit score. Alternatively, assume 

a transaction involves one applicant and 

one co-applicant and that the financial 

institution obtains or creates three credit 

scores for the applicant and three credit 

scores for the co-applicant. Assume 

further that the financial institution 

relies on the middle credit score for the 

applicant and the middle credit score 

for the co-applicant to make the credit 

decision for the transaction. The 

financial institution would comply with 

proposed § 1003.4(a)(15) by reporting 

both the middle score for the applicant 

and the middle score for the coapplicant. 

The Bureau believes that the approach 

described above for transactions 

involving multiple credit scores and 

multiple applicants or borrowers would 

limit the number of credit scores that 

financial institutions would need to 

report (at most two credit scores per 

application or covered loan), while 

ensuring that financial institutions 

provide meaningful credit score 

information. The Bureau invites 

comment on whether proposed 

§ 1003.4(a)(15) and its associated 

commentary provide an appropriate 

approach to handling situations 

involving multiple credit scores and 

multiple applicants or borrowers. 

Proposed comment 4(a)(15)–4 clarifies 

that the financial institution complies 

with § 1003.4(a)(15) by reporting not 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51785 

380 12 CFR 27.3(a)(1)(i), 128.6, 390.147. 

381 15 U.S.C. 1691 et seq.; 42 U.S.C. 3601 et seq. 

Many financial institutions opt not to report denial 

reasons under current Regulation C. However, 

ECOA and Regulation B require all financial 

institutions to provide applicants the reasons for 

denial, or a notice of their right to receive those 

denial reasons, and to maintain records of 

compliance. See Regulation B §§ 1002.9 and 

1002.12, 15 U.S.C. 1691(d). 

382E.g., San Francisco Hearing, supra note 133. 

383See supra note 364. 

384See Small Business Review Panel Report at 39. 

385 Id. at 26. 

386 Id. 

387 Id. at 26–7. 

388 Id. at 27. 

applicable if a file was closed for 

incompleteness or the application was 

withdrawn before a credit decision was 

made. It also clarifies that a financial 

institution complies with § 1003.4(a)(15) 

by reporting not applicable if it makes 

a credit decision without relying on a 

credit score for the applicant or 

borrower. 

In appendix A, proposed instruction 

4(a)(15)–1 directs financial institutions 

to enter the credit scores relied on in 

making the credit decision into column 

‘‘A’’ for the applicant or borrower and, 

where required by Regulation C, into 

column ‘‘CA’’ for the first co-applicant 

or co-borrower. Where a financial 

institution is required to report a single 

score for the transaction that 

corresponds to multiple applicants or 

borrowers, proposed instruction 

4(a)(15)–1 directs the financial 

institution to use column ‘‘A.’’ 

Proposed instruction 4(a)(15)–2 

provides the codes that financial 

institutions would use for each credit 

score reported to indicate the name and 

version of the scoring model used to 

generate the credit score relied on in 

making the credit decision, using 

column ‘‘A’’ and column ‘‘CA’’ as 

applicable. These include codes for the 

following models: Equifax Beacon 5.0, 

Experian Fair Isaac, FICO Risk Score 

Classic 04, FICO Risk Score Classic 98, 

VantageScore 2.0, and VantageScore 3.0. 

They also include a code to use if more 

than one credit scoring model was used 

in developing the credit score, as well 

as a code for any other credit scoring 

model that is not listed, a code for 

purchased loans, and a code for use if 

the financial institution did not rely on 

a credit score in making the credit 

decision or if a file was closed for 

incompleteness or an application was 

withdrawn before a credit decision was 

made. If the credit scoring model is one 

that is not listed, proposed instruction 

4(a)(15)–2.b instructs the financial 

institution to provide the name and 

version of the scoring model used in a 

free-form text field. The Bureau invites 

comment on whether these codes and 

the fields described above are 

appropriate for reporting credit score 

data and on any alternative approaches 

that might be used for reporting this 

information. 

4(a)(16) 

Section 1003.4(c)(1) currently permits 

optional reporting of the reasons for 

denial of a loan application. However, 

certain financial institutions supervised 

by the Office of the Comptroller of the 

Currency (OCC) and the Federal Deposit 

Insurance Corporation (FDIC) are 

required by those agencies to report 

denial reasons on their HMDA loan 

application registers.380 For the reasons 

discussed below, the Bureau is 

proposing to require all financial 

institutions subject to HMDA reporting 

to report the reasons for denial of a loan 

application. 

In general, the Bureau believes that 

the statistical value of optionally 

reported data is lessened because of the 

lack of standardization across all HMDA 

reporters. In addition, the reasons an 

application is denied are critical to 

understanding the financial institution’s 

credit decision and to screen for 

potential violations of 

antidiscrimination laws, such as ECOA 

and the Fair Housing Act.381 The 

Bureau has received feedback suggesting 

that requiring the collection of the 

reasons for denial of an application 

would improve the usefulness of HMDA 

data.382 Denial reasons are important for 

a variety of purposes including, for 

example, assisting examiners in their 

reviews of denial disparities and 

underwriting exceptions. 

Requiring the collection of the reasons 

for denial may facilitate more efficient, 

and less burdensome, fair lending 

examinations by the Bureau and other 

financial regulatory agencies, thereby 

furthering HMDA’s purpose of assisting 

in identifying possible discriminatory 

lending patterns and enforcing 

antidiscrimination statutes. 

Furthermore, as discussed above, 

certain financial institutions supervised 

by the OCC and the FDIC are required 

by those agencies to report denial 

reasons.383 For these reasons, pursuant 

to its authority under HMDA sections 

305(a) and 304(b)(6)(J), the Bureau 

proposes to require all financial 

institutions to report reasons for denial 

of an application. The Bureau believes 

this information is necessary to carry 

out HMDA’s purposes, because it will 

provide more consistent and meaningful 

data, which will assist in identifying 

whether financial institutions are 

serving the housing needs of their 

communities, as well as assist in 

identifying possible discriminatory 

lending patterns and enforcing 

antidiscrimination statutes. 

During the Small Business Review 

Panel process, a number of small entity 

representatives noted that a financial 

institution may have several reasons for 

denying a loan, which could complicate 

reporting.384 Some small entity 

representatives expressed concern about 

mandatory reporting of denial reasons, 

particularly where there are multiple 

reasons for a denial.385 In such 

instances, one small entity 

representative was concerned that the 

HMDA loan application register may not 

provide the full picture, while another 

noted that manual entry of the reasons 

would be required.386 Another small 

entity representative suggested an 

‘‘other’’ category if financial institutions 

are required to report denial reasons.387

In addition, one small entity 

representative supported reporting of 

denial reasons, citing its importance for 

fair lending analysis.388 While the Small 

Business Review Panel did not make a 

recommendation in light of these 

comments, the Bureau solicits feedback 

on these issues. 

Proposed instruction 4(a)(16) in 

appendix A provides technical 

instructions regarding how to enter the 

denial reason data on the loan 

application register. Proposed 

instruction 4(a)(16)–1 provides that a 

financial institution must indicate the 

principal reason(s) for denial, indicating 

up to three reasons. The proposed 

instruction modifies the current 

instruction in three ways. First, the 

proposed instruction clarifies that a 

financial institution must list the 

‘‘principal’’ reasons for denial. Second, 

the Bureau is proposing a free-form text 

field for denial reasons other than those 

provided in appendix A to account for 

the variety of reasons that may exist and 

to improve the utility of the ‘‘Other’’ 

data. The Bureau explains in proposed 

instruction 4(a)(16)–2 that, when a 

financial institution denies an 

application for a principal reason not 

included on the list of denial reasons in 

appendix A, an institution enters the 

corresponding code for ‘‘Other’’ and 

enters the principal denial reason(s). 

Financial institutions would no longer 

simply enter the corresponding code for 

‘‘Other’’ on the loan application register 

if the reason for denial is not provided 

on the list but also would be required 

to enter the principal denial reason(s) in 

the free-form text field. Third, the 

proposed instruction adds a code for 

‘‘not applicable’’ and explains in 

proposed instruction 4(a)(16)–3 that this 

code should be used by a financial 


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51786 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

389Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA to provide for the 

reporting of total points and fees. 

390 15 U.S.C. 1602(aa)(4) is part of TILA. Prior to 

amendments made by the Dodd-Frank Act, that 

section generally defined ‘‘points and fees’’ for the 

purpose of determining whether a transaction was 

a high-cost mortgage. See 15 U.S.C. 1602(aa)(4) 

(2006). Section 1100A of the Dodd Frank Act 

redesignated subsection 1602(aa)(4) as subsection 

1602(bb)(4), where it is currently codified. In light 

of that redesignation, the Bureau interprets HMDA 

section 304(b) as directing it to take into account 

15 U.S.C. 1602(bb)(4) and its implementing 

regulations, as those provisions address ‘‘points and 

fees’’ and because current subsection 1602(aa)(4) is 

no longer relevant to a determination regarding 

points and fees. 

391See 78 FR 6856 (Jan. 31, 2013); 78 FR 6408 

(Jan. 30, 2013). 

institution if the action taken on the 

application was not a denial pursuant to 

§ 1003.4(a)(8), such as if the application 

was withdrawn before a credit decision 

was made or the file was closed for 

incompleteness. Financial institutions 

would no longer leave this column 

blank on the loan application register 

but instead would enter the 

corresponding code for ‘‘not 

applicable.’’ 

The Bureau solicits feedback 

regarding whether the current codes in 

appendix A relating to reasons for 

denial (debt-to-income ratio, 

employment history, credit history, 

collateral, insufficient cash, unverifiable 

information, credit application 

incomplete, mortgage insurance denied, 

and other) should be modified. For 

example, the Bureau solicits feedback as 

to whether there are additional reasons 

for denying an application that are 

commonly used by financial institutions 

but are not present in the list of denial 

reasons. The Bureau also solicits 

feedback on the proposed requirement 

that a financial institution enter the 

principal denial reason(s) in the freeform text field when ‘‘Other’’ is entered 

in the loan application register. 

The Bureau is proposing to renumber 

current instruction I.F.2 of appendix A 

as instruction 4(a)(16)–4. Proposed 

instruction 4(a)(16)–4 explains how a 

financial institution that uses the model 

form for adverse action contained in 

appendix C to Regulation B (Form C–1, 

Sample Notice of Action Taken and 

Statement of Reasons) should report the 

denial reasons for purposes of HMDA. 

Similar to proposed instruction 

4(a)(16)–2 discussed above, proposed 

instruction 4(a)(16)–4 provides that, 

when a principal reason a financial 

institution denied the application is not 

provided on the list of denial reasons in 

the model form for adverse action 

contained in appendix C to Regulation 

B (Form C–1, Sample Notice of Action 

Taken and Statement of Reasons), 

financial institutions would no longer 

simply enter the corresponding code for 

‘‘Other’’ on the loan application register 

but also would be required to enter the 

principal denial reason(s) in the freeform text field. The Bureau solicits 

feedback regarding whether 

modifications or clarifications would 

assist financial institutions in 

complying with the proposed 

requirement. 

Proposed comment 4(a)(16)–1 clarifies 

that a financial institution complies 

with § 1003.4(a)(16) by reporting the 

principal reason(s) it denied the 

application, indicating up to three 

reasons. The proposed comment 

explains that the reasons reported must 

be specific and accurately describe the 

principal reasons the financial 

institution denied the application. The 

Bureau solicits feedback regarding 

whether additional clarifications would 

assist financial institutions in 

complying with the proposed 

requirement. 

In order to align with proposed 

instructions 4(a)(16)–2 and –4, proposed 

comment 4(a)(16)–2 clarifies that, when 

a principal reason a financial institution 

denied the application is not provided 

on the list of denial reasons in appendix 

A, a financial institution complies with 

proposed § 1003.4(a)(16) by entering 

‘‘Other’’ and reporting the principal 

reason(s) it denied the application. If an 

institution chooses to provide the 

applicant the reason(s) it denied the 

application using the model form 

contained in appendix C to Regulation 

B (Form C–1, Sample Notice of Action 

Taken and Statement of Reasons) or a 

similar form, the financial institution 

complies with proposed § 1003.4(a)(16) 

by entering the ‘‘Other’’ reason(s) that 

were specified on the form by the 

institution. If a financial institution 

chooses to provide the applicant a 

disclosure of the applicant’s right to a 

statement of specific denial reasons 

using the model form contained in 

appendix C to Regulation B (Form C–5, 

Sample Disclosure of Right to Request 

Specific Reasons for Credit Denial) or a 

similar form, or chooses to provide the 

denial reason(s) orally under Regulation 

B § 1002.9(a)(2)(ii), the financial 

institution complies with proposed 

§ 1003.4(a)(16) by entering the principal 

reason(s) it denied the application. The 

Bureau solicits feedback regarding 

whether additional clarifications would 

assist financial institutions in 

complying with the proposed 

requirement. 

4(a)(17) 

Section 304(b) of HMDA 389 requires 

reporting of ‘‘the total points and fees 

payable at origination in connection 

with the mortgage as determined by the 

Bureau, taking into account 15 U.S.C. 

1602(aa)(4).’’ 390 The Bureau proposes to 

implement this provision by requiring 

financial institutions to report the total 

points and fees associated with certain 

mortgage loans. 

In general, the term ‘‘points and fees’’ 

refers to costs associated with the 

origination of a mortgage loan. The 

Bureau proposes to define total points 

and fees by reference to TILA, as 

implemented by Regulation Z 

§ 1026.32(b)(1) or (2). Section 

1026.32(b)(1) defines ‘‘points and fees’’ 

for closed-end credit transactions. For a 

closed-end credit transaction, points 

and fees include all items included in 

the finance charge as specified under 

§ 1026.4(a) and (b), with the exception 

of certain items specifically excluded 

under § 1026.32(b)(1)(i)(A) through (F). 

These excluded items include interest 

or time-price differential; government 

mortgage insurance premiums and 

funding fees; annual private mortgage 

insurance premiums; bona fide thirdparty charges not retained by the 

creditor, loan originator, or an affiliate; 

and certain bona fide discount points 

paid by the consumer. Section 

1026.32(b)(1)(ii) through (vi) lists other 

items that are specifically included in 

points and fees, including compensation 

paid by a consumer or creditor to a loan 

originator; real estate-related charges; 

premiums for various forms of credit 

insurance; the maximum prepayment 

penalty that may be charged or collected 

under the terms of the mortgage loan; 

and the total prepayment penalty 

incurred by the consumer in a refinance 

transaction. Points and fees for openend credit plans are defined in 

§ 1026.32(b)(2). Section 1026.32(b)(2) 

generally includes all of the charges 

described above for closed-end 

transactions, with certain modifications 

and additions, such as the participation 

fees payable at or before account 

opening, and the charge, if any, to draw 

on the credit line. 

The Bureau’s 2013 HOEPA Final Rule 

and 2013 ATR Final Rule both limit the 

points and fees that lenders may charge 

when seeking to avoid HOEPA coverage 

or making a qualified mortgage, 

respectively.391 The Bureau’s 2013 

HOEPA Final Rule provides that a 

transaction is a high-cost mortgage if, 

among other things, the transaction’s 

points and fees exceed 5 percent of the 

total transaction amount or, for loans 

below $20,000, the lesser of 8 percent of 

the total transaction amount or $1,000 

(with the dollar figures also adjusted 

annually for inflation). High-cost 


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392 In addition to the Bureau, section 1412 of the 

Dodd-Frank Act directed the following agencies to 

prescribe qualified mortgage rules with respect to 

loans that they insure, guarantee, or administer: (1) 

the Department of Housing and Urban 

Development, with regard to mortgages insured 

under the National Housing Act; (2) the Department 

of Veterans Affairs, with regard to a loan made or 

guaranteed by the Secretary of Veterans Affairs; (3) 

the Department of Agriculture, with regard to loans 

guaranteed by the Secretary of Agriculture under 42 

U.S.C. 1472(h); and (4) the Rural Housing Service, 

with regard to loans insured by the Rural Housing 

Service. The qualified mortgage prong of the 

proposed points-and-fees provision would not 

apply to qualified mortgage rules promulgated by 

these agencies. Certain loans subject to the qualified 

mortgage rules of the other agencies would, 

however, be covered under the HOEPA prong of the 

points-and-fees provision. 

393See San Francisco Hearing, supra note 133. 

394See Atlanta Hearing, supra note 131. 

395See Small Business Review Panel Report at 

30–31, 55, 102, 108–10, 128. 

396See id. at 42. 

397Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

mortgages are subject to special 

disclosure requirements and restrictions 

on loan terms, and borrowers in highcost mortgages have enhanced remedies 

for violations of the law. The Bureau’s 

2013 ATR Final Rule generally 

precludes a loan from being considered 

a qualified mortgage if the points and 

fees paid by the borrower exceed 3 

percent of the total loan amount. 

Qualified mortgages are entitled to a 

presumption that the creditor making 

the loan has satisfied Regulation Z’s 

ability-to-repay requirements. 

Proposed § 1003.4(a)(17) requires 

financial institutions to report pointsand-fees data for covered loans or 

applications subject either to HOEPA or 

the Bureau’s 2013 ATR Final Rule. The 

Bureau intends for loans ‘‘subject to’’ 

HOEPA to apply to consumer loans 

secured by the borrower’s principal 

dwelling, except for transactions 

specifically excluded under 

§ 1026.32(a)(2), such as reverse 

mortgages, construction loans, loans 

originated and financed by a State 

housing finance agency, and loans 

originated and financed through the 

USDA’s direct loan program. Similarly, 

loans ‘‘subject to’’ the Bureau’s 2013 

ATR Final Rule include all consumer 

loans secured by a dwelling, including 

any real property attached to a dwelling, 

as defined in § 1026.2(a)(19), other than 

transactions exempt under § 1026.43(a), 

such as home-equity lines of credit, 

reverse mortgages, and temporary or 

bridge loans with terms of 12 months or 

less.392 Together, the HOEPA and 

qualified-mortgage prongs of the 

proposed points-and-fees provision 

cover open-end credit plans secured by 

primary residences and nearly all 

dwelling-secured, closed-end mortgage 

loans. 

Total points and fees are an important 

component of loan pricing. Excessive 

points and fees have been associated 

with originations of subprime loans and 

loans to vulnerable borrowers. Panelists 

at the Board’s 2010 Hearings stated that 

collecting information regarding points 

and fees would improve the usefulness 

of the HMDA data for determining 

whether lenders are serving the housing 

needs of their communities.393 As with 

other elements of loan pricing, greater 

information regarding points and fees 

will also enable deeper insight into the 

terms on which different communities 

are offered loans. For example, the 

Bureau has received feedback stating 

that borrowers in manufactured housing 

communities receive loans with higher 

prices than borrowers in other 

communities. 

For the above reasons, to implement 

HMDA section 304(b)(5)(A), the Bureau 

is proposing § 1003.4(a)(17), which 

provides that, for covered loans or 

applications subject to the Home 

Ownership and Equity Protection Act of 

1994 or covered loans or applications 

subject to Regulation Z 

§ 1026.43(e)(2)(iii), other than 

purchased covered loans, financial 

institutions shall report the total points 

and fees payable in connection with the 

covered loan or application, expressed 

in dollars and calculated in accordance 

with Regulation Z § 1026.32(b)(1) or (2), 

as applicable. For the reasons given 

above, the Bureau interprets the DoddFrank Act’s instruction to ‘‘tak[e] into 

account’’ the TILA’s definition of points 

and fees as allowing for alignment 

between the relevant provisions of 

Regulation C and Regulation Z. Defining 

points and fees consistently across 

regulations will avoid confusion and 

reduce the burden of reporting.394 This 

definition is also consistent with the 

MISMO version 3.3 data standard for 

total points and fees. 

The Bureau solicits comment on the 

benefits and burdens of the definition of 

points and fees proposed above, as well 

as on any specific elements of points 

and fees to include or exclude. 

Although the Bureau believes that most 

financial institutions will have to 

calculate points and fees for purposes of 

both the qualified mortgage points-andfees cap and the high-cost mortgage 

coverage threshold, it is possible that 

financial institutions that are certain of 

a loan’s qualified mortgage or high-cost 

status may not calculate the total points 

and fees. Furthermore, some financial 

institutions that calculate the total 

points and fees might not store the 

information in a format readily available 

for HMDA purposes. To facilitate 

compliance, the Bureau is proposing to 

exclude covered loans that have been 

purchased by a financial institution 

from this reporting requirement because 

it does not believe that the total points 

and fees would be evident on the face 

of the documentation obtained from the 

seller, but the Bureau solicits feedback 

on whether to apply the points-and-fees 

reporting requirement to purchased 

covered loans. 

During the Small Business Review 

Panel process, the small entity 

representatives expressed concern over 

the consistency and clarity of the 

points-and-fees definition.395 The Small 

Business Review Panel recommended 

that the Bureau seek comment in the 

proposed rule on the costs to small 

financial institutions of providing the 

pricing data, and consider aligning the 

requirements of Regulation C to the 

pricing data used in other Federal and 

State mortgage disclosures as a way to 

reduce burden.396 Consistent with the 

Small Business Review Panel’s 

recommendation, the Bureau is 

proposing a definition of points and fees 

that aligns with the definition 

promulgated under the TILA. The 

Bureau also solicits feedback on the 

burden to small financial institutions. 

Proposed instruction 4(a)(17) in 

appendix A provides technical 

instructions regarding how to enter 

points and fees data on the loan 

application register. Proposed 

instruction 4(a)(17)–1 provides 

technical instructions for entering the 

total points and fees payable in 

connection with the covered loan or 

application. Proposed instruction 

4(a)(17)–2 provides that a financial 

institution completing the loan 

application register must enter ‘‘NA’’ for 

covered loans subject to this reporting 

requirement for which the total points 

and fees were not known at or before 

closing, or for covered loans not subject 

to this reporting requirement, such as 

purchased covered loans. 

4(a)(18) 

Currently, neither HMDA nor 

Regulation C requires financial 

institutions to report the total 

origination charges associated with a 

covered loan. Section 304(b) of HMDA 

permits the disclosure of such other 

information as the Bureau may 

require.397 For the reasons discussed 

below, the Bureau is proposing to 

require, for covered loans subject to the 

disclosure requirements in Regulation Z 

§ 1026.19(f), the total of all itemized 

amounts that are designated borrowerpaid at or before closing, expressed in 


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398See 78 FR 79730 (Dec. 31, 2013). 

399Chicago Hearing, supra note 137. 

400See Small Business Review Panel Report at 42. 401See Regulation Z § 1026.19(f)(1)(i). 

402Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

403San Francisco Hearing, supra note 133. 

dollars, as disclosed pursuant to 

§ 1026.38(f)(1). 

Origination charges are costs that the 

borrower will pay to the creditor and 

any loan originator for originating and 

extending the credit. Specifically, for 

covered loans subject to the disclosure 

requirements of Regulation Z 

§ 1026.19(f), origination charges are 

those costs designated ‘‘borrower-paid’’ 

on Line A of the Closing Cost Details 

page of the Closing Disclosure, as 

provided for in Regulation Z 

§ 1026.38(f)(1). The Bureau established 

this definition of origination charges in 

its 2013 TILA–RESPA Final Rule, which 

will become effective on August 1, 

2015.398 These costs include charges 

such as application fees, origination 

fees, underwriting fees, processing fees, 

verification fees, and rate-lock fees, but 

do not include charges paid by the 

borrower for required services provided 

by persons other than the creditor or 

loan originator, or taxes or other 

government fees. 

The Bureau proposes to require 

reporting of total origination charges, as 

provided in proposed § 1003.4(a)(18), 

because they provide a more complete 

picture of loan pricing. The price of a 

loan consists of several elements, 

including the loan terms, discount 

points and cash rebates, origination 

points or fees, and closing costs. As the 

total of all charges paid by the borrower, 

the proposed origination charges data 

point provides a measure of the amount 

of charges directly imposed on a 

borrower by a financial institution, and 

therefore discloses information about 

those charges over which a financial 

institution exercises the most control. 

According to feedback received by the 

Bureau, greater precision among the 

elements of loan pricing might provide 

public officials and community 

organizations with a better 

understanding of whether financial 

institutions are charging similar prices 

to similar applicants. 

Furthermore, the Bureau has received 

feedback suggesting that the reporting 

burden would be lessened by 

consistency between HMDA data points 

and items on the Closing Disclosure, 

and thus has proposed the definition of 

origination charges already found in 

Regulation Z § 1026.38(f)(1).399 The 

Small Business Review Panel 

recommended that the Bureau consider 

aligning the requirements of Regulation 

C to the pricing data used in other 

Federal and State mortgage 

disclosures.400 Consistent with the 

Small Business Review Panel’s 

recommendation, the Bureau is 

proposing a definition of total 

origination charges that aligns with the 

costs designated ‘‘borrower-paid’’ on 

Line A of the closing cost details page 

of the Closing Disclosure. 

The Bureau recognizes that the utility 

of data on origination fees may have 

some limits. For example, reporting 

only borrower-paid origination charges 

will not directly provide data about the 

total cost of credit associated with a 

mortgage loan, because certain charges 

are excluded. Furthermore, by limiting 

the scope of this provision to covered 

loans that require closing disclosures, 

the Bureau acknowledges that the data 

will lack the total origination charges for 

loans excluded from Regulation Z 

§ 1026.19(f), such as home-equity lines 

of credit and reverse mortgages.401 The 

Bureau is also concerned with the 

burden that may result from requiring 

this information. For example, some 

financial institutions that calculate 

origination charges for purposes of the 

Closing Disclosure might not store the 

information in a format readily available 

for HMDA purposes. 

Despite these concerns, feedback 

received in the Bureau’s outreach 

activities suggests that the benefits to 

the public and to public officials would 

justify the costs imposed on industry, 

and the Bureau believes that reporting 

of origination costs, pursuant to 

proposed § 1003.4(a)(18), is necessary to 

carry out HMDA’s purposes. For the 

reasons given, this information would 

provide a more complete and useful 

picture of loan pricing, which would 

assist public officials and members of 

the public in determining whether 

financial institutions are serving the 

housing needs of their communities and 

neighborhoods. As explained above, 

total origination charges would also 

assist in identifying potentially 

discriminatory lending patterns. 

Accordingly, pursuant to HMDA 

sections 305(a) and 304(b)(5)(D), the 

Bureau is proposing § 1003.4(a)(18), 

which provides that for covered loans 

subject to the disclosure requirements in 

Regulation Z § 1026.19(f), a financial 

institution shall report the total of all 

itemized amounts that are designated 

borrower-paid at or before closing, 

expressed in dollars, as disclosed 

pursuant to § 1026.38(f)(1). The Bureau 

solicits feedback regarding the general 

utility of the revised data, the scope of 

the reporting requirement, and the costs 

associated with collecting and reporting 

the data. In particular, the Bureau 

solicits comment on whether a more 

comprehensive measure of the aggregate 

costs associated with the loan would be 

more appropriate, such as the amount 

listed as the ‘‘total closing costs’’ on 

Line J of the Closing Disclosure. 

Proposed instruction 4(a)(18) in 

appendix A provides technical 

instructions regarding how to enter the 

data on the loan application register. 

Proposed instruction 4(a)(18)–1 

provides technical instructions for 

entering the amount of the total 

origination charges. Proposed 

instruction 4(a)(18)–2 provides that a 

financial institution completing the loan 

application register must enter ‘‘NA’’ for 

covered loans for which no amounts 

paid by the borrower were known at or 

before closing, or for covered loans not 

subject to this reporting requirement, 

such as open-end lines of credit or 

reverse mortgages. 

4(a)(19) 

Currently, neither HMDA nor 

Regulation C requires financial 

institutions to report information 

regarding total discount points. Section 

304(b) of HMDA permits the disclosure 

of such other information as the Bureau 

may require.402 For the reasons 

discussed below, the Bureau is 

proposing to require, for covered loans 

subject to the disclosure requirements in 

Regulation Z § 1026.19(f), the points 

designated as paid to the creditor to 

reduce the interest rate, expressed in 

dollars, as described in 

§ 1026.37(f)(1)(i). 

Discount points are a type of prepaid 

interest that borrowers can pay to 

reduce the interest rate applicable to 

subsequent payments. For covered loans 

subject to the disclosure requirements in 

Regulation Z § 1026.19(f), the discount 

points that financial institutions would 

report are those listed on Line A.01 of 

the Closing Disclosure, as described in 

Regulation Z § 1026.37(f)(1)(i). The 

Bureau has received feedback suggesting 

that separate disclosure of discount 

points provides information useful for 

identifying potentially discriminatory 

lending patterns.403 Specifically, 

information regarding the amount paid 

to reduce the interest rate, combined 

with information regarding total points 

and fees and total origination charges, 

enables researchers, regulators, and 

members of the public to develop a 

greater understanding of loan pricing. 

The annual percentage rate and interest 

rate cannot effectively be compared 

across borrowers without precise 

information on how discount points 


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404Atlanta Hearing, supra note 131. 

405See Small Business Review Panel Report at 42. 

406Atlanta Hearing, supra note 131. 

407See Regulation Z § 1026.19(f)(1)(i). 

408Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

have altered the rate. By examining the 

changes in the interest rate produced by 

the purchase of a given amount of 

discount points, members of the public 

and public officials can better determine 

the value that borrowers receive in 

exchange for discount points, and 

whether similarly situated borrowers are 

receiving similar value. 

Furthermore, the Bureau has received 

feedback suggesting that the reporting 

burden would be lessened by 

consistency between HMDA data points 

and items on the Closing Disclosure, 

and thus has proposed the definition of 

discount points already found in 

Regulation Z § 1026.37(f)(1)(i).404 The 

Small Business Review Panel 

recommended that the Bureau consider 

aligning the requirements of Regulation 

C to the pricing data used in other 

Federal and State mortgage 

disclosures.405 Consistent with the 

Small Business Review Panel’s 

recommendation, the Bureau is 

soliciting feedback on the costs of 

reporting to small entities, and is 

proposing that financial institutions 

report the discount points already 

required to be listed on Line A.01 of the 

Closing Disclosure. This definition is 

also consistent with the MISMO version 

3.3 data standard for discount points. 

As with other loan pricing data 

discussed above, discount point data do 

not include loan profitability, a data 

point that, according to feedback 

received at the Board’s 2010 Hearings, 

might permit more detailed analysis of 

whether similarly situated borrowers are 

benefiting from similar pricing.406

Furthermore, by limiting the scope of 

this provision to covered loans that 

require closing disclosures, the Bureau 

acknowledges that the data will lack the 

total discount points for loans excluded 

from Regulation Z § 1026.19(f), such as 

home-equity lines of credit and reverse 

mortgages.407 The Bureau is also 

concerned with the burden that may 

result from requiring financial 

institutions to report discount points. 

As with other pricing information, some 

financial institutions that calculate total 

discount points for purposes of the 

Closing Disclosure might not store the 

information in a format readily available 

for HMDA purposes. 

Despite these concerns, feedback 

received in the Bureau’s outreach 

activities suggests that the benefits to 

the public and to public officials may 

justify these costs, and the Bureau 

believes that reporting of total discount 

points associated with a covered loan, 

pursuant to proposed § 1003.4(a)(19), is 

necessary to carry out HMDA’s 

purposes. For the reasons given, this 

information would provide a more 

complete and useful picture of loan 

pricing, which would assist pubic 

officials and members of the public in 

determining whether financial 

institutions are serving the housing 

needs of their communities. Improved 

pricing information would also assist 

public officials and members of the 

public in identifying potentially 

discriminatory lending patterns. 

Accordingly, pursuant to HMDA 

sections 305(a) and 304(b)(5)(D), the 

Bureau is proposing § 1003.4(a)(19), 

which provides that for covered loans 

subject to the disclosure requirements in 

Regulation Z § 1026.19(f), a financial 

institution shall report the points 

designated as paid to the creditor to 

reduce the interest rate, expressed in 

dollars, as described in 

§ 1026.37(f)(1)(i). The Bureau solicits 

feedback regarding the general utility of 

the revised data, the scope of the 

proposed reporting requirement, and the 

costs associated with collecting and 

reporting the data. Specifically, the 

Bureau seeks comment on whether to 

include any lender credits, premiums, 

or rebates in the measure of discount 

points. 

Proposed instruction 4(a)(19) in 

appendix A provides technical 

instructions regarding how to enter the 

data on the loan application register. 

Proposed instruction 4(a)(19)–1 

provides technical instructions for 

entering the total amount of points 

designated as paid to the creditor to 

reduce the interest rate. Proposed 

instruction 4(a)(19)–2 provides that a 

financial institution completing the loan 

application register must enter ‘‘NA’’ for 

covered loans for which no points to 

reduce the interest rate were known at 

or before closing, or for covered loans 

not subject to this reporting 

requirement, such as open-end lines of 

credit or reverse mortgages. 

4(a)(20) 

Neither HMDA nor Regulation C 

currently requires financial institutions 

to report the pre-discounted, riskadjusted interest rate associated with a 

covered loan. Section 304(b) of HMDA 

permits the disclosure of such other 

information as the Bureau may 

require.408 For the reasons discussed 

below, the Bureau is proposing to 

require reporting of, for covered loans 

subject to the disclosure requirements in 

Regulation Z § 1026.19(f), other than 

purchased covered loans, the interest 

rate that the borrower would receive if 

the borrower paid no bona fide discount 

points, as calculated pursuant to 

Regulation Z § 1026.32. 

The risk-adjusted, pre-discounted 

interest rate is the rate that the borrower 

would have received in the absence of 

any discount points or rebates. The rate 

the Bureau is proposing to require 

institutions to report under proposed 

§ 1003.4(a)(20) is the same base rate 

from which a financial institution 

would exclude ‘‘bona fide discount 

points’’ from points and fees for 

purposes of determining qualified 

mortgage and high-cost mortgage status 

under Regulation Z. Regulation Z 

§ 1026.32(b)(1)(i)(E) or (F) (closed-end 

loans), and § 1026.32(b)(2)(i)(E) or (F) 

(open-end credit plans), allows bona 

fide discount points to be excluded from 

the calculation of points and fees for 

both qualified mortgages and high-cost 

mortgages. Specifically, lenders may 

exclude up to two bona fide discount 

points from the points-and-fees 

calculation, depending on whether the 

‘‘interest rate without any discount’’ is 

within one or two percentage points of 

the average prime offer rate. Under the 

proposal, financial institutions would 

report the risk-adjusted, pre-discounted 

interest rate not only for covered loans 

for which bona fide discount points 

have been excluded from total points 

and fees pursuant to Regulation Z 

§ 1026.32(b), but for all covered loans 

subject to the disclosure requirements in 

Regulation Z § 1026.19(f), other than 

purchased covered loans. 

The Bureau has received feedback 

suggesting that reporting the riskadjusted, pre-discounted interest rate 

may be useful for fair lending purposes. 

The risk-adjusted, pre-discounted 

interest rate reflects loan-level price 

adjustments made on the basis of the 

characteristics of the borrower, 

collateral, and the current market 

conditions. Because these types of 

adjustments are typically based on 

reasonable business considerations, 

analyzing the changes to loan pricing 

that occur after a financial institution 

has determined the risk-adjusted, prediscounted interest rate can provide 

significant evidence of potential 

impermissible discrimination. Thus, 

knowing the pre-discounted interest 

rate, along with the rate that the 

borrower actually received and any 

discount points paid, may assist in 

understanding the value that the 

borrower received, relative to otherwise 

similarly situated borrowers. Also, the 

risk-adjusted, pre-discounted rate may 

be used to more efficiently focus fair 


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51790 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

409See Regulation Z § 1026.19(f)(1)(i). 

410See Regulation Z § 1026.32(b)(1)(i)(E), (F); 

(b)(2)(i)(E), (F). 

411See Small Business Review Panel Report at 

31–32, 74, 102, 130. 

412See id. at 42. 

413Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

414The pricing information provided by the rate 

spread relies on the annual percentage rate, which 

is different than the interest rate. The interest rate 

is the cost of the loan expressed as a percentage 

rate. The annual percentage rate is ‘‘a measure of 

the cost of credit, expressed as a yearly rate, that 

relates the amount and timing of value received by 

the consumer to the amount and timing of 

payments made.’’ Regulation Z § 1026.22(a)(1); see 

also Regulation Z § 1026.14 (describing the 

determination of APR for open-end credit). The cost 

of credit represented by the APR includes discount 

points, origination fees, other charges retained by 

the creditor, and certain third-party charges. 

Therefore, the rate spread and interest rate 

represent different measures of loan pricing. 

lending examinations, thereby reducing 

burden caused by false positives and 

conserving public resources. 

However, by limiting the scope of this 

provision to covered loans that require 

closing disclosures, the Bureau 

acknowledges that the data will lack the 

risk-adjusted, pre-discounted interest 

rate for loans excluded from Regulation 

Z § 1026.19(f), such as home-equity 

lines of credit and reverse mortgages.409

The Bureau is also concerned with the 

burden associated with reporting the 

risk-adjusted, pre-discounted interest 

rate. Some financial institutions may 

rarely exclude bona fide discount points 

from total points and fees pursuant to 

Regulation Z and may incur additional 

cost in calculating the risk-adjusted, 

pre-discounted interest for loans for 

which they would not make this 

calculation for purposes of compliance 

with Regulation Z. In addition, even 

financial institutions that calculate the 

rate for purposes of the qualified 

mortgage points-and-fees cap and the 

high-cost mortgage coverage threshold 

might not store the information in a 

format readily available for HMDA 

purposes. 

Despite the potential reporting 

difficulties outlined above, the Bureau 

has received feedback in its outreach 

efforts that the benefits of reporting the 

risk-adjusted, pre-discounted interest 

rate may justify the costs, and the 

Bureau believes that reporting this 

information is necessary to carry out 

HMDA’s purposes. For the reasons 

given, this information would provide a 

more complete and useful picture of 

loan pricing, which would be helpful in 

determining whether financial 

institutions are serving the housing 

needs of their communities. Improved 

pricing information would also 

significantly assist public officials and 

members of the public in identifying 

potentially discriminatory lending 

patterns. 

Accordingly, pursuant to HMDA 

sections 305(a) and 304(b)(5)(D), the 

Bureau is proposing § 1003.4(a)(20), 

which provides that for covered loans 

subject to the disclosure requirements in 

Regulation Z § 1026.19(f), other than 

purchased covered loans, a financial 

institution shall report the interest rate 

that the borrower would receive if the 

borrower paid no bona fide discount 

points, as calculated pursuant to 

Regulation Z § 1026.32. To facilitate 

compliance, the Bureau is proposing to 

exclude covered loans that have been 

purchased by a financial institution 

from this reporting requirement because 

it does not believe that the risk-adjusted, 

pre-discounted interest rate would be 

evident on the face of the 

documentation obtained from the seller. 

The Bureau solicits feedback regarding 

the general utility of the revised data 

and on the costs associated with 

collecting and reporting the data. In 

particular, the Bureau seeks information 

on any additional costs that financial 

institutions or vendors expect to 

encounter in calculating the riskadjusted, pre-discounted interest rate 

and in retaining these data specifically 

for HMDA reporting purposes, and any 

alternative means to calculate the base 

rate used in loan pricing that may be 

less burdensome for institutions to 

collect and report. The Bureau further 

solicits comment regarding the scope of 

the provision, particularly whether to 

restrict the reporting requirement to 

covered loans for which financial 

institutions have chosen to exclude 

bona fide discount points from total 

points and fees for the purposes of 

HOEPA coverage or qualified mortgage 

status.410

During the Small Business Review 

Panel process, the small entity 

representatives were generally 

concerned with the definitional clarity 

of, and the potential burden associated 

with, reporting the risk-adjusted, prediscounted interest rate.411 The Small 

Business Review Panel recommended 

that the Bureau seek comment in the 

proposed rule on the costs to small 

financial institutions of providing the 

pricing data, and consider aligning the 

requirements of Regulation C to the 

pricing data used in other Federal and 

State mortgage disclosures.412

Consistent with the Small Business 

Review Panel’s recommendation, the 

Bureau is soliciting feedback on the cost 

to small financial institutions. 

Proposed instruction 4(a)(20) in 

appendix A provides technical 

instructions regarding how to enter the 

data on the loan application register. 

Proposed instruction 4(a)(20)–1 

provides technical instructions for 

entering the risk-adjusted, prediscounted interest rate. Proposed 

instruction 4(a)(20)–2 provides that a 

financial institution completing the loan 

application register must enter ‘‘NA’’ for 

covered loans not subject to this 

reporting requirement, such as 

purchased covered loans, open-end 

lines of credit, or reverse mortgages. 

4(a)(21) 

Neither HMDA nor Regulation C 

currently requires financial institutions 

to report the interest rate associated 

with a mortgage loan. Section 304(b) of 

HMDA permits the disclosure of such 

other information as the Bureau may 

require.413 For the reasons discussed 

below, the Bureau is proposing to 

require reporting of the interest rate that 

is or would be applicable to the covered 

loan at closing or account opening. 

The Bureau has received feedback 

that data on the interest rate enables 

more effective comparison of pricing 

across borrowers. The interest rate 

provides pricing information separate 

from the elements of loan pricing, such 

as the rate spread,414 and may alone 

enable preliminary comparison among 

borrowers or communities. 

Furthermore, when combined with the 

other elements of loan pricing, such as 

the total discount points paid and the 

risk-adjusted, pre-discounted interest 

rate, the interest rate permits greater 

insight into loan pricing. For example, 

comparing the interest rate to the riskadjusted, pre-discounted interest rate 

can reveal the extent to which the rate 

has moved, and analyzing the interest 

rate in conjunction with the rate spread 

can permit a user of HMDA data to 

derive an approximation of the total cost 

associated with the loan. Therefore, 

reporting the interest rate may assist in 

identifying discriminatory lending 

patterns and in more precisely 

measuring the cost of credit available in 

particular communities. 

Although the proposal may entail 

some burden, the burden will be 

reduced by the fact that financial 

institutions will already know the 

interest applicable to most loans. For 

example, financial institutions would 

have to disclose this rate in the loan 

terms section of the Closing Disclosure, 

as provided for under Regulation Z 

§ 1026.38(b). The interest rate is also 

currently found in part I of the Uniform 

Residential Loan Application form. 

Furthermore, the interest rate is 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51791 

415See Small Business Review Panel Report at 31, 

85, 98, 102. 

416See id. at 42. 

417Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

418 12 U.S.C. 2803(b)(5)(C). 

419See Regulation Z § 1026.38 (b)(effective 

August 15, 2015). 

420H.R. Rep. No. 111–702, at 191 (2011). 

421Atlanta Hearing, supra note 131; Chicago 

Hearing, supra note 137; San Francisco Hearing, 

supra note 133. 

422Atlanta Hearings, supra note 131. 

included in the MISMO version 3.3 data 

standard. For some financial 

institutions, however, the information 

might not be stored in a format readily 

available for HMDA purposes. 

Furthermore, the proposed interest rate 

reporting requirement would apply to 

all covered loans, not just loans subject 

to the disclosure requirements of 

Regulation Z. 

The Bureau is aware of the potential 

costs associated with requiring reporting 

of the interest rate. Feedback received 

pursuant to the Bureau’s outreach, 

however, suggests that these costs may 

be justified by the benefits of this 

information to the public and to public 

officials, and the Bureau believes that 

reporting of the interest rate is necessary 

to carry out HMDA’s purposes. For the 

reasons given, this information would 

provide a more complete and useful 

picture of loan pricing, which would be 

helpful in determining whether 

financial institutions are serving the 

housing needs of their communities. 

Furthermore, as a component of loan 

pricing information, the interest rate 

would assist public officials and 

members of the public in identifying 

potentially discriminatory lending 

patterns. Therefore, pursuant to HMDA 

sections 305(a) and 304(b)(6)(J), the 

Bureau is proposing § 1003.4(a)(21), 

which provides that financial 

institutions shall report the interest rate 

that is or would be applicable to the 

covered loan at closing or account 

opening. The Bureau solicits feedback 

regarding whether this proposed 

requirement is appropriate. 

During the Small Business Review 

Panel process, the small entity 

representatives expressed concern over 

the clarity of the interest rate reporting 

requirement.415 The Small Business 

Review Panel recommended that the 

Bureau seek comment in the proposed 

rule on the costs to small financial 

institutions of providing the pricing 

data, and consider aligning the 

requirements of Regulation C to the 

pricing data used in other Federal and 

State mortgage disclosures.416 The 

Bureau agrees that the interest rate 

reporting requirement should be clear 

and consistent with other regulations to 

the extent practicable. Consistent with 

the Small Business Review Panel’s 

recommendation, for covered loans 

subject to the disclosure requirements of 

Regulation Z § 1026.38, the Bureau is 

proposing to use the methods of 

identifying the interest rate contained in 

Regulation Z, as explained in the 

proposed commentary accompanying 

proposed § 1003.4(a)(21). The Bureau is 

also soliciting feedback on the burden of 

reporting for small financial 

institutions. 

Proposed comment 4(a)(21)–1 clarifies 

that a financial institution must identify 

the interest rate that is or would be 

applicable to the covered loan at closing 

or account opening, as applicable. 

Proposed comment 4(a)(21)–1 illustrates 

that for covered loans subject to the 

disclosure requirements of Regulation Z 

§ 1026.38, a financial institution 

complies with proposed § 1003.4(a)(21) 

by identifying the interest rate that is 

the rate disclosed pursuant to 

Regulation Z § 1026.37(b)(2). For an 

adjustable-rate covered loan subject to 

the disclosure requirements of 

Regulation Z § 1026.38, if the interest 

rate at closing is not known, a financial 

institution complies with proposed 

§ 1003.4(a)(21) by identifying the fully 

indexed rate, which, for purposes of 

§ 1003.4(a)(21), means the interest rate 

calculated using the index value and 

margin at the time of closing, pursuant 

to Regulation Z § 1026.37(b)(2). 

Proposed instructions 4(a)(21)–1 and –2 

in appendix A provide technical 

instructions regarding how to enter the 

data on the loan application register. 

4(a)(22) 

Regulation C does not currently 

require financial institutions to report 

information regarding the prepayment 

penalty associated with a mortgage loan. 

However, section 304(b) of HMDA 417

requires reporting of the term in months 

of any prepayment penalty or other fee 

or charge payable upon repayment of 

some portion of principal or the entire 

principal in advance of scheduled 

payments.418 As discussed below, the 

Bureau is proposing to implement 

HMDA section 304(b)(5)(C) by requiring 

financial institutions to report the term, 

in months, of any prepayment penalty, 

as defined in Regulation Z 

§ 1026.32(b)(6)(i) or (ii), as applicable. 

Prepayment penalties are charges 

imposed on borrowers for paying all or 

part of the transaction’s principal before 

the date on which the principal is due. 

The Bureau is proposing to align the 

definition of prepayment penalty for 

HMDA purposes with the definition 

found in Regulation Z § 1026.32(b)(6), 

which defines prepayment penalty for 

purposes of the high-cost and qualified 

mortgage rules. The amount and term in 

years of any potential prepayment 

penalty is listed on the loan terms table 

of the Closing Disclosure.419

In amending HMDA through section 

1094 of the Dodd-Frank Act, Congress 

found that more specific loan pricing 

information would ‘‘provide more 

transparency on underwriting practices 

and patterns in mortgage lending and 

help improve the oversight and 

enforcement of fair lending laws.’’ 420

Prepayment penalties are an important 

component of loan pricing. Loans with 

prepayment penalties are typically more 

expensive, and the Bureau has received 

feedback suggesting that information 

regarding prepayment penalties would 

improve the usefulness of the HMDA 

data for revealing potentially 

discriminatory lending patterns and for 

determining whether lenders are serving 

their communities.421

The Bureau has also received 

feedback favoring consistency between 

HMDA data points and items on the 

Closing Disclosure as a means of 

clarifying the regulation and reducing 

burden.422 Although the term of any 

prepayment penalty is not listed in 

months on the Closing Disclosure, it is 

listed in years, which enables a 

relatively simple calculation. 

Furthermore, the prepayment penalty 

data point in this proposal is aligned to 

the ‘‘prepayment penalty expiration 

months count’’ data point in version 3.3 

of the MISMO data standard. 

To implement HMDA section 

304(b)(5)(C), and pursuant to HMDA 

section 305(a), the Bureau is proposing 

§ 1003.4(a)(22), which provides that, 

except for purchased covered loans, 

financial institutions shall report the 

term in months of any prepayment 

penalty, as defined in Regulation Z 

§ 1026.32(b)(6)(i) or (ii), as applicable. 

To facilitate compliance, the Bureau is 

proposing to except covered loans that 

have been purchased by a financial 

institution from this reporting 

requirement because it does not believe 

that the term of the prepayment penalty 

would be evident on the face of the 

documentation obtained from the seller. 

Although the Closing Disclosure 

describes the term of any prepayment 

penalty that may be imposed on the 

borrower, this information is provided 

in years, rather than in months, as 

required by the Dodd-Frank Act and as 

implemented in this proposal. 

Furthermore, purchased covered loans 

not subject to the disclosure 


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51792 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

423See Small Business Review Panel Report at 29, 

129. 

424See id. at 102–03. 

425See id. at 41. 426See Dodd-Frank Act section 1094(3)(A)(iv). 

427See Small Business Review Panel Report at 

27–28, 40, 81,103,129. 

428See id. at 40. 

requirements of Regulation Z would 

require no Closing Disclosure. The 

Bureau solicits feedback regarding the 

general utility and costs associated with 

collecting and reporting the data. The 

Bureau also solicits feedback on the 

scope of the proposed requirement, 

including whether to limit the 

prepayment penalty reporting 

requirement to loans subject to 

Regulation Z, or to apply it to purchased 

covered loans. 

During the Small Business Review 

Panel process, the small entity 

representatives did not express 

significant concerns regarding reporting 

of the prepayment penalty.423 One small 

entity representative questioned which 

amount would be reported in the case 

of a prepayment penalty that varied 

based on the borrower’s actions.424 The 

Small Business Review Panel 

recommended that the Bureau seek 

comment in the proposed rule on the 

costs to small financial institutions of 

providing the data, as well as on the 

methods of reporting this information 

that would minimize burden on small 

financial institutions while still meeting 

the Dodd-Frank Act reporting 

requirements and purposes of 

HMDA.425 The Bureau agrees that the 

burden on small financial institutions 

should be minimized, but notes that 

HMDA section 304(b)(5)(C) specifically 

provides for reporting the prepayment 

penalty in months, rather than in 

amount or years, as provided on the 

Closing Disclosure. Consistent with the 

Small Business Review Panel’s 

recommendation, the Bureau seeks 

feedback on the reporting burden for 

small financial institutions. 

Proposed instruction 4(a)(22) in 

appendix A provides technical 

instructions regarding how to enter the 

data on the loan application register. 

Proposed instruction 4(a)(22)–1 

provides technical instructions for 

entering the term in months of any 

prepayment penalty applicable to the 

covered loan or application. Proposed 

instruction 4(a)(22)–2 specifies that a 

financial institution must enter ‘‘NA’’ 

for covered loans for which a 

prepayment penalty may not be 

imposed under the terms of the covered 

loan, for covered loans not subject to 

this reporting requirement, such as 

purchased covered loans, or for 

applications for which the prepayment 

penalty term is unknown, such as 

applications closed for incompleteness. 

4(a)(23) 

Currently, neither HMDA nor 

Regulation C contains requirements 

regarding an applicant’s or borrower’s 

debt-to-income ratio. Section 304(b) of 

HMDA permits the disclosure of such 

other information as the Bureau may 

require.426 For the reasons discussed 

below, the Bureau is proposing to 

require financial institutions to report 

information related to the applicant’s or 

borrower’s debt-to-income ratio. 

Financial institutions often consider 

the ratio of an applicant’s total monthly 

debt to total monthly income as part of 

the underwriting process. The Bureau 

has received feedback suggesting that 

requiring the collection of this debt-toincome ratio would improve the 

usefulness of the HMDA data. An 

applicant’s debt-to-income ratio is an 

important factor in the underwriting 

process that often affects the pricing of 

the credit offered to an applicant. In 

some cases, an applicant’s debt-toincome ratio may determine whether an 

applicant is offered credit at all. Thus, 

this information may help the public 

determine whether financial institutions 

are filling their obligations to serve the 

housing needs of the communities and 

neighborhoods in which they are 

located. As debt-to-income ratio may be 

predictive of default, these data may 

help public officials identify geographic 

locations or segments of the population 

that would benefit from special public 

or private sector investment and lending 

programs. 

However, the Bureau is concerned 

about the reliability of these data. Debtto-income ratio calculations may vary 

between financial institutions, may vary 

within a financial institution based on 

the type of loan, and may evolve over 

time. Financial institutions that intend 

to sell a mortgage loan may calculate 

multiple debt-to-income ratios during 

the underwriting process based on 

internal and investor requirements. The 

Bureau is also concerned about the 

potential burden that may result from 

requiring the collection of debt-toincome ratio. For example, the Bureau 

is aware that some financial institutions 

may not rely on the debt-to-income ratio 

for underwriting purposes. 

Collecting debt-to-income ratio 

information may impose a burden on 

financial institutions. However, 

feedback received from industry, 

consumer advocates, and other users of 

HMDA data suggests that the potential 

benefits to the public and to public 

officials may outweigh these potential 

burdens. Based on these considerations, 

the Bureau believes that it may be 

appropriate to require financial 

institutions to collect information 

regarding debt-to-income ratio. 

Accordingly, pursuant to its authority 

under sections 305(a) and 304(b)(6)(J) of 

HMDA, the Bureau is proposing 

§ 1003.4(a)(23), which provides that, for 

a covered loan that is not, or an 

application that is not for, a reverse 

mortgage, a financial institution shall 

report the ratio of the applicant’s or 

borrower’s total monthly debt to the 

total monthly income relied on in 

making the credit decision. The Bureau 

solicits feedback regarding whether this 

proposed requirement is appropriate 

generally, and specifically solicits 

feedback regarding whether this 

proposed requirement would be less 

burdensome than requiring the 

collection of other debt-to-income 

ratios, such as a debt-to-income ratio 

that is calculated according to investor 

requirements but is not relied on in 

making the credit decision, or the debtto-income ratio that may be required 

under the ability-to-repay provisions of 

Regulation Z. Although the Bureau 

believes that this proposed requirement 

may be appropriate, the Bureau 

recognizes that financial institutions 

may not always rely on an applicant’s 

debt-to-income ratio when making a 

credit decision, such as when 

underwriting a reverse mortgage 

transaction. Thus, proposed 

§ 1003.4(a)(23) does not require a 

financial institution to collect debt-toincome ratio information for reverse 

mortgages. The Bureau solicits feedback 

regarding whether this proposed 

exception is appropriate and regarding 

whether there are other types of 

transactions in which an applicant’s 

debt-to-income ratio is not considered. 

During the Small Business Review 

Panel process, several small entity 

representatives expressed concern about 

a potential debt-to-income ratio 

reporting requirement.427 The Small 

Business Review Panel recommended 

that the Bureau solicit comment on 

whether it would be less burdensome 

for small financial institutions if the 

Bureau adopted a specific method for 

calculating the debt-to-income ratio or 

would allow the small financial 

institutions flexibility in developing 

their own calculations for debt-toincome ratio.428 Based on this feedback 

and consistent with the Small Business 

Review Panel’s recommendation, the 

Bureau solicits feedback regarding 

whether it would be less burdensome 


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429See Dodd-Frank Act section 1094(3)(A)(iv). 

for small financial institutions to report 

the debt-to-income ratio relied on in 

making the credit decision, or if it 

would be less burdensome to small 

financial institutions for the Bureau to 

adopt a specific debt-to-income ratio 

calculation. 

Proposed comment 4(a)(23)–1 

discusses the requirement that the 

financial institution collect the ratio of 

the applicant’s or borrower’s total 

monthly debt to total monthly income 

relied on in making the credit decision 

and provides an illustrative example. 

Proposed comment 4(a)(23)–2 clarifies, 

if a financial institution relies on a set 

of underwriting requirements in making 

a credit decision, and the requirements 

include the ratio of the applicant’s or 

borrower’s total monthly debt to total 

monthly income as one of multiple 

factors, § 1003.4(a)(23) requires the 

financial institution to report the DTI 

ratio considered as part of the set of 

underwriting requirements relied on by 

the financial institution. For example, if 

a financial institution relies on a set of 

underwriting requirements in making a 

credit decision, the requirements 

include the applicant’s or borrower’s 

DTI ratio as one of multiple factors, and 

the financial institution approves the 

application, the financial institution 

complies with § 1003.4(a)(23) by 

reporting the DTI ratio considered as 

part of the set of underwriting 

requirements. Similarly, if a financial 

institution relies on a set of 

underwriting requirements in making a 

credit decision, the requirements 

include the applicant’s or borrower’s 

DTI ratio as one of multiple factors, and 

the financial institution denies the 

application because an underwriting 

requirement other than the DTI ratio 

requirement is not satisfied, the 

financial institution complies with 

§ 1003.4(a)(23) by reporting the DTI 

ratio considered as part of the set of 

underwriting requirements. 

Proposed comment 4(a)(23)–3 clarifies 

that, if a file was closed for 

incompleteness, or if an application was 

withdrawn before a credit decision was 

made, a financial institution complies 

with § 1003.4(a)(23) by reporting that no 

credit decision was made, even if the 

financial institution had calculated the 

ratio of the applicant’s total monthly 

debt to total monthly income. For 

example, if a file is incomplete and is 

so reported in accordance with 

§ 1003.4(a)(8), the financial institution 

complies with § 1003.4(a)(23) by 

reporting that no credit decision was 

made, even if the financial institution 

had calculated the applicant’s DTI ratio. 

Similarly, if an application was 

expressly withdrawn by the applicant 

before a credit decision was made, the 

financial institution complies with 

§ 1003.4(a)(23) by reporting that no 

credit decision was made, even if the 

financial institution had calculated the 

applicant’s DTI ratio. 

Proposed comment 4(a)(23)–4 clarifies 

that § 1003.4(a)(23) does not require a 

financial institution to calculate an 

applicant’s or borrower’s debt-to-income 

ratio, nor does it require a financial 

institution to rely on an applicant’s or 

borrower’s debt-to-income ratio in 

making a credit decision. This proposed 

comment also explains that if a financial 

institution makes a credit decision 

without relying on the applicant’s or 

borrower’s debt-to-income ratio, the 

financial institution complies with 

§ 1003.4(a)(23) by reporting that no 

debt-to-income ratio was relied on in 

connection with the credit decision. 

Under appendix A, proposed 

instruction 4(a)(23)–1 provides 

technical instructions regarding how to 

enter the debt-to-income ratio data on 

the loan application register. Proposed 

instruction 4(a)(23)–2 provides 

technical instructions for covered loans 

in which no debt-to-income ratio is 

relied on in connection with the credit 

decision, for reverse mortgages, for files 

closed for incompleteness, and for 

applications withdrawn before a credit 

decision is made. 

4(a)(24) 

Currently, neither HMDA nor 

Regulation C contains requirements 

regarding loan-to-value ratio. Section 

304(b) of HMDA permits the disclosure 

of such other information as the Bureau 

may require.429 For the reasons 

discussed below, the Bureau is 

proposing to require financial 

institutions to report the ratio of the 

total amount of debt secured by the 

property to the value of the property. 

Financial institutions regularly 

calculate the loan-to-value (LTV) ratio 

and the combined loan-to-value (CLTV) 

ratio as part of the underwriting process. 

The LTV ratio generally refers to the 

ratio of the value of a secured debt to 

the value of the property securing the 

debt, while the CLTV ratio generally 

refers to the ratio of total amount of 

secured debt to the value of the property 

securing the debt. As discussed in part 

III.A above, during the 2010 Board 

Hearings the CLTV ratio was cited as an 

important factor both in the 

determination of whether to extend 

credit and for the pricing terms upon 

which credit would be extended. The 

Bureau also has received feedback that 

the CLTV ratio is a standard 

underwriting factor regularly calculated 

by financial institutions, both for a 

financial institution’s own underwriting 

purposes and to satisfy investor 

requirements. Furthermore, during the 

mortgage market crisis State and Federal 

officials focused on CTLV ratios in 

crafting emergency mortgage programs 

to assist homeowners with secured debt 

in excess of the value of their homes. 

Thus, it appears that data related to the 

CLTV ratio would improve the 

usefulness of the HMDA data. 

However, a potential CLTV reporting 

requirement may pose some challenges. 

The Bureau is generally concerned 

about the potential burden associated 

with reporting calculated data fields, 

such as the CLTV ratio. Also, CLTV 

ratio calculations on home-equity lines 

of credit may vary between financial 

institutions, which may affect the 

reliability of these data. Furthermore, 

the Bureau understands that CLTV 

ratios may not be entirely accurate, 

especially when the exact values of 

multiple debts secured by the property 

is not known until the date of closing or 

after, which may present a challenge for 

reporting purposes. 

Notwithstanding these concerns about 

a CLTV reporting requirement, the 

potential benefits seem to outweigh the 

potential burdens. CLTV ratios appear 

to be calculated by all financial 

institutions, are a significant factor in 

the underwriting process, and provide 

valuable insight into both the stability of 

community homeownership and the 

functioning of the mortgage market. In 

contrast, the burdens associated with a 

CLTV reporting requirement appear to 

be limited to the general burden 

associated with reporting HMDA data 

and technical issues related to 

determining the exact ratio. 

Furthermore, by providing information 

regarding the combined loan-to-value 

ratio of transactions subject to 

Regulation C, this proposed provision 

would ensure that the citizens and 

public officials of the United States are 

provided with sufficient information to 

enable them to determine whether 

depository institutions are filling their 

obligations to serve the housing needs of 

the communities and neighborhoods in 

which they are located. Combined loanto-value ratio data also would assist 

public officials in their determination of 

the distribution of public sector 

investments in a manner designed to 

improve the private investment 

environment. 

Based on these considerations, the 

Bureau believes that requiring financial 

institutions to collect information 

regarding CLTV ratios may be necessary 

to carry out HMDA’s purposes. 


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51794 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

430See Small Business Review Panel Report at 14, 

30, 57, 80, 96, 101. 

431See id. at 41. 

432 Dodd-Frank Act section 1094(3)(A)(iv), 12 

U.S.C. 2803(b)(6)(D). 

433See Small Business Review Panel Report at 29, 

98. 

Accordingly, pursuant to its authority 

under sections 305(a) and 304(b)(6)(J) of 

HMDA, the Bureau is proposing 

§ 1003.4(a)(24), which provides that a 

financial institution shall record the 

ratio of the total amount of debt secured 

by the property to the value of the 

property, as determined in accordance 

with proposed § 1003.4(a)(24)(i) and (ii). 

Proposed § 1003.4(a)(24)(i) provides 

that, for a covered loan that is a homeequity line of credit, the ratio shall be 

determined by dividing the sum of the 

unpaid principal balance of the first 

mortgage, the full amount of any homeequity line of credit (whether drawn or 

undrawn), and the balance of any other 

subordinate financing by the value of 

the property. Proposed 

§ 1003.4(a)(24)(ii) provides that, for a 

covered loan that is not a home-equity 

line of credit, the ratio shall be 

determined by dividing the combined 

unpaid principal balance amounts of the 

first and all subordinate mortgages, 

excluding undrawn home-equity lines 

of credit amounts, by the value of the 

property. 

The Bureau solicits feedback 

regarding whether this proposed 

requirement is appropriate generally. 

Also, as part of the Bureau’s effort to 

align the Regulation C requirements to 

the MISMO data standards discussed in 

part II.B above, this proposed 

requirement is conceptually identical 

and textually similar to the definitions 

of the Combined LTV Ratio Percent data 

point and Home Equity Combined LTV 

Ratio Percent data point in proposed 

MISMO version 3.3. The Bureau solicits 

feedback regarding whether this 

proposed alignment is appropriate and 

whether the text of this proposed 

requirement should be clarified. Finally, 

although the Bureau believes that 

financial institutions calculate CTLV 

ratios on all transactions subject to 

Regulation C, the Bureau solicits 

feedback regarding whether there are 

particular transactions in which a CLTV 

ratio would not be calculated or 

considered during the underwriting 

process. 

During the Small Business Review 

Panel process, several small entity 

representatives stated that a combined 

loan-to-value ratio reporting 

requirement would pose particular 

burdens and challenges, especially with 

respect to ratios on home-equity lines of 

credit and commercial loans.430 The 

Small Business Review Panel 

recommended that, in addition to 

soliciting comment on whether to 

require reporting of the combined loanto-value ratio, the Bureau solicit 

comment on whether a Bureau-defined 

calculation method would be less 

burdensome for small financial 

institutions than allowing the financial 

institutions to develop their own 

calculations for the combined loan-tovalue ratio.431 Consistent with the Small 

Business Review Panel’s 

recommendation, in addition to the 

general solicitation of feedback 

provided above, the Bureau solicits 

feedback regarding whether it would be 

less burdensome for small financial 

institutions to report the combined loanto-value relied on in making the credit 

decision, or if it would be less 

burdensome to small financial 

institutions for the Bureau to adopt a 

specific combined loan-to-value ratio 

calculation. 

Proposed comment 4(a)(24)–1 clarifies 

that, if a financial institution makes a 

credit decision without calculating the 

combined loan-to-value ratio, the 

financial institution complies with 

§ 1003.4(a)(24) by reporting that no 

combined loan-to-value ratio was 

calculated in connection with the credit 

decision. Proposed comment 4(a)(24)–2 

explains that, for home-equity lines of 

credit, § 1003.4(a)(24)(i) requires a 

financial institution to calculate the 

combined loan-to-value ratio by 

including the full amount of any homeequity line of credit, whether drawn or 

undrawn, and provides illustrative 

examples. Proposed comment 4(a)(24)– 

3 explains that, for transactions that are 

not home-equity lines of credit, 

§ 1003.4(a)(24)(ii) requires a financial 

institution to calculate the combined 

loan-to-value ratio by including the 

amounts outstanding under homeequity lines of credit secured by the 

property, and provides illustrative 

examples. Under appendix A, proposed 

instruction 4(a)(24)–1 provides 

technical instructions regarding how to 

enter the combined loan-to-value ratio 

data on the loan application register. 

Proposed instruction 4(a)(24)–2 

provides technical instructions for 

covered loans in which no combined 

loan-to-value ratio is calculated. 

4(a)(25) 

Regulation C does not require 

financial institutions to report 

information regarding the loan’s term. 

HMDA section 304(b)(6)(D) requires, for 

loans and completed applications, 

reporting of the actual or proposed term 

in months of the mortgage loan.432 The 

length of time a borrower has to repay 

a loan is an important loan feature for 

both borrowers and creditors. For 

borrowers, the loan term helps 

determine the amount of principal due 

with each payment, which significantly 

influences both the borrower’s ability to 

afford the loan and the amount of 

interest the borrower will pay over the 

life of the loan. For creditors, the loan 

term impacts the creditor’s interest rate 

risk and is thus a significant factor in 

the risk of extending credit and can 

affect loan pricing. For these reasons, 

including loan term in HMDA will help 

provide a more complete picture of the 

covered loans reported and may help to 

explain pricing or other differences that 

were previously indiscernible with 

HMDA data. The proposal to report 

information about non-amortizing 

features, discussed below in the sectionby-section analysis of proposed 

§ 1003.4(a)(27) may be useful in 

discerning differences in covered loans 

with similar loan terms that may in fact 

be very different because of how the 

loans amortize. 

Proposed § 1003.4(a)(25) implements 

HMDA section 304(b)(6)(D) by requiring 

financial institutions to collect and 

report data on the number of months 

until the legal obligation matures for a 

covered loan or application. During the 

Small Business Review Panel process, 

small entity representatives expressed 

some concerns about reporting loan 

term for certain types of loans, 

including home-equity lines of credit 

and loans with different amortization 

and maturity terms.433 The proposed 

instructions in appendix A for 

paragraph 4(a)(25) provide details on 

reporting loan term for home-equity 

lines of credit and other specific types 

of covered loans. Proposed instruction 

4(a)(25)–1.b provides that the loan term 

for an open-end line of credit with a 

definite term includes both the draw 

and the repayment period. The Bureau 

believes that including both the draw 

and repayment periods for home-equity 

lines of credit most accurately reflects 

the loan term. Proposed instruction 

4(a)(25)–1.c provides that, for covered 

loans without a definite term, including 

some home-equity lines of credit and 

reverse mortgages, institutions should 

report the loan term as ‘‘NA.’’ The 

Bureau believes that this proposed 

instruction will facilitate compliance by 

differentiating covered loans without a 

definite term. 

Proposed comment 4(a)(25)–1 clarifies 

that, for covered loans that have 

different maturity and amortization 

terms, the loan term reported should be 


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434Small Business Review Panel Report at 41. 

435 Dodd-Frank Act section 1094(3)(A)(iv), 12 

U.S.C. 2803(b)(6)(D). 

436The guidance provided by the commentary 

gives examples using the loan product designations 

from the Loan Estimate pursuant to the Bureau’s 

2013 TILA–RESPA Final Rule, and would be 

consistent with similar guidance on preferred rates 

in Regulation Z. See 78 FR 79730, 79916 (Dec. 31, 

2013), Regulation Z comments 17(c)(1)–11.iii and 

40(d)(12)(viii)–1. 

437Small Business Review Panel Report at 41. 

438Section 1094(3)(A)(iv), 12 U.S.C. 

2803(b)(6)(C). 

439See Small Business Review Panel Report at 

29–30. 

440See Small Business Review Panel Report at 79. 

the maturity term. The comment 

provides an example of a five year 

balloon loan for illustration purposes. 

For covered loans with a balloon 

payment or other amortization features 

which would cause the covered loan not 

to be fully amortizing over its term, such 

features would be reported under the 

requirements of proposed 

§ 1003.4(a)(27). Proposed comment 

4(a)(25)–2 would clarify that for covered 

loans with non-monthly repayment 

schedules, such as a covered loan with 

a bi-weekly repayment schedule, the 

loan term should be reported in months 

and the term reported should not 

include any fractional months 

remaining. The Bureau believes this 

comment would facilitate compliance 

by providing guidance on how to report 

loan terms for covered loans with 

repayment schedules measured in time 

units other than months. 

The Small Business Review Panel 

recommended that the Bureau seek 

public comment on what method of 

reporting loan term would minimize 

burden on small financial institutions 

while still meeting the Dodd-Frank Act 

reporting requirements and purposes of 

HMDA.434 Consistent with the 

recommendation of the Small Business 

Review Panel, the Bureau solicits 

feedback on what method of reporting 

loan term would minimize burden on 

small financial institutions while still 

meeting the Dodd-Frank Act reporting 

requirements and purposes of HMDA. 

Section 1003.4(a)(25) is proposed to 

implement HMDA section 304(b)(6)(D). 

The Bureau believes the proposed 

reporting requirement will provide the 

public and public officials with data to 

help determine whether financial 

institutions are serving the housing 

needs of their communities by 

providing information about the types of 

loans that are being made, and assist in 

identifying possible discriminatory 

lending patterns and enforcing 

antidiscrimination statutes by allowing 

information about similar loans to be 

compared and analyzed appropriately. 

4(a)(26) 

Regulation C does not require 

financial institutions to report 

information regarding the number of 

months until the first interest rate 

adjustment may occur. HMDA section 

304(b)(6)(B) requires the reporting of the 

actual or proposed term in months of 

any introductory period after which the 

rate of interest may change.435 Proposed 

§ 1003.4(a)(26) implements this 

requirement by requiring financial 

institutions to collect and report data on 

the number of months until the first 

date the interest rate may change after 

loan origination. Proposed 

§ 1003.4(a)(26) would apply regardless 

of how the interest rate adjustment is 

characterized by product type, such as 

adjustable rate, step rate, or another type 

of product with a ‘‘teaser’’ rate. Interest 

rate variability can be an important 

feature in long-term affordability for 

borrowers, and the Bureau believes that 

reporting this information will allow for 

better analysis of loans and applications 

using HMDA data. 

The proposal provides instructions for 

reporting the introductory period in 

appendix A. Proposed instruction 

4(a)(26)–1.a provides that the 

introductory period should be reported 

as ‘‘NA’’ for a fixed-rate covered loan. 

Proposed instruction 4(a)(26)–1.b 

provides that the introductory period 

should be reported as measured from 

loan origination for purchased loans, or 

‘‘NA’’ for purchased fixed rate loans. 

Proposed comment 4(a)(26)–1 illustrates 

the requirement to report the 

introductory interest rate period, 

including for a home-equity line of 

credit with a teaser rate; an adjustablerate loan with an introductory rate; and 

a step-rate loan with an introductory 

rate that then adjusts to a different, 

known rate. Proposed comment 

4(a)(26)–2 provides guidance on 

preferred rates. The comment provides 

illustrative examples of preferred rates 

and provides that a financial institution 

reports initial interest rate periods based 

on preferred rates only if the terms of 

the legal obligation provide that the 

preferred rate will expire at a defined 

future date.436

The Small Business Review Panel 

recommended that the Bureau seek 

public comment on what method of 

reporting initial interest rate period 

would minimize burden on small 

financial institutions while still meeting 

the Dodd-Frank Act reporting 

requirements and purposes of 

HMDA.437 Consistent with the 

recommendation of the Small Business 

Review Panel, the Bureau solicits 

feedback on what method of reporting 

initial interest rate period would 

minimize burden on small financial 

institutions while still meeting the 

Dodd-Frank Act reporting requirements 

and purposes of HMDA. 

4(a)(27) 

Regulation C currently does not 

require financial institutions to report 

whether a loan allows or would have 

allowed the borrower to make payments 

other than fully amortizing payments. 

HMDA section 304(b)(6)(C) requires 

reporting of the presence of contractual 

terms or proposed contractual terms that 

would allow the mortgagor or applicant 

to make payments other than fully 

amortizing payments during any portion 

of the loan term.438 Non-amortizing 

features, once a rarity, became more 

commonplace in the lead-up to the 

mortgage crisis. Such features can put 

borrowers at risk and even lead to 

foreclosure if the borrower is unable to 

pay the principal balance of the loan 

when it eventually becomes due. The 

Dodd-Frank Act addressed nonamortizing features of loans in a variety 

of contexts. For example, the definition 

of a qualified mortgage in TILA section 

129C(b)(2)(A), as added by Dodd-Frank 

Act section 1412, generally excludes 

from that definition residential mortgage 

loans for which regular periodic 

payments may result in an increase of 

the principal balance, or that allow 

deferred repayment of principal and 

interest, as well as loans the terms of 

which result in certain balloon 

payments. 

The Bureau is proposing to 

implement HMDA section 304(b)(6)(C) 

by adding new § 1003.4(a)(27) to 

Regulation C. During the Small Business 

Review Panel process, small entity 

representatives generally agreed that 

this information is currently collected 

and available.439 One small entity 

representative requested that the Bureau 

clearly define and provide specific 

examples of non-amortizing features.440

The Bureau believes it is reasonable to 

interpret HMDA section 304(b)(6)(C) to 

require reporting non-amortizing 

features by identifying specific, welldefined non-amortizing loan features. 

Proposed § 1003.4(a)(27) requires 

reporting of balloon payments, as 

defined by 12 CFR 1026.18(s)(5)(i), 

under § 1003.4(a)(27)(i); interest only 

payments, as defined by 12 CFR 

1026.18(s)(7)(iv), under 

§ 1003.4(a)(27)(ii); a contractual term 

that could cause the loan to be a 

negative amortization loan, as defined 

by 12 CFR 1026.18(s)(7)(v), under 


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441Small Business Review Panel Report at 41. 

442 Dodd-Frank Act section 1094(3)(A)(iv), 12 

U.S.C. 2803(b)(6)(A). 

443 GAO, Fair Lending: Data Limitations and the 

Fragmented U.S. Financial Regulatory Structure 

Challenge Federal Oversight and Enforcement 

Efforts, GAO–09–704, 21 (July 2009), http://

www.gao.gov/new.items/d09704.pdf. 

444 75 FR 35030, 35032 (June 21, 2010). 

445Atlanta Hearing, supra note 131; San 

Francisco Hearing, supra note 133; Chicago 

Hearing, supra note 137; Washington Hearing, 

supra note 130. 

446Early fair housing litigation challenged 

discriminatory appraisal practices including, for 

example, a practice which adjusted property values 

downward if the ethnic composition of the 

neighborhood to which the property belonged was 

not homogenous. See United States v. Am. Inst. of 

Real Estate Appraisers of Nat’l Ass’n of Realtors, 

442 F.Supp. 1072 (N.D. Ill. 1977). The 1988 

amendments to the Fair Housing Act explicitly 

banned discriminatory appraisal practices, 42 

U.S.C. 3605. The Federal Housing Enterprises 

Financial Safety and Soundness Act of 1992 

provided for review of the GSEs with respect to 

potential discriminatory effects of appraisal 

guidelines, including consideration of the age of 

dwellings or the age of neighborhoods. 12 U.S.C. 

4545(1), (6). 

447Public Law 102–242, section 223, 105 Stat. 

2236 (1991). 

448 15 U.S.C. 1691(e); Regulation B § 1002.14; 78 

FR 7216 (Jan. 31, 2013). 

449See Small Business Review Panel Report at 30, 

41. 

450See id. 

§ 1003.4(a)(27)(iii); or any other 

contractual term that would allow for 

payments other than fully amortizing 

payments, as defined by 12 CFR 

1026.43(b)(2), under § 1003.4(a)(27)(iv). 

The Bureau believes that proposed 

§ 1003.4(a)(27)(iv) concerning ‘‘other’’ 

types of non-amortizing features would 

implement HMDA section 304(b)(6)(C) 

so as to carry out HMDA’s purposes, 

and that it may be helpful in identifying 

other such features that may be present 

in the market or that may arise at a later 

time. 

As discussed above, the Bureau is 

proposing to define the terms for 

reporting under Regulation C consistent 

with Regulation Z definitions to 

facilitate compliance. The Bureau is 

proposing to add comment 4(a)(27)–1 in 

order to facilitate compliance and 

provide additional guidance on 

alignment with Regulation Z. Proposed 

comment 4(a)(27)–1 would provide that 

an institution may rely on the 

definitions in Regulation Z for the 

contractual features to be reported, but 

clarifies that loans or applications 

should be reported without regard to 

whether the credit is for personal, 

family, or household purposes, without 

regard to whether the person to whom 

credit is extended is a consumer, 

without regard to whether the property 

is a dwelling, and without regard to 

whether the person extending credit is 

a creditor, as those terms are defined in 

Regulation Z. 

Proposed appendix A instructions 

4(a)(27)(i), (ii), (iii), and (iv) provide that 

financial institutions should indicate 

whether a particular feature is present 

by using true or false. The Bureau 

solicits comments on whether any 

exclusions for this reporting 

requirement for certain types of loans 

are appropriate, and on whether any 

additional non-amortizing features 

should be specifically identified rather 

than reported under § 1003.4(a)(27)(iv). 

The Small Business Review Panel 

recommended that the Bureau seek 

public comment on what method of 

reporting non-amortizing features would 

minimize burden on small financial 

institutions while still meeting the 

Dodd-Frank Act reporting requirements 

and purposes of HMDA.441 Consistent 

with the recommendation of the Small 

Business Review Panel, the Bureau 

solicits feedback on what method of 

reporting non-amortizing features would 

minimize burden on small financial 

institutions while still meeting the 

Dodd-Frank Act reporting requirements 

and purposes of HMDA. 

Section 1003.4(a)(27) is proposed to 

implement HMDA section 304(b)(6)(C). 

The proposed reporting requirement 

will provide the public and public 

officials with data to help determine 

whether financial institutions are 

serving the housing needs of their 

communities by providing information 

about the types of loans that are being 

made, and assist in identifying possible 

discriminatory lending patterns and 

enforcing antidiscrimination statutes by 

allowing information about similar 

loans to be compared and analyzed 

appropriately. 

4(a)(28) 

Regulation C does not require 

financial institutions to report 

information regarding the value of the 

property that secures or will secure the 

loan. HMDA section 304(b)(6)(A) 

requires the reporting of the value of the 

real property pledged or proposed to be 

pledged as collateral.442 Proposed 

§ 1003.4(a)(28) implements this 

requirement by requiring financial 

institutions to report the value of the 

property securing the covered loan or, 

in the case of an application, proposed 

to secure the covered loan relied on in 

making the credit decision. 

Regulation C currently includes a 

requirement to report loan amount. 

Knowing the property value in addition 

to loan amount allows HMDA users to 

estimate the loan-to-value ratio (LTV). 

LTV measures a borrower’s equity in the 

property and is a key underwriting and 

pricing criterion. A 2009 GAO report on 

fair lending noted that LTV would be 

valuable for screening for 

discriminatory practices.443 During the 

Board’s 2010 Hearings, LTV was 

specifically mentioned as a topic of 

consideration.444 Many panelists at the 

hearings supported adding LTV to 

Regulation C.445

Property valuation has also long been 

an issue of concern for consumers and 

fair housing advocates.446 ECOA was 

amended in 1991 to require creditors to 

provide applicants with appraisal 

reports upon request for dwellingsecured loans.447 ECOA was amended 

by the Dodd-Frank Act to mandate the 

provision of appraisals and other 

valuations developed in connection 

with applications for first lien dwellingsecured loans, and these requirements 

are implemented by the Bureau’s ECOA 

valuations rule.448 Adding property 

value to HMDA data will further 

HMDA’s purposes by providing 

additional information on how 

institutions are serving the housing 

needs of their communities. The 

additional information about LTV may 

also help to explain disparities that 

otherwise might appear to be part of a 

potentially discriminatory pattern. 

During the Small Business Review 

Panel process, small entity 

representatives expressed some 

concerns regarding reporting of property 

value.449 Some small entity 

representatives noted that multiple 

valuations are sometimes developed 

during the application process, and that 

valuations may not be available for 

certain types of loans. One small entity 

representative recommended that the 

value reported should be the one relied 

on in the credit decision.450

Appendix A provides technical 

instructions for reporting the property 

value relied on in dollars. Proposed 

instruction 4(a)(28)–1 would provide 

that financial institutions should report 

the value of the property relied on in 

making the credit decision in dollars. 

Proposed instruction 4(a)(28)–2 would 

provide that if the value of the property 

was not relied on in making the credit 

decision, the value should be reported 

as ‘‘NA.’’ The Bureau is proposing to 

add new comment 4(a)(28)–1 in order to 

facilitate compliance. Proposed 

comment 4(a)(28)–1 explains how to 

report the property value used by an 

institution in calculating loan-to-value 

ratio. The comment provides that if an 

institution relied on an appraised value 

for the property, it would report that 

value. However, if an institution relied 


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451Small Business Review Panel Report at 41. 

452Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

453 53 FR 31683, 31685 (Aug. 19, 1988). 

454Ann M. Burkhart, Bringing Manufactured 

Housing into the Real Estate Finance System, 37 

Pepperdine Law Review 427, 428 (2010), available 

at http://papers.ssrn.com/sol3/papers.cfm?abstract_

id=1548441. 

455See James M. Milano, An Overview and 

Update on Legal and Regulatory Issues in 

Manufactured Housing Finance, 60 Consumer 

Financial Law Quarterly Report 379, 383 (2006); 

Burkhart, supra note 438, at 430. 

456Adam Rust & Peter Skillern, Community 

Reinvestment Association of North Carolina, Nine 

Myths of Manufactured Housing: What 2004 HMDA 

Data says about a Misunderstood Sector (2006), 

available at http://www.reinvestmentpartners.org/

sites/reinvestmentpartners.org/files/Myths-andRealities-of-Manufactured-Housing.pdf; Delaware 

State Housing Authority, Manufactured Housing in 

Delaware: A Summary of Information and Issues 

(2008), available at http://

www.destatehousing.com/FormsAndInformation/

Publications/manu_homes_info.pdf. 

457Milano, supra note 439 at 380. 

458William Apgar, et al., An Examination of 

Manufactured Housing Community- and AssetBuilding Strategies 5 (2002). 

459 GAO, Federal Housing Administration: 

Agency Should Assess the Effects of Proposed 

Changes to the Manufactured Home Loan Program, 

GAO 07–879, available at http://www.gao.gov/ 

new.items/d07879.pdf. 

460See generally Burkhart, supra note 438. 

461Washington Hearing, supra note 130. 

on the purchase price of the property, it 

would report that value. The Bureau is 

also proposing to add new comment 

4(a)(28)–2, which provides guidance for 

reporting property value when multiple 

valuations are obtained. It provides as 

an example that when a financial 

institution obtains two appraisals or 

other valuations with different values 

for the property, it reports the value 

relied on in making the credit decision. 

The Small Business Review Panel 

recommended that the Bureau clarify in 

the proposed rule and seek public 

comment on which property valuations 

must be reported. As discussed above, 

the proposal provides guidance on 

which property valuation to report.451

Consistent with the recommendation of 

the Small Business Review Panel, the 

Bureau solicits feedback on which 

property valuations should be reported. 

For the reasons given in the sectionby-section analysis of proposed 

§ 1003.4(a)(29), the Bureau believes that 

implementing HMDA through 

Regulation C to treat mortgage loans 

secured by all manufactured homes 

consistently, regardless of legal 

classification under State law, is 

reasonable, and is necessary and proper 

to effectuate HMDA’s purposes and 

facilitate compliance therewith. 

Accordingly, pursuant to its authority 

under HMDA sections 305(a) and 

304(b)(6)(A), the Bureau proposes 

§ 1003.4(a)(28). The Bureau believes that 

this proposed reporting requirement is 

necessary and proper to effectuate the 

purposes of HMDA and facilitate 

compliance therewith. The proposed 

reporting requirement will provide the 

public and public officials with data to 

help determine whether financial 

institutions are serving the housing 

needs of their communities by 

providing information about the values 

of properties that are being financed; it 

will also assist public officials in 

distributing public-sector investment so 

as to attract private investment by 

providing information about property 

values; and it will assist in identifying 

possible discriminatory lending patterns 

and enforcing antidiscrimination 

statutes by allowing information about 

similar loans to be compared and 

analyzed appropriately. 

4(a)(29) 

Neither HMDA nor Regulation C 

requires financial institutions to report 

whether loans relating to manufactured 

homes are or would be secured by real 

or personal property. Section 304(b) of 

HMDA permits disclosure of such other 

information as the Bureau may 

require.452 For the reasons discussed 

below, the Bureau believes it may be 

appropriate to require financial 

institutions to report whether a 

manufactured home is legally classified 

as real property or as personal property. 

Since 1988, Regulation C has required 

reporting of home purchase and home 

improvement loans and refinancings 

related to manufactured homes, whether 

or not the homes are considered real 

property under State law.453

Manufactured homes serve vital housing 

needs in communities and 

neighborhoods throughout the United 

States. For example, manufactured 

housing is the largest unsubsidized 

source of affordable homeownership in 

the United States.454 Manufactured 

homes also often share certain essential 

financing features with nonmanufactured homes. But classifications 

of manufactured homes as real or 

personal property vary significantly 

among States and can be ambiguous.455

Regulation C’s consistent treatment of 

manufactured housing in HMDA data 

has proven important to furthering 

HMDA’s purposes and provided 

communities and public officials with 

important information about 

manufactured housing lending.456 The 

Bureau believes that the unique nature 

of the manufactured home financing 

market warrants additional information 

reporting. Although in many respects 

manufactured and site built housing are 

similar, manufactured home financing 

reflects certain key differences as 

compared to site built home financing. 

State laws treat site built homes as real 

property, with financing secured by a 

mortgage or deed of trust. On the other 

hand State law may treat manufactured 

homes as personal property or real 

property depending on the 

circumstances.457 Manufactured home 

owners may own or rent the underlying 

land, which is an additional factor in 

manufactured home owners’ total 

housing cost and can be relevant to 

financing.458

These features of manufactured home 

financing can significantly influence 

interest rates, loan pricing, appraisal 

and valuation practices, and applicable 

legal protections.459 HMDA data from 

2012 on manufactured homes highlight 

many of the differences between 

manufactured housing lending and 

lending related to site built homes. For 

example, 82 percent of conventional 

first-lien home purchase loans for 

manufactured homes were higherpriced, compared to 3.2 percent for 

similar loans for site built homes. The 

average rate spread of those higherpriced manufactured home loans was 6 

percent, compared to 2.6 percent for the 

site built home loans. The denial rate for 

first-lien conventional owner-occupied 

home purchase loans for manufactured 

housing was 56 percent, compared to 

13.7 percent for similar loans for site 

built homes. Given these differences 

and the importance of manufactured 

housing to low- and moderate-income 

families, the Bureau believes that 

additional information collection and 

reporting on manufactured housing will 

further the purposes of HMDA. 

Different legal regimes, tax 

implications, appraisal standards, and 

consumer protections can depend on 

whether the manufactured home is 

legally classified as personal property or 

as real property.460 Further, the Bureau 

understands that there are different 

underwriting and pricing considerations 

based on the distinction. Because of the 

importance of manufactured housing to 

the housing market, the Bureau believes 

that additional information on the legal 

classification of the manufactured home 

will improve the utility of HMDA data 

for manufactured housing. 

Participants at the Board’s 2010 

Hearings discussed the distinctions 

between chattel and real property 

manufactured home loans, and some 

recommended differentiating them in 

HMDA.461 Additional feedback was also 

received as part of the Board’s 2010 

Hearings that supported differentiating 


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462See, e.g., Cal. Health & Safety Code 

§ 18551(a)(1)(A); Colo. Rev. Stat. § 38–29–202(1)(d); 

Conn. Gen. Stat. § 21–67a; Fla. Stat. § 319.261; 

Idaho Code § 63–304(1)(b); N.H. Rev. Stat. § 477:44, 

subp. I; Or. Rev. Stat. § 446.626(1); S.C. Code § 56– 

19–510; Tex. Occ. Code § 1201.2055. 

463Manufactured Housing Institute, Quick Facts: 

Trends and Information About the Manufactured 

Housing Industry, 6 (2013), http:// 

www.manufacturedhousing.org/lib/ 

forcedownload.asp?filepath=

www.manufacturedhousing.org/admin/template/ 

brochures/93temp.pdf; Milano, supra note 437, at 

381 n. 14. 

464See generally Milano supra note 439.; See 

Burkhart supra note 438 at 443; Uniform 

Manufactured Housing Act § 4(c) comment (‘‘This 

provision eliminates the ambiguity that currently 

exists in some state statutes concerning the 

purposes for which the home is to be treated as real 

property. When a statutory provision that a 

manufactured home can be classified as real 

property does not include this type of language, 

courts have questioned whether the home is real 

property only for certain purposes, such as 

financing, or for all purposes.’’) (2012), available at 

http://www.uniformlaws.org/Committee.aspx?title=

Manufactured%20Housing%20Act. 

465See Small Business Review Panel Report at 32, 

33, 99, and 127. 

466Fannie Mae, Fannie Mae Single Family Selling 

Guide § B5–2–02 (June 24, 2014), available at 

http://www.fanniemae.com/content/guide/ 

sel062414.pdf; Freddie Mac, Freddie Mac Single 

Family Selling Guide § H33.2 (June 24, 2014), 

available at http://www.freddiemac.com/

singlefamily/guide/bulletins/pdf/062414Guide.pdf. 

467Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

real and personal property 

manufactured home loans. The Bureau 

understands that classifying the loan as 

either a real property or a personal 

property loan may not provide a 

complete picture of manufactured 

housing finance. For example, certain 

State laws permit manufactured homes 

to be legally classified as real property 

even if the home is sited on leased land, 

such as in a manufactured home 

community, and such a manufactured 

home could be secured by a leasehold 

mortgage.462 The Bureau also 

understands that there could be 

reporting questions that arise from 

certain aspects of manufactured housing 

lending, such as lenders offering 

combination land/home financing 

wherein the manufactured home is 

secured as personal property but the 

land is secured as real property; or 

where the security interest taken in the 

manufactured home may change as the 

transaction progresses; or where a 

lender may, out of prudence, perfect its 

security interest in a manufactured 

home through multiple methods.463 The 

Bureau understands that there may be 

ambiguities in certain State laws about 

the legal classification of a 

manufactured home as personal 

property or real property, and that, as a 

result, it may not be clear whether 

certain financing transactions should be 

classified as mortgage transactions.464

During the Small Business Review 

Panel process, the small entity 

representatives generally did not oppose 

collecting information on whether 

manufactured housing is legally 

classified as real or personal property. 

Several small entity representatives 

noted that State laws often determine 

under what circumstances a 

manufactured home is treated as real or 

personal property, and that there are 

pricing differences dependent on that 

classification. One small entity 

representative noted that this could be 

easily collected, and believed the data 

would be useful for examiners and 

consumer advocates and might help to 

clear up confusion as to the legal 

classification of the dwelling in certain 

circumstances.465

The Bureau’s proposal is tied to the 

manufactured home’s legal 

classification rather than characterizing 

the loan as a real property or personal 

property loan. Both GSE selling guides 

refer to the legal classification of the 

manufactured home for purposes of 

eligibility requirements.466 The Bureau 

believes that the manufactured 

housing’s legal classification under 

applicable State law will facilitate 

compliance by focusing the reporting 

requirement on the status of the 

dwelling, rather than on the 

characterization of the loan or how the 

obligation is secured. As discussed 

below, the Bureau is also proposing to 

collect additional information regarding 

the applicant or borrower’s property 

interest in the land on which the 

manufactured home is located, which 

will provide more detailed HMDA data 

about manufactured housing loans 

when combined with data about the 

legal classification of the home. 

Proposed additions to appendix A 

provide technical instructions for 

reporting the legal classification for 

manufactured housing. As discussed in 

the section-by-section analysis of 

proposed § 1003.4(a)(9) and proposed 

comment 4(a)(9)–2, if more than one 

property is taken, or in the case of an 

application, proposed to be taken as 

security for a single covered loan or 

application, a financial institution may 

report one of the properties in a single 

entry on its loan application register or 

report all of the properties using 

multiple entries on its loan application 

register. Regardless of whether the 

financial institution elects to report the 

transaction in one entry or more than 

one entry, the information required by 

§ 1003.4(a)(29) should relate to the 

property identified under paragraph 

4(a)(9). The Bureau is also proposing 

comment 4(a)(29)–2 to clarify how to 

report the information required by 

§ 1003.4(a)(29) for a covered loan 

secured by, or in the case of an 

application, proposed to be secured by, 

more than one property. 

For the reasons given, pursuant to its 

authority under sections 305(a) and 

304(b)(6)(J) of HMDA, the Bureau is 

proposing § 1003.4(a)(29), which 

requires financial institutions to report 

whether a dwelling is legally classified 

as real property or as personal property, 

if the dwelling related to the property 

identified in § 1003.4(a)(9) is a 

manufactured home. Pursuant to its 

authority under HMDA section 305(a) to 

provide for adjustments for any class of 

transactions, the Bureau believes that 

interpreting HMDA to treat mortgage 

loans secured by all manufactured 

homes consistently is necessary and 

proper to effectuate HMDA’s purposes 

and facilitate compliance therewith. In 

light of changes in the mortgage market, 

certain differences between 

manufactured housing lending and 

lending related to site built homes, and 

the importance of manufactured 

housing generally, especially for lowand moderate-income families, the 

Bureau believes proposed 

§ 1003.4(a)(29) will provide necessary 

insight into this loan data and allow it 

to be used to help determine whether 

financial institutions are serving the 

housing needs of their communities, 

assist public officials in public-sector 

investment determinations, and assist in 

identifying possible discriminatory 

lending patterns and enforcing 

antidiscrimination statutes. 

The Bureau solicits feedback on these 

requirements in general. In particular, 

the Bureau solicits feedback on whether 

reporting the legal classification of the 

dwelling appropriately captures 

distinctions between personal property 

and real property lending, whether 

possible ambiguities in State law could 

make compliance with the reporting 

requirement difficult, and whether 

additional guidance could be provided 

on what information financial 

institutions could rely on to facilitate 

compliance. 

4(a)(30) 

Neither HMDA nor Regulation C 

requires financial institutions to report 

information about what property 

interest applicants or borrowers have in 

the land on which their manufactured 

homes are located. Section 304(b) of 

HMDA permits disclosure of such other 

information as the Bureau may 

require.467 For the reasons discussed 

below, the Bureau believes it may be 


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468Apgar, supra note 442. 

469 Kevin Jewell, Consumers Union, 

Manufactured Housing Appreciation: Stereotypes 

and Data (2003), http://consumersunion.org/pdf/

mh/Appreciation.pdf. 

470See Small Business Review Panel Report at 33, 

127. 

471 Katherine MacTavish, et al., Housing 

Vulnerability Among Rural Trailer-Park 

Households, 13 Georgetown Journal on Poverty Law 

and Policy 97 (2006). 

472 GAO, Federal Housing Administration: 

Agency Should Assess the Effects of Proposed 

Changes to the Manufactured Home Loan Program, 

GAO 07–879, http://www.gao.gov/new.items/

d07879.pdf. 

473See Small Business Review Panel Report at 56. 

474Restatement (Second) of Property, Landlord & 

Tenant § 1.6 (1977). 

475 Katherine MacTavish, supra note 453. 

476Apgar, supra note 440. 

477Sally Ward, et al., Carsey Institute, Resident 

Ownership in New Hampshire’s ‘‘Mobile Home 

Parks:’’ A Report on Economic Outcomes, (2010), 

http://www.carseyinstitute.unh.edu/publications/

Ward_Community_Fund.pdf. 

appropriate to require financial 

institutions to collect and report 

whether the applicant or borrower owns 

the land on which the manufactured 

home is or will be located through a 

direct or indirect ownership interest or 

leases the land through a paid or unpaid 

leasehold interest. 

Manufactured home owners generally 

either own or lease the land on which 

the manufactured home is sited.468 Land 

may be owned either directly or 

indirectly through a cooperative or 

similar ownership structure. A 

leasehold interest could arise through a 

lease with specified terms and rental 

payments or through a tenancy at will 

arising from the landowner’s 

permission. Whether a manufactured 

home owner owns or rents the 

underlying land can have important 

implications for the financing of the 

transaction and its long-term 

affordability and the appreciation of the 

manufactured home.469 Because of the 

importance of manufactured housing to 

the housing market, the Bureau believes 

that additional information on the 

applicant or borrower’s land property 

interest may improve the utility of 

HMDA data for manufactured housing. 

During the Small Business Review 

Panel process some small entity 

representatives believed that it could be 

burdensome to collect this information. 

One small entity representative noted 

that the information may be gathered for 

loan servicing, but it might not be 

available for withdrawn or denied 

loans.470 The Bureau believes that 

financial institutions may already be 

collecting or analyzing some 

information on land property interest 

for underwriting or servicing purposes. 

Cooperative fees, ground rent, and 

leasehold payments are included in the 

definition of mortgage-related 

obligations in § 1026.43(b)(8) of 

Regulation Z pursuant to the Bureau’s 

2013 ATR Final Rule, for example. 

Creditors subject to the rule are required 

to consider such obligations in assessing 

an applicant’s ability-to-repay and to 

verify the information using reasonably 

reliable third-party records pursuant to 

§ 1026.43(c). 

Many manufactured homes are 

located on leased land. For example, in 

a manufactured home park, the home 

owner pays rent to the park owner for 

the right to occupy a lot in addition to 

making payments on the manufactured 

home loan.471 The park owner typically 

provides sewer, water, roads, and other 

services.472 A manufactured home 

owner could also lease land outside of 

a manufactured home park. Finally, 

manufactured homes are sometimes 

located on land for which the 

manufactured home owner does not 

own or have a formal lease. For 

example, a manufactured home owner 

may be permitted by a family member 

to locate the home on family land.473

This arrangement could be formal or 

informal, without a specific agreement 

as to term or rent. Even in such an 

informal arrangement a tenancy at will 

leasehold interest may arise.474

As discussed above, if the land on 

which the manufactured home is 

located is owned it could be financed 

with the manufactured home in a land/ 

home loan, or the land could be 

financed separately or already owned by 

the manufactured home loan borrower. 

An emerging scenario involves a 

manufactured home park owned as a 

cooperative by the residents, often 

called a resident-owned community.475

As compared to owners of manufactured 

homes on leased land, the residents in 

such communities have greater control 

over the property on which their homes 

are located due to their communal 

ownership interest.476 One study found 

that residents who own their 

communities benefit from lower lot fees, 

higher home sale prices, faster home 

sales, and access to better financing.477

Proposed additions to appendix A 

provide technical instructions for 

reporting land property interest for 

manufactured housing covered loans 

and applications. Proposed instruction 

4(a)(30)–1 instructs financial 

institutions to indicate whether the 

applicant or borrower’s interest in the 

land on which the manufactured home 

related to the covered loan or 

application is or will be located is a 

direct ownership interest, an indirect 

ownership interest (such as a home in 

a resident-owned community), a paid 

leasehold interest (such as a lease for a 

lot in a manufactured home park), or an 

unpaid leasehold interest (such as a 

home on family-owned land). Proposed 

instruction 4(a)(30)–1.e provides for 

reporting ‘‘not applicable’’ if the 

dwelling is not a manufactured home or 

the location for the manufactured home 

is not determined. 

The proposal adds comment 4(a)(30)– 

1, which provides additional guidance 

on indirect ownership. The comment 

provides illustrative guidance on 

identifying resident-owned 

communities and examples of reporting 

land property interest depending on 

whether or not the applicant or 

borrower is a member of the ownership 

structure. Proposed comment 4(a)(30)–2 

provides additional guidance on 

leasehold interests. The comment 

provides illustrative guidance on 

identifying paid and unpaid leasehold 

interests. As discussed in the sectionby-section analysis of proposed 

§ 1003.4(a)(9) and proposed comment 

4(a)(9)–2, if more than one property is 

taken, or in the case of an application, 

proposed to be taken as security for a 

single covered loan or application, a 

financial institution may report one of 

the properties in a single entry on its 

loan application register or report all of 

the properties using multiple entries on 

its loan application register. Regardless 

of whether the financial institution 

elects to report the transaction in one 

entry or more than one entry, the 

information required by § 1003.4(a)(30) 

should relate to the property identified 

under paragraph 4(a)(9). The Bureau is 

also proposing comment 4(a)(30)–3 to 

clarify how to report the information 

required by § 1003.4(a)(30) for a covered 

loan secured by, or in the case of an 

application, proposed to be secured by, 

more than one property. 

For the reasons given, pursuant to its 

authority under sections 305(a) and 

304(b)(6)(J) of HMDA, the Bureau is 

proposing § 1003.4(a)(30), which 

requires financial institutions to report 

whether the applicant or borrower owns 

the land on which the manufactured 

home is or will be located through a 

direct or indirect ownership interest or 

leases the land through a paid or unpaid 

leasehold interest, if the dwelling 

related to the property identified in 

§ 1003.4(a)(9) is a manufactured home. 

For the reasons given, the Bureau 

believes proposed § 1003.4(a)(30) is 

necessary to carry out HMDA’s 

purposes, because it will provide 

necessary insight into loan data and 

allow it to be used to help determine 

whether financial institutions are 

serving the housing needs of their 

communities, since this information can 


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51800 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

478See MISMO, Version 3.3 of the MISMO 

Residential Reference Model (Financed Unit Count); 

Fannie Mae, Fannie Mae Implementation Guide for 

Loan Delivery Data, Appendix A (Oct. 29, 2013), 

https://www.fanniemae.com/content/technology_

requirements/uldd-implementation-guideappendix-a.pdf; Freddie Mac, Freddie Mac 

Implementation Guide for Loan Delivery Data, 

Appendix A (Jan. 29, 2014), http://

www.freddiemac.com/singlefamily/sell/docs/FRE_

IG_selling_system_appendix_a_data_

requirements.pdf. 

479San Francisco Hearing, supra note 133. 

480San Francisco Hearing, supra note 133. 

481See MISMO, Version 3.3 of the MISMO 

Residential Reference Model (Financed Unit Count); 

Fannie Mae, Fannie Mae Implementation Guide for 

Loan Delivery Data, Appendix A (Oct. 29, 2013), 

https://www.fanniemae.com/content/technology_

requirements/uldd-implementation-guideappendix-a.pdf; Freddie Mac, Freddie Mac 

Implementation Guide for Loan Delivery Data, 

Appendix A (Jan. 29, 2014), http:// 

www.freddiemac.com/singlefamily/sell/docs/FRE_

IG_selling_system_appendix_a_data_

requirements.pdf. 

have important implications for the 

financing, long-term affordability, and 

appreciation of the housing at issue. 

The Bureau solicits feedback on what 

information financial institutions collect 

about an applicant’s or borrower’s land 

property interest for manufactured 

home transactions, and about any 

potential difficulties associated with 

complying with the proposed reporting 

requirement. The Bureau solicits 

feedback about whether financial 

institutions consider payments that may 

be associated with such interests in 

underwriting, such as lease payments, 

ground rents, or cooperative fees, and 

about what information they typically 

collect regarding such payments. The 

Bureau specifically solicits feedback 

regarding reporting land property 

interest for land that is neither formally 

leased nor owned, such as familyowned land which the applicant or 

borrower does not have a direct 

ownership interest in, and whether the 

proposal appropriately addresses that 

scenario. The Bureau also specifically 

solicits feedback on resident-owned 

communities and whether the proposal 

appropriately addresses them. The 

Bureau solicits feedback on whether this 

proposal, combined with the proposal 

regarding manufactured home legal 

classification, appropriately captures 

and differentiates the lending products 

in manufactured home finance; on 

whether it will allow for communities to 

assess how financial institutions are 

meeting the needs of manufactured 

home owners; and on whether different 

or additional requirements, 

enumerations, or guidance is 

appropriate. 

4(a)(31) 

Section 1003.4(a)(5) requires financial 

institutions to report the property type 

to which a loan or application relates. 

Financial institutions must report 

whether the dwelling is a one-to fourfamily dwelling (other than 

manufactured housing), a manufactured 

home, or a multifamily dwelling. 

Section 1003.4(a)(5) does not require 

financial institutions to report the 

number of units in properties. HMDA to 

section 304(b)(6)(J) permits disclosure of 

such other information as the Bureau 

may require. For the reasons discussed 

below, pursuant to HMDA sections 

305(a) and 304(b)(6)(J), the Bureau is 

proposing to add § 1003.4(a)(31), which 

requires a financial institution to report 

the number of individual dwelling units 

related to the property securing the 

covered loan or, in the case of an 

application, proposed to secure the 

covered loan. As discussed above, the 

Bureau is proposing to replace the 

current property type reporting 

requirement with construction method 

and to separate the concept of the 

number of units from that reporting 

requirement. Separating the property 

type requirement into two distinct 

reporting requirements would better 

align HMDA reporting with industry 

practice and will improve the quality of 

the data. 

The Bureau believes that information 

on the total number of units may 

improve the utility of HMDA data both 

for covered loans and applications 

related to one-to four-family dwellings. 

The information will allow single family 

homes to be differentiated from 

duplexes and similar properties. 

Multifamily dwellings would be 

reported with the exact number of units 

in the property, allowing for more 

robust analysis of multifamily dwelling 

finance. The Bureau understands that 

tracking total number of units is 

consistent with the MISMO/ULDD data 

standard.478 As discussed below, the 

Bureau is also considering a 

requirement to report the number of 

income-restricted units for multifamily 

dwellings with affordable housing 

subsidies. This information will be 

useful when combined with the total 

number of units in a multifamily 

dwelling to determine the percentage of 

subsidized units for mixed-income 

affordable housing projects. As such, the 

proposal would help serve the HMDA 

purposes of assisting the public and 

government officials to determine 

whether financial institutions are 

serving the housing needs of their 

communities, and it would assist public 

officials in targeting public investments. 

Multifamily housing has always been 

an essential component of the nation’s 

housing stock. In the wake of the 

housing crisis, multifamily housing has 

taken on an increasingly important role 

in communities, as families have turned 

to rental housing for a variety of 

reasons.479 Many participants at the 

Board’s 2010 Hearings expressed a 

desire for HMDA to include more 

specific data about multifamily 

properties.480 HMDA highlights the 

importance of multifamily lending to 

the recovering housing finance market 

and to consumers. At the peak of the 

housing market in 2004, 48,437 

originated multifamily loans were 

reported under HMDA. By 2010 the 

volume for originated multifamily loans 

had dropped to 18,974. However, in 

2012 multifamily loans rose sharply to 

36,761—a much greater rise than the 

originated loan volume for one- to fourfamily dwellings. Greater detail about 

multifamily housing finance may 

provide additional information about 

whether financial institutions are 

serving the housing needs of their 

communities, and may provide 

information to assist public official in 

making decisions about public-sector 

investments, and to help identify 

potential fair lending concerns. 

The Bureau notes that many of 

Regulation C’s current and proposed 

reporting requirements may not be 

relevant for applications or loans related 

to multifamily dwellings. Financial 

institutions report that they often have 

different processes for commercial 

loans, including loans related to 

multifamily dwellings, which increases 

the burden of reporting data for such 

loans. The Bureau recognizes the 

potential burden associated with 

reporting HMDA data for applications 

and loans related to multifamily 

dwellings. However, the importance of 

multifamily housing to the nation’s 

housing stock and feedback from public 

officials and consumer advocates 

suggests that potential benefits to the 

public and public officials may justify 

these potential burdens, and the Bureau 

believes that disclosure of this 

information, pursuant to proposed 

§ 1003.4(a)(31), is necessary to carry out 

HMDA’s purposes. 

Proposed instructions in appendix A 

provide technical details for reporting 

total individual dwelling units. 

Proposed comment 4(a)(31)–1 provides 

guidance for reporting total units for 

loans involving multiple properties and 

cross-references comment 4(a)(9)–2. 

The Bureau understands that tracking 

total number of units is consistent with 

the MISMO/ULDD data standard.481

However, the Bureau is concerned that 

some financial institutions may not 

differentiate total unit counts for two- to 


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482See Small Business Review Panel Report at 32, 

99, 127. 

483See Small Business Review Panel Report at 42. 

484Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

485Harvard University Joint Center for Housing 

Studies, America’s Rental Housing: Evolving Market 

and Needs (Dec. 9, 2013), http:// 

www.jchs.harvard.edu/americas-rental-housing. 

486Low-Income Housing Tax Credit Database, 

http://lihtc.huduser.org/. 

487 Insured Multifamily Mortgages Database, 

http://portal.hud.gov/hudportal/HUD?src=/ 

program_offices/housing/comp/rpts/mfh/mf_f47. 

488Multifamily Assistance and Section 8 

Contracts Database, http://portal.hud.gov/ 

hudportal/HUD?src=/program_offices/housing/ 

mfh/exp/mfhdiscl. 

489See, e.g., the National Housing Preservation 

Database, http://www.preservationdatabase.org/. 

four-family dwellings. During the Small 

Business Review Panel process, some 

small entity representatives preferred 

distinguishing only between one- to 

four-family dwellings and multifamily 

dwellings with no total unit count; 

others preferred distinguishing between 

single family dwellings, two- to fourfamily dwellings, and multifamily 

dwellings; and still others suggested 

ranges of units for multifamily 

dwellings.482 The Small Business 

Review Panel recommended that the 

Bureau seek public comment on 

appropriate alternatives to reporting the 

total number of dwelling units, 

including whether financial institutions 

should report ranges of the number of 

units.483 Based on this feedback and 

consistent with the recommendation of 

the Small Business Review Panel, the 

Bureau solicits feedback on appropriate 

alternatives to reporting the total 

number of dwelling units, including 

whether financial institutions should 

report ranges of the number of units 

such as one, two to four, and five or 

more. 

4(a)(32) 

Neither HMDA nor Regulation C 

requires financial institutions to report 

information about the number of 

dwelling units in multifamily dwellings 

that are income-restricted pursuant to 

affordable housing programs. Section 

304(b) of HMDA permits disclosure of 

such other information as the Bureau 

may require.484 For the reasons 

discussed below, pursuant to HMDA 

sections 305(a) and 304(b)(6)(J), the 

Bureau is proposing § 1003.4(a)(32), 

which requires financial institutions to 

collect and report information on the 

number of individual dwelling units in 

multifamily dwellings that are incomerestricted pursuant to Federal, State, or 

local affordable housing programs. 

Affordable multifamily housing is an 

important component of the housing 

market for low- and moderate-income 

consumers and an important investment 

of Federal, State, and local government 

resources. A December 2013 study by 

the Harvard Joint Center on Housing 

Studies noted that in 2012 

approximately 21.1 million households 

were cost-burdened (i.e., spending more 

than 30 percent of income on housing), 

and estimated that, while 19.3 million 

households were eligible for affordable 

housing assistance, only 4.6 million 

received such assistance.485 For these 

reasons, and as explained below, the 

Bureau believes that additional 

information about whether multifamily 

housing loans are related to multifamily 

dwellings with affordability restrictions 

would further HMDA’s purposes, in part 

by providing more useful information 

about these vital public resources, and 

thereby assisting public officials in 

distributing public-sector investment so 

as to attract private investment to areas 

where it is needed. 

The Bureau believes that data 

reported pursuant to this proposal could 

be combined with other existing 

publically available data to obtain 

additional detail on multifamily 

dwelling affordability. For example, 

HUD maintains publically available data 

on Low-Income Housing Tax Credit 

multifamily dwellings; 486 publically 

available data on FHA-insured 

multifamily dwellings, which includes 

information on whether the insured 

dwelling loan included affordability 

components from Low-Income Housing 

Tax Credits or tax exempt bonds; 487 and 

information about contracts for Section 

8-assisted multifamily dwellings.488

Other organizations maintain or 

aggregate data on multifamily affordable 

housing which could be utilized with 

HMDA data provided by this 

proposal.489

The Bureau recognizes that reporting 

information regarding affordability 

restrictions may entail new burden for 

some financial institutions that do not 

ordinarily make loans to affordable 

housing properties and may be 

unfamiliar with these programs. 

Conversely, the Bureau understands that 

many financial institutions specialize in 

this kind of lending or have special 

programs designed for such lending and 

believes that such institutions may have 

this information readily available. 

Based on these considerations, the 

Bureau is proposing to require financial 

institutions to collect and report 

information on the number of 

individual dwellings units that are 

income-restricted pursuant to Federal, 

State, or local affordable housing 

programs. 

The proposal adds technical 

instructions for reporting in appendix 

A. Proposed instruction 4(a)(32)–1 

provides general reporting information. 

Proposed instruction 4(a)(32)–1.a 

specifies to report ‘‘NA’’ if the dwelling 

is not a multifamily dwelling. Proposed 

instruction 4(a)(32)–1.b specifies to 

report ‘‘0’’ for a multifamily dwelling 

that contains no individual dwelling 

units subject to affordable housing 

income restrictions. 

The Bureau is also proposing to add 

several comments. Proposed comment 

4(a)(32)–1 clarifies that incomerestricted affordable housing units are 

generally subject to income level 

restrictions defined by area median 

income and provided by HUD or 

another agency responsible for 

implementing the applicable affordable 

housing program. The comment 

provides that such restrictions are 

frequently part of programs that provide 

public funds, special tax treatment, or 

density bonuses for affordable housing 

purposes. The comment provides that 

rent control or rent stabilization and 

acceptance of Housing Choice Vouchers 

or other portable housing assistance are 

not considered to create incomerestricted affordable housing individual 

dwelling units for purposes of proposed 

§ 1003.4(a)(32). 

Proposed comment 4(a)(32)–2 

provides illustrative examples of 

Federal programs and funding sources 

that may result in individual dwellings 

units that are reportable under 

§ 1003.4(a)(32). Proposed comment 

4(a)(32)–3 provides illustrative 

examples of State and local programs 

and funding sources that may result in 

individual dwelling units that are 

reportable under § 1003.4(a)(32). 

Proposed comment 4(a)(32)–4 provides 

guidance for reporting income-restricted 

units for loans involving multiple 

properties and cross-references 

comment 4(a)(9)–2. 

The Bureau considered whether to 

require financial institutions to report 

the specific affordable housing program 

related to the multifamily dwelling, or 

the area median income level at which 

units in the multifamily dwelling are 

considered affordable. However, the 

Bureau believes that the large variety of 

Federal, State, and local affordable 

housing programs would make 

implementing a more specific reporting 

requirement difficult and burdensome. 

Similarly, reporting income affordability 

level for units in the multifamily 

dwelling may be unduly burdensome. 

The Bureau understands that many 

affordable multifamily dwellings 


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51802 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

490See Small Business Review Panel Report at 42. 

491 Id. 

492 Dodd-Frank Act, section 1094(3), 12 U.S.C. 

2803(b)(6)(E). 

493See, e.g., House Consideration of HR 4173, 155 

Cong. Record H 14430 (daily ed. Dec. 9, 2009) 

(Cong. Ellison (MN)) (‘‘And nearly one in four U.S. 

borrowers currently owes more on their mortgage 

than their home is worth. This, in large measure, 

happened, Madam Chair, because mortgage brokers, 

unregulated lured families with low teaser-rate 

interest rates that later skyrocketed to unaffordable 

levels, hidden fees, and charges in 

incomprehensible terms and conditions that 

brought on the housing crisis and undermined the 

financial system.’’); Senate Consideration of S 3217, 

156 Cong. Rec. S 3323 (daily ed. May 6, 2010) (Sen. 

LeMieux (FL)) (‘‘One is we know mortgages were 

given to people who should not have had 

mortgages-people who had no income and no jobs. 

They called them ninja loans-no income, no jobs. 

There were a lot of them in my State of Florida. 

Why were they written? Many of them were written 

because they were written by mortgage brokers and 

banks that did not have to retain any of those 

mortgages on their books. There were no 

underwriting standards. They could just ship them 

off. They had no skin in the game and no 

responsibility.’’). 

494See, e.g., Chicago Hearing, supra note 137 

(remarks of Janis Bowdler, Deputy Director of the 

Wealth Building Project, National Council of La 

Raza); id. (remarks of Michael Collins, Researcher, 

University of Wisconsin). 

495See, e.g., Keith Ernst, et al, ‘‘Steered Wrong: 

Brokers, Borrowers, and Subprime Loans,’’ Center 

for Responsible Lending, April 8, 2008, available at 

http://www.responsiblelending.org/mortgagelending/research-analysis/steered-wrong-brokersborrowers-and-subprime-loans.pdf. 

include multiple layers of affordable 

housing program subsidies in 

development and long-term financing, 

further complicating a specific reporting 

requirement. 

During the Small Business Review 

Panel process, small entity 

representatives generally stated that 

information concerning multifamily 

affordable housing is not generally 

disclosed during the loan process and 

may be labor-intensive to obtain.490 The 

Small Business Review Panel 

recommended that the Bureau seek 

public comment concerning the extent 

to which information about multifamily 

affordable housing programs is available 

in loan files, how financial institutions 

currently use this information, and the 

costs and other burdens of obtaining 

these data.491 Consistent with the 

recommendation of the Small Business 

Review Panel, the Bureau solicits 

feedback on the extent to which 

information about multifamily 

affordable housing programs is available 

in loan files, how financial institutions 

currently use this information, and the 

costs and other burdens of obtaining 

these data. 

The Bureau solicits feedback 

generally about this requirement. The 

Bureau also solicits feedback on 

whether additional information about 

the program or type of affordable 

housing would be valuable and serve 

HMDA’s purposes, and about the 

burdens associated with collecting such 

information compared with the burdens 

of the proposal. Comment is solicited on 

the following points: whether the 

Bureau should require reporting of 

information concerning programs 

targeted at specific groups (such as 

seniors or persons with disabilities); 

whether income restrictions above a 

certain threshold should be excluded for 

reporting purposes (such as income 

restrictions above the area median 

income); whether it would be 

appropriate to simplify the requirement 

and report only whether a multifamily 

dwelling contains a number of incomerestricted units above a certain 

percentage threshold; whether financial 

institutions should be required to report 

the specific affordable housing program 

or programs; and whether financial 

institutions should be required to report 

the area median income level at which 

units in the multifamily dwelling are 

considered affordable. The Bureau also 

solicits feedback on whether the burden 

on financial institutions may be reduced 

by providing instructions or guidance 

specifying that institutions only to 

report income-restricted dwelling units 

that they considered or were aware of in 

originating, purchasing, or servicing the 

loan. 

4(a)(33) 

Regulation C does not require 

financial institutions to report 

information concerning the application 

channel of covered loans and 

applications. HMDA section 304(b)(6)(E) 

requires financial institutions to 

disclose ‘‘the channel through which 

application was made, including retail, 

broker, and other relevant categories,’’ 

for each covered loan and 

application.492 Proposed § 1003.4(a)(33) 

implements this requirement by 

requiring financial institutions to record 

certain information related to the 

application channel of each reported 

origination and application. 

Congress added the requirement to 

record information about the 

application channel to the HMDA data 

collection because it believed that it 

would enrich HMDA data. For example, 

Congress expressed concerns that the 

wholesale channel may have presented 

greater risks to applicants than the retail 

channel during the financial crisis.493

Participants in the Board’s 2010 

Hearings also urged for the addition of 

information about the application 

channel to the HMDA data collection.494

The loan terms and rates that a financial 

institution offers an applicant may 

depend on how the applicant submits 

the application (i.e., whether through 

the retail, wholesale, or correspondent 

channel).495 Thus, identifying 

transactions by channel may help to 

interpret loan pricing and other 

information in the HMDA data. 

The mortgage industry generally 

operates through three primary 

application channels: retail, wholesale, 

and correspondent. These channels are 

often characterized by three factors: (1) 

which institution received the 

application directly from the applicant, 

(2) which institution made the credit 

decision, and (3) in which institution’s 

name the loan closed (i.e., to whom the 

obligation initially was payable). The 

term ‘‘retail channel’’ generally refers to 

situations where the applicant submits 

the application directly to the financial 

institution that makes the credit 

decision on the application and to 

whom the obligation is initially payable. 

On the other hand, the term 

‘‘wholesale channel,’’ which is also 

referred to as the ‘‘broker channel,’’ 

generally refers to situations where the 

applicant submits the application to a 

mortgage broker and the broker sends 

the application to a financial institution 

that makes the credit decision on the 

application and to whom the obligation 

is initially payable. The wholesale 

channel may also include some 

arrangements, such as table funding, in 

which the obligation is not initially 

payable to the financial institution that 

makes the credit decision. 

The third channel includes 

correspondent arrangements between 

two financial institutions. A purchasing 

financial institution may have different 

arrangements with correspondents and 

may or may not delegate underwriting 

authority to a correspondent. A 

correspondent with delegated 

underwriting authority processes an 

application much like the retail channel 

described above. The correspondent 

receives the application directly from 

the applicant, makes the credit decision, 

closes the loan in its name, and 

immediately or within a short period of 

time sells the loan to another 

institution. Correspondents with 

nondelegated authority operate more 

like a mortgage broker in the wholesale 

channel. These correspondents receive 

the application from the applicant, but 

prior to closing involve a third-party 

institution that makes the credit 

decision. The transaction generally 

closes in the name of the correspondent, 

which immediately or within a short 

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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51803 

496See generally, 78 FR 11280, 11284 (Feb. 15, 

2013); CFPB Examination Procedure, http://

files.consumerfinance.gov/f/201401_cfpb_mortgageorigination-exam-procedures.pdf. 

497See, e.g., Small Business Review Panel Report 

at 26. 

498See id at 39–40. 

499 Dodd-Frank Act section 1094(3)(A)(iv), 12 

U.S.C. 2803(b)(6)(F). 

500 12 U.S.C. 5107(c). 

501 12 CFR parts 1007 (Regulation G) and 1008 

(Regulation H). 

party institution that made the credit 

decision.496

Collecting information about the 

application channel presents challenges 

due to the complexities of the mortgage 

market and HMDA’s reporting 

requirements. As discussed above in the 

section-by-section analysis of proposed 

§ 1003.4(a), the financial institution that 

made the credit decision prior to closing 

reports the application or origination, 

regardless of whether the loan closed or 

would have closed in that institution’s 

name. Since retail lenders, mortgage 

brokers, and correspondent lenders all 

may make a credit decision on an 

application, financial institutions that 

report HMDA data include financial 

institutions acting in all of those roles. 

In addition, each financial institution 

may play a different role in different 

transactions, e.g., act as a retail lender 

in one transaction and as a 

correspondent lender in another 

transaction. Furthermore, financial 

institutions may characterize the 

different application channels 

differently and may not routinely collect 

information about application channels. 

The Bureau recognizes the potential 

challenges and burdens with collecting 

information about application channels. 

However, the Bureau believes that the 

potential benefits to the public and to 

public officials may justify these 

potential burdens. The Bureau also 

believes that disclosure of information 

about application channels is an 

appropriate method of implementing 

HMDA section 304(b)(6)(E) in a manner 

that carries out HMDA’s purposes. 

Based on these considerations, the 

Bureau proposes to implement the 

Dodd-Frank amendment by requiring 

financial institutions to collect and 

report information on whether the 

application was submitted directly to 

the financial institution reporting the 

loan or application and on whether the 

covered loan closed or, in the case of an 

application, would have closed in the 

name of the financial institution 

reporting the covered loan or 

application. The Bureau believes that 

this approach implements the relevant 

Dodd-Frank Act amendment to HMDA 

in a manner that carries out HMDA’s 

purposes, without imposing undue 

burden. 

Accordingly, pursuant to HMDA 

sections 304(b)(6)(E) and 305(a), the 

Bureau proposes § 1003.4(a)(33), which 

provides that, except for purchased 

covered loans, a financial institution is 

required to report the following 

information about the application 

channel of the covered loan or 

application: Whether the applicant or 

borrower submitted the application for 

the covered loan directly to the financial 

institution; and whether the obligation 

arising from the covered loan was or, in 

the case of an application, would have 

been initially payable to the financial 

institution. The Bureau solicits feedback 

regarding whether this proposed 

requirement is appropriate generally 

and regarding alternative ways to collect 

application channel information. 

To facilitate compliance, the Bureau 

proposes to except purchased covered 

loans from this requirement. The Bureau 

believes that reporting of the 

information required by proposed 

§ 1003.4(a)(33) for purchased covered 

loans would not provide valuable 

information because there would likely 

be little variation in the information 

reported (i.e., a financial institution 

reporting a purchase of a covered loan 

would nearly always report that the 

application was not submitted directly 

to the financial institution and that the 

covered loan did not close in the name 

of the financial institution). 

Accordingly, the Bureau believes that it 

may not be appropriate to burden 

financial institutions with the 

requirement to report the information 

required by proposed § 1003.4(a)(33) for 

purchased covered loans. The Bureau 

solicits feedback on whether this 

exception is appropriate. 

During the Small Business Review 

Panel process, small entity 

representatives expressed concerns 

about the burden associated with 

collecting application channel 

information given the complexities of 

their business practices.497 The Panel 

recommended that the Bureau seek 

comment on the most effective means of 

collecting information about the 

application channel of the reported 

covered loans and applications.498

Consistent with the Small Business 

Review Panel’s recommendation, the 

Bureau seeks feedback on whether 

alternative ways of collecting 

application channel information would 

achieve the statutory requirement in a 

more efficient manner. 

The Bureau is also proposing 

commentary to clarify the reporting 

requirements. Proposed comment 

4(a)(33)–1 contains several examples 

that illustrate when an application is 

submitted directly to a financial 

institution. Proposed comment 4(a)(33)– 

2 clarifies that proposed § 1003.4(a)(33) 

requires financial institutions to report 

whether the obligation arising from a 

covered loan or application was or 

would have been initially payable to the 

institution. Proposed comment 4(a)(33)– 

3 explains how to report the application 

channel information if the financial 

institution is reporting the credit 

decision made by an agent consistent 

with comment 4(a)–5. Proposed 

additions to appendix A provide 

technical instructions regarding how to 

enter the application channel data on 

the loan application register. 

4(a)(34) 

Regulation C does not require 

financial institutions to report 

information regarding a loan originator 

identifier. HMDA section 304(b)(6)(F) 

requires the reporting of, ‘‘as the Bureau 

may determine to be appropriate, a 

unique identifier that identifies the loan 

originator as set forth in section 1503 of 

the [Secure and Fair Enforcement for] 

Mortgage Licensing Act of 2008’’ 

(S.A.F.E. Act).499 Proposed 

§ 1003.4(a)(34) implements this 

requirement by requiring financial 

institutions to report, for a covered loan 

or application, the unique identifier 

assigned by NMLSR for the mortgage 

loan originator, as defined in Regulation 

G § 1007.102 or Regulation H § 1008.23, 

as applicable. 

The S.A.F.E. Act provides for a 

unique identifier under the NMLSR for 

residential mortgage loan originators.500

The S.A.F.E. Act requirements are 

implemented by the Bureau’s 

Regulations G and H.501 The Bureau 

believes that implementing the DoddFrank Act requirement for a mortgage 

loan originator unique identifier will 

improve HMDA data and assist in 

identifying and addressing potential 

issues, such as training deficiencies 

with specific loan originators, as well as 

strengthen the transparency of the 

residential mortgage market. The ability 

to identify an individual who has 

primary responsibility in the transaction 

will enable new dimensions of analysis, 

including being able to link individual 

mortgage loan originators or groups of 

mortgage loan originators to a financial 

institution. The NMLSR mortgage loan 

originator unique identifier also 

provides a vehicle for industry to selftest and determine appropriate 

corrective measures when it identifies 


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51804 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

502Regulation Z § 1026.36(g). 

503Regulation Z § 1026.37(k). 

504The Bureau’s 2013 Final Loan Originator Rule 

and 2013 TILA-RESPA Final Rule also provide 

standards for identifying the appropriate loan 

officer or loan originator where more than one 

individual is listed in the loan documents or 

disclosure documents, as applicable. See Regulation 

Z § 1026.36(g), comment 36(g)(1)(ii)–1; § 1026.37(k), 

comment 37(k)–3. 

505See Small Business Review Panel Report at 26. 

506 Id. 

507 Id. 

508 Id. at 39. 509 Dodd-Frank Act section 1094(3)(A)(iv), 12 

U.S.C. 2803(b)(6)(J). 510E.g., Washington Hearing, supra note 130. 511Comment Letter of Donald Clark, Secretary, 

Federal Trade Commission, December 3, 2010. 

individual misconduct through selfanalysis of HMDA data. 

A requirement to collect and report a 

mortgage loan originator unique 

identifier may impose some burden on 

financial institutions. However, the 

Bureau believes that the potential 

benefits to the public and public 

officials justify these potential burdens, 

and the Bureau believes that disclosure 

of this information is an appropriate 

method of implementing HMDA section 

304(b)(6)(F) and carrying out HMDA’s 

purposes. This information is provided 

on certain loan documents pursuant to 

the loan originator compensation 

requirements under TILA.502 This 

information will also be provided on the 

TILA–RESPA integrated disclosure form 

starting on August 1, 2015.503 As a 

result, the NMLSR unique identifier for 

the mortgage loan originator will be 

readily available to HMDA reporters at 

little to no ongoing cost. Accordingly, 

the Bureau is proposing § 1003.4(a)(34), 

which provides that a financial 

institution shall report, for a covered 

loan or application, the unique 

identifier assigned by the NMLSR for 

the mortgage loan originator as defined 

in Regulation G § 1007.102 or 

Regulation H § 1008.23, as applicable. 

Proposed instruction 4(a)(34)–1 in 

appendix A provides technical 

instructions regarding how to enter the 

NMLSR ID on the loan application 

register. This proposed instruction 

provides that a financial institution 

must enter the NMLSR mortgage loan 

originator unique identifier as set forth 

in the S.A.F.E. Act, as implemented by 

Regulation G (S.A.F.E. Mortgage 

Licensing Act—Federal Registration of 

Residential Mortgage Loan Originators), 

12 CFR part 1007, and Regulation H 

(S.A.F.E. Mortgage Licensing Act—State 

Compliance and Bureau Registration 

System), 12 CFR part 1008. Proposed 

instruction 4(a)(34)–2 in appendix A 

provides that, in the event that the 

mortgage loan originator is not required 

to obtain and has not been assigned an 

NMLSR ID, a financial institution must 

enter ‘‘NA’’ for not applicable. 

Proposed comment 4(a)(34)–1 

discusses the requirement that a 

financial institution report the NMLSR 

ID for the mortgage loan originator and 

describes the NMLSR ID. Proposed 

comment 4(a)(34)–2 discusses the 

requirement that a financial institution 

report ‘‘NA’’ for not applicable when the 

mortgage loan originator is not required 

to obtain and has not been assigned an 

NMLSR ID. Proposed comment 4(a)(34)– 

2 also provides that, if a mortgage loan 

originator has been assigned an NMLSR 

ID, a financial institution complies with 

proposed § 1003.4(a)(34) by reporting 

the mortgage loan originator’s NMLSR 

ID regardless of whether the mortgage 

loan originator is required to obtain an 

NMLSR ID for the particular transaction 

being reported by the financial 

institution. The proposed comment 

provides an illustrative example. 

Proposed comment 4(a)(34)–3 

explains that, in the event that more 

than one individual meets the definition 

of a mortgage loan originator, as defined 

in Regulation G § 1007.102 or 

Regulation H § 1008.23, for a covered 

loan or application, a financial 

institution complies with proposed 

§ 1003.4(a)(34) by reporting the NMLSR 

ID of the individual mortgage loan 

originator with primary responsibility 

for the transaction.504 The proposed 

comment explains that a financial 

institution that establishes and follows 

a reasonable, written policy for 

determining which individual mortgage 

loan originator has primary 

responsibility for the reported 

transaction complies with proposed 

§ 1003.4(a)(34). 

During the Small Business Review 

Panel process, the small entity 

representatives generally supported the 

proposal to require the NMLSR 

identifier for the mortgage loan 

originator involved in the 

transaction.505 One small entity 

representative noted that the 

information is already collected on 

RESPA forms, but urged the Bureau to 

specify clearly when the identifier must 

be provided.506 Another small entity 

representative, however, expressed 

concern about the potential unmerited 

negative impact on loan originators who 

are identified with a significant number 

of loans that fail for reasons other than 

inadequate underwriting.507 With 

respect to each of the unique identifiers 

specified in the Dodd-Frank Act, 

including the mortgage loan originator 

identifier, the Small Business Review 

Panel recommended that the Bureau 

seek comment on each identifier under 

consideration and on whether each of 

the identifiers should be required for all 

entries on the loan application register, 

or only for loan originations and 

purchases.508 Consistent with the Small 

Business Review Panel’s 

recommendations, the Bureau solicits 

feedback on its proposal requiring 

financial institutions to report, for a 

covered loan or application, the unique 

identifier assigned by the NMLSR for 

the mortgage loan originator. In 

addition, the Bureau specifically solicits 

comment on whether the mortgage loan 

originator unique identifier should be 

required for all entries on the loan 

application register, including 

applications that do not result in 

originations, or only for loan 

originations and purchases. 

4(a)(35) 

Currently, Regulation C does not 

require financial institutions to report 

information regarding recommendations 

received from automated underwriting 

systems, and HMDA does not expressly 

require this itemization. Section 304(b) 

of HMDA permits the disclosure of 

‘‘such other information as the Bureau 

may require.’’ 509 For the reasons 

discussed below, the Bureau believes it 

may be appropriate to require financial 

institutions to report information related 

to the automated underwriting system 

used to evaluate the application and the 

recommendation generated by that 

system. 

Financial institutions often use an 

automated underwriting system (AUS) 

to evaluate an applicant’s credit risk. As 

part of the Board’s 2010 Hearings, 

feedback indicated that HMDA data 

would be improved if institutions 

collected and reported the automated 

underwriting system used in evaluating 

an application and the recommendation 

generated by that system.510 For 

example, the Federal Trade Commission 

stated that ‘‘[t]his information is often 

crucial to isolating and examining 

discretion in a lender’s loan approval 

and denial decisionmaking.’’ 511 The 

Bureau believes that requiring financial 

institutions to collect and report the 

automated underwriting system used to 

evaluate an application, and the 

recommendation generated by that 

system, may further the purposes of 

HMDA. Information about automated 

underwriting would help the public and 

public officials evaluate whether 

financial institutions are serving the 

housing needs of their communities and 

assist in identifying possible 

discriminatory lending patterns by 

allowing information about similar 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51805 

512See Small Business Review Panel Report at 39. 

513 Id. at 26. 

514 Id. 

515 Id. 

516 Id. at 39. 

517 Id. 

loans and applications to be compared 

and analyzed appropriately. The Bureau 

believes that AUS data could improve 

the accuracy of fair lending analysis 

used to identify potential underwriting 

disparities. By including key 

information considered by financial 

institutions in their underwriting 

decisions, financial regulators can more 

effectively monitor institutions for 

possible discrimination and reduce the 

likelihood of false positives that 

increase regulatory costs for both 

institutions and regulators. 

However, collecting and reporting 

data on automated underwriting 

systems may pose some concerns. The 

automated underwriting systems used 

by financial institutions to evaluate 

applications may vary between 

institutions, as may the 

recommendations generated by those 

systems. Financial institutions may also 

have different policies and procedures 

for how they use automated 

underwriting systems and 

recommendations in the credit decision. 

In addition, automated underwriting 

systems may evolve over time. Financial 

institutions may also use multiple 

automated underwriting systems to 

evaluate an application and may 

consider multiple recommendations 

generated by those systems in their 

underwriting process. Requiring the 

collection of information about 

automated underwriting systems may 

impose burden on financial institutions. 

Notwithstanding the concerns 

associated with collecting and reporting 

information about automated 

underwriting systems, the potential 

benefits to the public and public 

officials may justify any potential 

burden. The Bureau believes that the 

collection and reporting of information 

related to automated underwriting 

systems, pursuant to proposed 

§ 1003.4(a)(35), is necessary to carry out 

HMDA’s purposes. This data would 

assist in understanding a financial 

institution’s underwriting 

decisionmaking and would also provide 

useful information for fair lending 

examinations. Based on these 

considerations and pursuant to its 

authority under sections 305(a) and 

304(b)(6)(J) of HMDA, the Bureau is 

proposing § 1003.4(a)(35)(i), which 

provides that except for purchased 

covered loans, a financial institution 

shall report the name of the automated 

underwriting system it used to evaluate 

the application and the 

recommendation generated by that 

automated underwriting system. In 

addition, the Bureau is proposing 

§ 1003.4(a)(35)(ii), which defines an 

automated underwriting system as an 

electronic tool developed by a 

securitizer, Federal government insurer, 

or guarantor that provides a 

recommendation regarding whether the 

application is eligible to be purchased, 

insured, or guaranteed by that 

securitizer, Federal government insurer, 

or guarantor. The Bureau solicits 

feedback regarding whether these 

proposed requirements are appropriate 

and whether there are alternative ways 

to collect information about automated 

underwriting systems. For example, 

financial institutions could report the 

recommendation generated by the 

automated underwriting system used to 

evaluate the application in defined 

categories, such as ‘‘recommended 

approval’’ or ‘‘recommended referral for 

further underwriting.’’ In addition, the 

Bureau specifically solicits feedback 

regarding whether limiting the 

definition of an automated underwriting 

system as proposed in § 1003.4(a)(35)(ii) 

to one that is developed by a securitizer, 

Federal government insurer, or 

guarantor is appropriate. The Bureau is 

not proposing commentary to proposed 

§ 1003.4(a)(35)(ii) because the Bureau 

believes that the proposed definition is 

straightforward and clear. However, the 

Bureau solicits feedback regarding 

whether commentary is needed to 

clarify this proposed definition or to 

facilitate compliance. 

The Bureau believes that financial 

institutions that use automated 

underwriting systems to evaluate 

applications will be able to easily 

identify the system used and the 

recommendation generated by that 

system for purposes of HMDA reporting. 

However, the Bureau has excluded 

purchased covered loans from the 

requirements of proposed 

§ 1003.4(a)(35) because the Bureau 

anticipates that it could be burdensome 

for financial institutions that purchase 

covered loans to identify the AUS data. 

The Bureau solicits feedback on 

whether this exclusion is appropriate. 

During the Small Business Review 

Panel process, the small entity 

representatives indicated that, in 

general, their financial institutions use 

manual underwriting procedures, and 

reporting AUS recommendations could 

provide an incomplete and distorted 

picture of loan transactions, triggering 

unnecessary fair lending scrutiny.512 A 

number of small entity representatives 

expressed concern that, if financial 

institutions are required to report AUS 

results, there would be an increase in 

the ‘‘false positive’’ indicators of fair 

lending violations.513 Small entity 

representatives were particularly 

concerned about AUS results that do not 

align with the action taken for reasons 

unrelated to underwriting, and the 

potential costs and negative publicity 

that may result.514 A number of small 

entity representatives also questioned 

the value of AUS information and 

whether the HMDA purposes the 

information would serve could be 

realized in other ways.515 The Small 

Business Review Panel recommended 

that the Bureau solicit additional 

information in the proposed rule on the 

extent to which AUS-generated 

information is used by small financial 

institutions and how that information is 

used in credit decisions.516 The Small 

Business Review Panel also 

recommended that the Bureau seek 

public comment on whether any 

method of reporting on the use of an 

automated underwriting system that is 

included in the proposed rule is 

consistent with the current practices of 

small financial institutions.517

Consistent with the Small Business 

Review Panel’s recommendations, the 

Bureau solicits feedback on these issues. 

The Bureau is also proposing 

technical instructions in appendix A 

regarding how to enter the AUS data on 

the loan application register. Proposed 

instruction 4(a)(35)–1 provides that a 

financial institution must indicate the 

name of the automated underwriting 

system it used to evaluate the 

application by entering the applicable 

code from a list. The Bureau solicits 

feedback regarding whether this 

proposed instruction is appropriate 

generally, and specifically solicits 

feedback regarding whether the 

proposed instruction would be less 

burdensome if the list of systems were 

modified by, for example, either 

removing or adding systems. 

Proposed instruction 4(a)(35)–2 

provides that a financial institution 

completing the loan application register 

must indicate the AUS recommendation 

generated by the automated 

underwriting system that it used to 

evaluate the application by entering the 

applicable code from a list. The Bureau 

solicits feedback regarding whether this 

proposed instruction is appropriate 

generally, and specifically solicits 

feedback regarding whether the 

proposed instruction would be less 

burdensome if the list of AUS 

recommendations were modified by, for 

example, either removing or adding 

AUS recommendations. In addition, the 


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51806 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

518See Dodd-Frank Act section 1094(3)(A)(iv). 

Bureau is proposing to use two freeform text fields for automated 

underwriting system information (for 

‘‘Other’’ automated underwriting 

systems and recommendations, 

respectively) to account for the variety 

of systems and recommendations that 

currently exist or that may exist in the 

future. The Bureau solicits feedback on 

the proposed requirement that, when a 

financial institution selects ‘‘Other’’ for 

automated underwriting system and 

recommendation, the financial 

institution must enter the name of the 

AUS used to evaluate the application 

and the recommendation generated by 

that AUS. 

Proposed comment 4(a)(35)–1 

discusses the requirement that a 

financial institution report the AUS 

recommendation generated by the 

automated underwriting system used by 

the financial institution to evaluate the 

application and provides an illustrative 

example. A financial institution 

complies with proposed § 1003.4(a)(35) 

by reporting an AUS recommendation if 

the recommendation was considered by 

the financial institution in its 

underwriting process. For example, 

when a financial institution takes into 

account a combination of an AUS 

recommendation and manual 

underwriting in making the credit 

decision, the financial institution has 

considered the AUS recommendation in 

its underwriting process and reports the 

AUS recommendation. 

Proposed comment 4(a)(35)–2.i 

discusses the requirement that a 

financial institution report the name of 

the automated underwriting system 

used by the financial institution to 

evaluate the application, explains which 

automated underwriting system to 

report if a financial institution uses 

multiple automated underwriting 

systems to evaluate an application, and 

provides an illustrative example. When 

a financial institution uses more than 

one automated underwriting system to 

evaluate an application, the financial 

institution complies with proposed 

§ 1003.4(a)(35) by reporting the name of 

the AUS developed by a securitizer, 

Federal government insurer, or 

guarantor that was used closest in time 

to the credit decision. For example, 

when a financial institution processes 

an application through the automated 

underwriting system of two different 

government-sponsored enterprises, such 

as the Federal National Mortgage 

Association (Fannie Mae) or the Federal 

Home Loan Mortgage Corporation 

(Freddie Mac), the financial institution 

complies with proposed § 1003.4(a)(35) 

by reporting the name of the AUS that 

was used closest in time to the credit 

decision. If a financial institution 

processes an application through 

multiple AUSs at the same time, the 

financial institution complies with 

proposed § 1003.4(a)(35) by reporting 

the name of the AUS that generated the 

recommendation that was a factor in the 

credit decision. 

Proposed comment 4(a)(35)–2.ii 

explains which AUS recommendation 

to report if a financial institution 

obtains multiple AUS recommendations 

and provides an illustrative example. 

When a financial institution obtains two 

or more AUS recommendations for an 

applicant or borrower that are generated 

by a single or multiple AUSs developed 

by a securitizer, Federal government 

insurer, or guarantor, the financial 

institution complies with proposed 

§ 1003.4(a)(35) by reporting the AUS 

recommendation generated closest in 

time to the credit decision. For example, 

when a financial institution receives a 

recommendation from an automated 

underwriting system that requires the 

financial institution to manually 

underwrite the loan, but in addition the 

financial institution subsequently 

processes the application through a 

different automated underwriting 

system that also generates a 

recommendation, the financial 

institution complies with proposed 

§ 1003.4(a)(35) by reporting the AUS 

recommendation generated closest in 

time to the credit decision. If a financial 

institution obtains multiple AUS 

recommendations at the same time, the 

financial institution complies with 

proposed § 1003.4(a)(35) by reporting 

the AUS recommendation that was a 

factor in the credit decision. 

Proposed comment 4(a)(35)–3 

explains when a financial institution 

should report ‘‘not applicable’’ for AUS 

data and provides examples. If a 

financial institution does not use an 

AUS developed by a securitizer, Federal 

government insurer, or guarantor to 

evaluate the application, the financial 

institution complies with proposed 

§ 1003.4(a)(35) by reporting ‘‘not 

applicable.’’ For example, if a financial 

institution only manually underwrites 

an application and does not consider an 

AUS recommendation in its 

underwriting process, the financial 

institution complies with proposed 

§ 1003.4(a)(35) by reporting ‘‘not 

applicable.’’ Also, if the file was closed 

for incompleteness or the application 

was withdrawn before a credit decision 

was made, the financial institution 

complies with proposed § 1003.4(a)(35) 

by reporting ‘‘not applicable.’’ 

4(a)(36) 

Neither HMDA nor Regulation C 

requires a financial institution to report 

whether a reportable transaction is a 

reverse mortgage. Section 304(b) of 

HMDA permits the disclosure of such 

other information as the Bureau may 

require.518 For the reasons discussed 

below, the Bureau is proposing to 

require financial institutions to identify 

whether a reportable transaction is a 

reverse mortgage. 

Currently, although reverse mortgages 

that are home purchase loans, home 

improvement loans, or refinancings are 

reported, financial institutions are not 

required to separately identify if a 

reported transaction is a reverse 

mortgage. Some of the current reporting 

requirements, and several of the 

proposed requirements discussed above, 

do not apply to reverse mortgages. The 

Bureau has received feedback indicating 

that financial institutions often spend 

significant amounts of time during the 

reporting process dealing with 

submission errors related to 

inapplicable fields. Requiring financial 

institutions to identify whether a 

reportable transaction is a reverse 

mortgage would allow the Bureau to 

develop a submission system that 

automatically removes inapplicable 

fields. This should facilitate compliance 

by reducing the amount of time 

financial institutions spend on 

submitting reverse mortgage data. 

Identifying reverse mortgages may 

also improve the usefulness of the data. 

Communities concerned about 

homeownership stability may find the 

data useful because reverse mortgages 

reduce a homeowner’s equity over time. 

Also, as reverse mortgages are 

commonly obtained by persons 

approaching retirement age, 

communities and public officials may 

use the data to ascertain whether 

financial institutions are fulfilling their 

obligations to all members of their 

communities. Furthermore, improved 

reverse mortgage data would assist in 

identifying possible discriminatory 

lending patterns and enforcing 

antidiscrimination statutes. 

For the reasons discussed above, the 

Bureau believes that it may be 

appropriate to improve the HMDA data 

related to reverse mortgages. Pursuant to 

its authority under sections 305(a) and 

304(b)(6)(J) of HMDA, the Bureau is 

proposing § 1003.4(a)(36), which 

provides that a financial institution 

shall record whether the covered loan 

is, or the application is for, a reverse 

mortgage, and whether the reverse 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51807 

519See Small Business Review Panel Report at 40, 

90, 129, and 132. 

520See id. at 40. 

521See Dodd-Frank Act section 1094(3)(A)(iv). 

522See supra note 241, 242. 

523See Dodd-Frank Act section 1094(3)(A)(iv). 

524See Small Business Review Panel Report at 40, 

57, 80, 85, 103–104, and 129. 

mortgage is an open- or closed-end 

transaction. The Bureau solicits 

feedback regarding whether this 

proposed requirement is appropriate. 

While the Bureau is not proposing 

commentary applicable to proposed 

§ 1003.4(a)(36), the Bureau solicits 

feedback regarding whether 

commentary would help clarify or 

illustrate the requirements of this 

proposed reporting requirement. 

Proposed instruction 4(a)(36)–1 

provides technical requirements for 

completing the loan application register, 

stating that a financial institution 

should enter on the loan application 

register whether the covered loan is a 

reverse mortgage by entering one of 

three codes, and identifies the 

applicable transactions for each code. 

During the Small Business Review 

Panel process, small entity 

representatives were not generally 

concerned about a proposed 

requirement to identify reverse 

mortgages.519 The Small Business 

Review Panel recommended that the 

Bureau seek comment on any costs and 

other burdens associated with existing 

or potential HMDA requirements related 

to reverse mortgages.520 Consistent with 

the Small Business Review Panel’s 

recommendation, the Bureau solicits 

feedback regarding any costs and 

burdens associated with this proposed 

requirement regarding reverse 

mortgages, as well as the costs and 

burdens generally associated with 

Regulation C requirements related to 

reverse mortgages. 

4(a)(37) 

Currently, neither HMDA nor 

Regulation C requires a financial 

institution to identify whether a 

reportable transaction is a home-equity 

line of credit. Section 304(b) of HMDA 

permits the disclosure of such other 

information as the Bureau may 

require.521 For the reasons discussed 

below, the Bureau believes that it may 

be appropriate to require financial 

institutions to separately identify 

reported transactions that are homeequity lines of credit. 

Although home-equity lines of credit 

currently may be reported as home 

purchase loans or home improvement 

loans, users of the HMDA data cannot 

identify which of those loans are homeequity lines of credit. The Bureau has 

received feedback indicating that the 

HMDA data would be improved by 

requiring financial institutions to 

identify whether a reportable 

transaction is a home-equity line of 

credit. Studies suggest that in the years 

leading up to the financial crisis homeequity line of credit lending was 

correlated with real estate speculation, 

which may have increased prices in 

local housing markets prior to the 

collapse.522 Thus, clarifying the HMDA 

data in this manner would help 

communities and public officials better 

understand local lending practices and 

patterns. Furthermore, as home-equity 

lines of credit tend to be priced 

differently than other reportable 

transactions, being able to identify them 

would help clarify the data and 

facilitate effective data analysis. In 

addition, the Bureau believes that 

financial institutions may employ 

different policies, procedures, and 

systems for home-equity line of credit 

lending, so requiring financial 

institutions to identify these 

transactions would facilitate compliance 

by aligning with standard business 

practices. Furthermore, as the Bureau is 

also proposing to include dwellingsecured commercial lines of credit, the 

Bureau believes that differentiating 

between transactions would improve 

the usefulness of the data. 

For the reasons discussed above, 

pursuant to its authority under sections 

305(a) and 304(b)(6)(J) of HMDA, the 

Bureau is proposing § 1003.4(a)(37), 

which provides that a financial 

institution shall report whether the 

covered loan is, or the application is for, 

an open-end line of credit, and also 

whether the open-end line of credit is a 

home-equity line of credit. The Bureau 

solicits feedback regarding whether this 

proposed requirement is appropriate. 

While the Bureau is not proposing 

commentary applicable to proposed 

§ 1003.4(a)(37), the Bureau solicits 

feedback regarding whether 

commentary would help clarify or 

illustrate the requirements of this 

proposed reporting requirement. 

Proposed instruction 4(a)(37)–1 

provides technical requirements for 

completing the loan application register 

by identifying the applicable 

transactions for one of three codes. 

4(a)(38) 

Currently, neither HMDA nor 

Regulation C contains requirements 

related to whether a loan would be 

considered a qualified mortgage under 

Regulation Z. Section 304(b) of HMDA 

permits the disclosure of such other 

information as the Bureau may 

require.523 For the reasons discussed 

below, the Bureau believes that it may 

be appropriate to require financial 

institutions to report a covered loan’s 

qualified mortgage status under 

Regulation Z. 

The ability-to-repay and qualified 

mortgage provisions of Regulation Z 

were intended to address several of the 

harmful underwriting practices that 

were used in the years leading up to the 

financial crisis. For this reason, 

community groups and public officials 

may find useful information related to 

loans that are exempt from the abilityto-repay requirements, subject to the 

requirements, or are considered 

qualified mortgages under the 

requirements. Furthermore, this 

information may be particularly useful 

for public officials at the U.S. 

Department of Housing and Urban 

Development, the U.S. Department of 

Veterans Affairs, and the U.S. 

Department of Agriculture, as these 

agencies administer programs and 

promulgate regulations related to the 

ability-to-repay standards of Regulation 

Z. In addition, the Bureau has received 

feedback that information related to 

qualified mortgage status is becoming a 

part of the mortgage industry data 

standards. Thus, this information is 

consistent with the regular business 

practices of financial institutions and 

should not be particularly burdensome. 

For these reasons, the Bureau believes 

that it may be appropriate to require 

financial institutions to report data 

regarding whether a covered loan is a 

qualified mortgage under Regulation Z. 

Accordingly, pursuant to its authority 

under sections 305(a) and 304(b)(5)(D) 

of HMDA, the Bureau is proposing 

§ 1003.4(a)(38), which provides that a 

financial institution shall report 

whether the covered loan is subject to 

the ability-to-repay provisions of 

Regulation Z, 12 CFR 1026.43, and 

whether the covered loan is a qualified 

mortgage, as described under 12 CFR 

1026.43(e) or (f). The Bureau solicits 

feedback regarding whether this 

proposed requirement is appropriate, 

whether this proposed requirement 

would result in more useful data, and 

whether this proposed requirement 

would impose additional burdens or 

result in additional challenges that the 

Bureau has not considered. 

During the Small Business Review 

Panel process, several small entity 

representatives expressed concerns 

about a potential requirement to report 

a covered loan’s qualified mortgage 

status.524 The Small Business Review 


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51808 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

525See id. at 40. 

526Section 1003.4(c)(3) of Regulation C currently 

provides that a financial institution may report, but 

is not required to report, home-equity lines of credit 

made in whole or in part for the purpose of home 

improvement or home purchase. If a financial 

institution elects to report a home-equity line of 

credit, it reports only the amount of the line 

intended for home improvement or home purchase 

purposes at the time of the application. As a result, 

in certain cases, current HMDA data contains 

information regarding the initial draw on a homeequity line of credit. 

527Section 1094(3)(A)(iv) of the Dodd-Frank Act 

amended section 304(b) of HMDA. 

528See Michael LaCour-Little, Wei Yu, and Libo 

Sun, The Role of Home Equity Lending in the 

Recent Mortgage Crisis, 42 Real Estate Economics 

153 (2014). 

529 Jessica Silver-Greenberg, A Risky Lifeline for 

the Elderly Is Costing Some Their Homes, N.Y. 

Times, Oct. 14, 2012, at A1 (‘‘Reverse mortgages, 

which allow homeowners 62 and older to borrow 

money against the value of their homes and not pay 

it back until they move out or die, have long been 

fraught with problems.’’); see also U.S. Consumer 

Fin. Prot. Bureau, Report to Congress on Reverse 

Mortgages (2012). 

530See Atlanta Hearing, supra note 131; Chicago 

Hearing, supra note 137. 

531See Bd. Of Governors of the Fed. Reserve Sys., 

Fed. Reserve Statistical Release, Z.1 Financial 

Accounts of the United States: Flow of Funds, 

Balance Sheets, and Integrated Macroeconomic 

Accounts, at 113, Table B.100 (2014), available at 

http://www.federalreserve.gov/releases/z1/Current/

z1.pdf .; see also Ken Harney, Homeowners’ Equity 

Jumps 20 Percent After a Years-Long Slump, Wash. 

Post, Jan. 4, 2013. 

Panel recommended that the Bureau 

solicit comment on how the burden of 

collecting the qualified mortgage 

information could be minimized.525

Based on this feedback and consistent 

with the Small Business Review Panel’s 

recommendation, the Bureau requests 

feedback regarding whether 

modifications to the proposed 

requirement would minimize the 

burden of collecting information related 

to a covered loan’s qualified mortgage 

status. 

Proposed comment 4(a)(38)–1 clarifies 

that financial institutions may rely on 

Regulation Z § 1026.43, the related 

commentary, and appendix Q to part 

1026 in determining whether a covered 

loan is a qualified mortgage. This 

proposed comment further clarifies that, 

if a covered loan is subject to Regulation 

Z § 1026.43, but is not a qualified 

mortgage pursuant to § 1026.43(e) or (f), 

§ 1003.4(a)(38) requires a financial 

institution to identify the covered loan 

as a loan that is not a qualified 

mortgage. Proposed comment 4(a)(38)–1 

also explains that, if a covered loan is 

not subject to paragraphs (c) through (f) 

of Regulation Z § 1026.43, 

§ 1003.4(a)(38) requires the financial 

institution to identify the covered loan 

as a loan that is not subject to the 

reporting requirements of § 1026.43. 

Finally, this proposed comment 

provides several illustrative examples of 

the requirements of § 1003.4(a)(38). 

The Bureau is also proposing 

technical requirements related to the 

completion of the loan application 

register in appendix A. Proposed 

instruction 4(a)(38)–1 states that 

financial institutions should enter on 

the loan application register whether the 

covered loan is a qualified mortgage 

under Regulation Z by entering one of 

six codes. Proposed instruction 

4(a)(38)–2 identifies the applicable 

codes for a covered loan that is a 

standard qualified mortgage, a 

temporary qualified mortgage, a small 

creditor qualified mortgage, a balloonpayment qualified mortgage, or not a 

qualified mortgage. Proposed 

instruction 4(a)(38)–3 identifies the 

applicable code for an application for a 

covered loan, and for a covered loan 

that is not subject to the ability-to-repay 

requirements of Regulation Z. 

Section 1003.4(a)(38) is proposed 

pursuant to the Bureau’s authority 

under sections 305(a) and 304(b)(5)(D) 

of HMDA. Pursuant to section 305(a) of 

HMDA, the Bureau believes that this 

proposed requirement is necessary to 

carry out the purposes of HMDA. By 

providing information regarding 

whether a covered loan is a qualified 

mortgage under Regulation Z, this 

proposed provision would ensure that 

the citizens and public officials of the 

United States are provided with 

sufficient information to enable them to 

determine whether depository 

institutions are filling their obligations 

to serve the housing needs of the 

communities and neighborhoods in 

which they are located. Furthermore, 

qualified mortgage data also would 

assist public officials, particularly 

HUD’s Federal Housing Administration, 

in their determination of the 

distribution of public sector investments 

in a manner designed to improve the 

private investment environment. 

4(a)(39) 

Currently, neither HMDA nor 

Regulation C requires a financial 

institution to report the amount of first 

draw on a home-equity line of credit or 

an open-end reverse mortgage.526

Section 304(b) of HMDA permits the 

disclosure of such other information as 

the Bureau may require.527 For the 

reasons discussed below, the Bureau is 

proposing to require financial 

institutions to report, for a home-equity 

line of credit and an open-end reverse 

mortgage, the amount of the draw on the 

covered loan, if any, made at account 

opening. 

Both home-equity lines of credit and 

reverse mortgages represent important 

segments of the mortgage market that 

have been associated with problematic 

practices. Home-equity lines of credit 

were often used by speculative real 

estate investors both before and after the 

financial crisis, and were popular in 

areas where housing prices increased 

significantly prior to the collapse of the 

real estate market.528 Likewise, reverse 

mortgages have long presented the 

potential for abuse of vulnerable 

seniors.529 As a result, participants in 

the Board’s 2010 Hearings called for 

more data regarding home-equity lines 

of credit and reverse mortgages, 

including the initial amount drawn.530

Although originations of home-equity 

lines of credit have declined from their 

pre-market crash levels, they are 

expected to be become increasingly 

popular as homeowners regain 

equity.531 Similarly, as the population 

of elderly individuals increases, reverse 

mortgages may become available to a 

larger segment of the population. The 

Bureau believes that requiring financial 

institutions to report the amount of the 

initial draw would permit greater 

insight into the operation of the markets 

for these important products. Such 

information would also help to ensure 

that public officials and public interest 

organizations can monitor risks to their 

communities and neighborhoods. 

The Bureau believes that the burden 

of reporting the amount of the initial 

draw will be lessened by the fact that 

financial institutions will already need 

to record this amount in order to 

properly service the loan. However, the 

Bureau recognizes that financial 

institutions might not store the 

information in a format readily available 

for HMDA purposes. Home-equity lines 

of credit, for example, tend to run on a 

different platform than traditional, 

closed-end mortgage loans. Despite the 

potential increased burden described 

above, feedback received pursuant to 

the Bureau’s outreach activities 

indicates that reporting of the initial 

draw may be justified. Accordingly, 

pursuant to its authority under sections 

305(a) and 304(b)(5)(D) of HMDA, the 

Bureau is proposing § 1003.4(a)(39), 

which provides that a financial 

institution shall report, for a homeequity line of credit and an open-end 

reverse mortgage, the amount of the 

draw on the covered loan, if any, made 

at account opening. The Bureau believes 

that this proposed requirement is 

necessary to carry out HMDA’s 

purposes. This proposed revision would 

provide a more complete picture of the 

home mortgage market and help the 

public and public officials compare the 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51809 

532 Dodd-Frank Act section 1094(3)(A)(i), 12 

U.S.C. 2803(b)(4). 

533 63 FR 12329 (Mar. 12, 1998). 

534 63 FR 12329, 12330. 

535 65 FR 78656, 78658 (Dec. 15, 2000). 

536 65 FR 78659. 

537 67 FR 7222 (Feb. 15, 2002). 

538 67 FR 7224. 

539 Id.. 

use of these products across different 

communities and groups of borrowers, 

thereby assisting in determining 

whether financial institutions are 

serving the housing needs of their 

communities. The Bureau seeks 

comment regarding the general utility of 

the data and on the costs associated 

with collecting and reporting the data. 

Although the Bureau believes that 

information about the initial draw is 

most useful for home-equity lines of 

credit, the Bureau solicits feedback 

regarding whether this data would be 

useful for all open-end lines of credit, 

including dwelling-secured commercial 

lines of credit. Furthermore, the Bureau 

understands that financial institutions 

have been developing new products, 

including multiple-draw closed-end 

reverse mortgages, and accordingly 

seeks feedback on whether to require 

reporting of the initial draw for all 

reverse mortgages, whether closed or 

open-end. 

Proposed instruction 4(a)(39) in 

appendix A provides technical 

instructions regarding how to enter the 

data on the loan application register. 

Proposed instruction 4(a)(39)–1 

provides that a financial institution 

must enter in dollars the amount of any 

draw on a home-equity line of credit or 

an open-end reverse mortgage made at 

the time of account opening. 

4(b) Collection of Data on Ethnicity, 

Race, Sex, Age, and Income 

Section 1003.4(b)(1) of current 

Regulation C requires that a financial 

institution collect data about the 

ethnicity, race, and sex of the applicant 

or borrower as prescribed in appendix 

B. Section 1003.4(b)(2) provides that the 

ethnicity, race, sex, and income of an 

applicant or borrower may but need not 

be collected for loans purchased by the 

financial institution. The Bureau 

proposes to add age to § 1003.4(b)(1) 

and (b)(2), and proposes to amend 

§ 1003.4(b)(1) by requiring a financial 

institution to collect data about the 

ethnicity, race, sex, and age of the 

applicant or borrower as prescribed in 

both appendices A and B. The Bureau 

also is proposing minor wording 

changes to § 1003.4(b)(1) and (b)(2). 

As discussed in the section-by-section 

analysis of § 1003.4(a)(10), the DoddFrank Act amended HMDA section 

304(b)(4) to require financial 

institutions to report an applicant’s or 

borrower’s age.532 As discussed above, 

the Bureau is proposing to implement 

the requirement to collect and report age 

by adding this characteristic to the 

information listed in § 1003.4(a)(10)(i). 

To conform to that proposed 

requirement, the Bureau is proposing to 

add age to § 1003.4(b)(1) and (b)(2). In 

addition, as part of the Bureau’s efforts 

to streamline and clarify Regulation C, 

the Bureau is proposing to amend 

§ 1003.4(b)(1) by requiring a financial 

institution to collect data about the 

ethnicity, race, sex, and age of the 

applicant or borrower as prescribed in 

appendices A and B since both 

appendices contain instructions for the 

collection of an applicant’s or 

borrower’s demographic information. 

As discussed above, § 1003.4(b)(2) 

provides that ethnicity, race, sex, and 

income data may but need not be 

collected for loans purchased by a 

financial institution. Instruction I.D.1.a 

of appendix A provides that a financial 

institution need not collect or report 

this applicant and borrower information 

for loans purchased and if an institution 

chooses not to report this information, 

it should use the Codes for ‘‘not 

applicable.’’ While the proposed 

reporting requirements do not require 

reporting of ethnicity, race, sex, age, and 

income for loans purchased by a 

financial institution, the Bureau solicits 

feedback on whether this exclusion is 

appropriate. In particular, the Bureau 

specifically solicits feedback on the 

general utility of ethnicity, race, sex, 

age, and income data on purchased 

loans and on the unique costs and 

burdens associated with collecting and 

reporting the data that financial 

institutions may face if the reporting 

requirement were modified to no longer 

permit optional reporting but instead 

require reporting of this applicant and 

borrower information for purchased 

loans. 

4(c) Optional Data 

4(c)(1) 

Current § 1003.4(c)(1) provides that a 

financial institution may report the 

reasons it denied a loan application but 

is not required to do so. As discussed 

in the section-by-section analysis of 

§ 1003.4(a)(16), the Bureau is proposing 

to make reporting of denial reasons 

mandatory instead of optional. To 

conform to that proposed requirement, 

the Bureau is proposing to delete 

§ 1003.4(c)(1). 

4(c)(2) 

Section 1003.4(c)(2) provides that 

institutions may report requests for 

preapprovals that are approved by the 

institution but not accepted by the 

applicant, but they are not required to 

do so. The Bureau is proposing to make 

reporting of requests for preapprovals 

approved by the financial institution but 

not accepted by the applicant 

mandatory instead of optional. 

The Board published an advanced 

notice of proposed rulemaking in 1998 

which solicited feedback about 

reporting of preapprovals.533 The Board 

noted that originations resulting from 

preapprovals were already being 

reported without any kind of 

preapproval identifier, and noted that 

Regulation B required sending adverse 

action notices when preapproval 

requests were denied.534 Some 

commenters noted that aligning with 

Regulation B’s adverse action 

requirement could distort the data by 

capturing denials but not requests that 

were approved but did not lead to an 

origination.535 Following the advance 

notice, the Board proposed an approach 

that would align with Regulation B’s 

discussion of preapprovals and 

prequalifications.536 In response to 

additional comments received on that 

proposal the Board adopted the current 

preapproval requirement in 2002, with 

specific action taken codes and a flag for 

preapproval requests.537 The Board also 

provided for optional reporting of 

preapproval requests that are approved 

but not accepted by the applicant, 

because it believed that lenders might 

want ‘‘to put into context the 

preapproval requests that are 

denied.’’ 538 The Board did not provide 

for reporting preapproval requests that 

were closed for incompleteness or 

withdrawn because it believed that the 

number of such requests would be small 

and the benefit of such data would not 

warrant the burden of reporting it.539

The Board noted that, based on 2000 

HMDA data, 2 percent of other mortgage 

applications were closed for 

incompleteness and 7 percent were 

withdrawn. 

The Bureau believes that reporting of 

preapprovals approved by the financial 

institution but not accepted by the 

applicant provides context for denials of 

preapproval requests, and improves fair 

lending analysis because it allows 

denials to be compared to a more 

complete set of approved preapproval 

requests. Combining originated loans 

and loans approved but not accepted for 

purposes of comparison with denied 

applications is common in fair lending 

analysis for other home purchase 

applications. However, such analysis is 


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51810 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

540A financial institution’s obligation to report 

data to the Bureau or the appropriate agency for the 

institution is addressed below in the section-bysection analysis of proposed § 1003.5(a). 

541 Dodd-Frank Act section 1094(3)(B), 12 U.S.C. 

2803(h)(1). 

542HMDA section 304(j)(6) requires that loan 

application register information described in 

HMDA section 304(j)(1) for any year shall be 

maintained and made available, upon request, for 

three years. 

not possible for preapprovals if an 

institution does not report preapprovals 

approved but not accepted. 

Analysis of the currently reported 

preapproval requests that are approved 

but not accepted highlights the 

importance of these data. Over half of 

all reported home purchase applications 

in the 2012 HMDA data (excluding 

loans purchased by a financial 

institution) were received by financial 

institutions that offer preapproval 

programs. Approximately 14 percent of 

reported preapproval requests were 

approved but not accepted. For all home 

purchase applications (excluding loans 

purchased by a financial institution), 

approximately 5 percent were approved 

but not accepted. Because the 14 

percent represents only institutions that 

chose to report preapproval requests 

approved but not accepted, the 

percentage if the proposal were adopted 

would likely be higher. For certain 

institutions with large preapproval 

programs, the percentage of preapproval 

requests that are approved but not 

accepted is much higher, including 

above 50 percent for some institutions. 

For all home purchase applications 

(excluding loans purchased by a 

financial institution and not including 

preapproval requests), approximately 2 

percent were closed for incompleteness 

and 9 percent were withdrawn, similar 

to the percentages from the 2000 HMDA 

data. Preapproval requests that are 

approved but not accepted thus occur 

more frequently than other applications 

for home purchases that are approved 

but not accepted and represent an 

important element of HMDA data. 

Therefore, the Bureau is proposing to 

make reporting of requests for 

preapprovals approved by the financial 

institution but not accepted by the 

applicant mandatory instead of 

optional. Consequently, the Bureau is 

proposing to delete current 

§ 1003.4(c)(2) and, as noted above, to 

revise § 1003.4(a) accordingly. The 

Bureau believes that this change will 

not represent any additional burden for 

institutions that currently choose to 

report such preapprovals, and that the 

burden may not be great for institutions 

that currently do not choose to report 

such preapprovals because of 

information that such institutions 

currently collect about all of their 

preapproval requests before the outcome 

of the request is known. However, the 

Bureau solicits feedback about whether 

financial institutions expect significant 

burden associated with the proposed 

change. 

4(c)(3) 

Section 1003.4(c)(3) of Regulation C 

currently provides that a financial 

institution may report, but is not 

required to report, home-equity lines of 

credit made in whole or in part for the 

purpose of home improvement or home 

purchase. As discussed in the sectionby-section analysis to § 1003.2(o), the 

Bureau is proposing to require reporting 

of open-end lines of credit, which 

include home-equity lines of credit. To 

conform to that proposed modification, 

the Bureau proposes to delete 

§ 1003.4(c)(3). The Bureau also proposes 

to delete comment 4(c)(3)–1, which 

currently provides that an institution 

that opts to report home-equity lines 

reports the disposition of all 

applications, not just originations. The 

Bureau solicits feedback regarding 

whether this proposed modification is 

appropriate. 

4(d) 

For the reasons discussed above in the 

section-by-section analysis of proposed 

§ 1003.3(c), the Bureau proposes to 

move the discussion of excluded data to 

proposed § 1003.3(c). Accordingly, the 

Bureau proposes to reserve § 1003.4(d). 

4(f) Quarterly Recording of Data 

As part of the effort to streamline 

Regulation C, the Bureau proposes to 

move the data recording requirement in 

§ 1003.4(a) to proposed § 1003.4(f) and 

to make technical modifications to the 

requirement. Proposed § 1003.4(f) 

provides that a financial institution 

shall record 540 the data collected 

pursuant to § 1003.4 on a loan 

application register within 30 calendar 

days after the end of the calendar 

quarter in which final action is taken 

(such as origination or purchase of a 

covered loan, or denial or withdrawal of 

an application). 

Section 1003.5 Disclosure and 

Reporting 

5(a) Reporting to Agency 

5(a)(1) 

HMDA section 304(h)(1) provides that 

a financial institution shall submit its 

HMDA data to the Bureau or to the 

appropriate agency for the institution in 

accordance with rules prescribed by the 

Bureau.541 HMDA section 304(h)(1) also 

directs the Bureau to develop 

regulations, in consultation with other 

appropriate agencies, that prescribe the 

format for disclosures required under 

HMDA section 304(b), the method for 

submission of the data to the 

appropriate agency, and the procedures 

for disclosing the information to the 

public. HMDA section 304(n) also 

requires that the data required to be 

disclosed under HMDA section 304(b) 

shall be submitted to the Bureau or to 

the appropriate agency for any 

institution reporting under HMDA, in 

accordance with regulations prescribed 

by the Bureau. HMDA section 304(c) 

requires that information required to be 

compiled and made available under 

HMDA section 304, other than loan 

application register information under 

section 304(j), must be maintained and 

made available for a period of five 

years.542

Section 1003.5(a)(1) of Regulation C 

requires that, by March 1 following the 

calendar year for which data are 

compiled, a financial institution must 

submit its complete loan application 

register to the agency specified in 

appendix A. Section 1003.5(a)(1) also 

provides that a financial institution 

shall retain a copy of its complete loan 

application register for its records for at 

least three years. Section II of appendix 

A to Regulation C provides information 

concerning where financial institutions 

should submit their complete loan 

application registers. Additional 

information concerning submission of 

the loan application register is found in 

comments 4(a)–1.vi and –1.vii, 5(a)–1 

and –2, and 5(a)–5 through –8. 

Comment 5(a)–2 provides that a 

financial institution that reports 25 or 

fewer entries on its loan application 

register may submit the register in paper 

form. For the reasons described below, 

the Bureau is proposing several changes 

to § 1003.5(a)(1). 

Quarterly Reporting 

The Bureau is proposing that a 

financial institution with a high 

transaction volume report its HMDA 

data to the Bureau or appropriate agency 

on a quarterly, rather than an annual, 

basis. This proposal is based on 

considerations relating to the timeliness 

of HMDA data submitted, the quality of 

the data submitted, and the Bureau’s 

desire to make annual HMDA data 

available to the public earlier than they 

are currently made available. 

Under the current regime, HMDA data 

may be reported as many as 14 months 

after final action is taken on an 


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543For example, a loan originated on January 1 

in calendar year one is not reported to the Bureau 

or other appropriate agency until March 1 of 

calendar year two. 

544Based on its analysis to date, the Bureau 

believes that releasing HMDA data to the public on 

a quarterly basis, even in aggregate form, may create 

risks to applicant and borrower privacy that are not 

justified by the benefits of such release. However, 

the Bureau, in consultation with the other 

appropriate agencies, intends to evaluate options 

for the agencies’ release of data or analysis more 

frequently than annually at a later date. 

545Currently, § 1003.4(a) requires that ‘‘all 

reportable transactions shall be recorded, within 

thirty calendar days after the end of the calendar 

quarter in which final action is taken (such as 

origination or purchase of a loan, or denial or 

withdrawal of an application), on a register in the 

format prescribed in Appendix A of this part.’’ The 

Bureau’s proposal moves this requirement, with 

some revisions, to proposed § 1003.4(f). 

546Section 1003.4(a). 

547See proposed § 1003.4(f). 

application or loan.543 The Bureau is 

concerned that this delay impairs the 

ability of the Bureau and the 

appropriate agencies to use HMDA data 

to effectuate the purposes of the statute 

in a timely manner. The Bureau believes 

that timelier data would allow it and the 

appropriate agencies to determine, in 

much closer to ‘‘real time,’’ whether 

financial institutions are fulfilling their 

obligations to serve the housing needs of 

communities in which they are located. 

The Bureau also believes that timelier 

identification of risks to local housing 

markets and troublesome trends by the 

Bureau and the appropriate agencies 

would allow for more effective 

interventions or other actions by the 

agencies and other public officials. The 

Bureau’s proposal reduces the 

maximum time lag between final action 

on a loan or application and reporting 

from 14 months to approximately five 

months for a significant percentage of 

reported transactions. 

Further, as quarterly reporting 

requires financial institutions with 

larger transaction volumes to review 

and edit smaller batches of reportable 

data several times throughout the year, 

the Bureau believes that quarterly 

reporting would facilitate and enhance 

compliance with HMDA, reduce 

reporting errors, and improve the 

quality of HMDA data. Finally, because 

quarterly reporting would permit the 

Bureau to process HMDA data 

throughout the year, the Bureau believes 

the proposal may allow for the earlier 

annual release to the public of HMDA 

data. The HMDA data are currently 

made public by the FFIEC in September 

of each year, up to 20 months after final 

action is taken on applications and 

loans reflected in the data. HMDA data 

users have complained to the Bureau, 

and to the Board before it, that this 

delay reduces the usefulness of the data 

to the public. Although the Bureau 

currently does not anticipate that 

HMDA data would be released to the 

public more frequently than 

annually,544 it believes that quarterly 

reporting may allow the Bureau and the 

FFIEC to expedite disclosures of annual 

HMDA data to the public and better 

serve the public disclosure goals of the 

statute. 

Based on these considerations, the 

Bureau believes that it may be 

appropriate to require certain financial 

institutions to report their HMDA data 

on a quarterly basis. Accordingly, 

proposed § 1003.5(a)(1)(ii) requires that, 

within 60 calendar days after the end of 

each calendar quarter, a financial 

institution that reported at least 75,000 

covered loans, applications, and 

purchased covered loans, combined, for 

the preceding calendar year (the 75,000 

transaction threshold) shall submit its 

loan application register containing all 

data required to be recorded pursuant to 

§ 1003.4(f).545 The Bureau believes that 

this proposed requirement is necessary 

and proper to effectuate the purposes of 

HMDA. The Bureau solicits comment on 

whether this proposal is appropriate, 

including any increase in costs resulting 

from the requirement that financial 

institutions submit accurate HMDA data 

on a quarterly basis as opposed to once 

each year. 

To the extent there are cost increases, 

the Bureau seeks to balance those costs 

with the benefits of quarterly reporting 

described above. The Bureau’s proposal 

limits the imposition of any increased 

costs to those institutions with the 

largest transaction volumes, thus 

minimizing the number of financial 

institutions subject to the proposed 

requirement while maximizing the 

volume of data reported on a quarterly 

basis. The Bureau believes that realizing 

the benefits of more timely data 

submission requires that the agencies 

receive sufficient data to perform 

meaningful analyses. Further, the 

Bureau believes that, the larger the 

volume of data submitted and processed 

during the course of the calendar year, 

the more likely HMDA data could be 

released to the public earlier the 

following year than is currently the 

case. Based on 2012 HMDA data, the 

75,000 transaction threshold proposed 

would have required 28 financial 

institutions to report on a quarterly 

basis in 2013. In 2012, these 28 

institutions reported approximately 50 

percent of all transactions reported 

under HMDA. The Bureau solicits 

feedback on whether the proposed 

75,000 transaction threshold is justified 

by the benefits of quarterly reporting. 

The Bureau’s proposal requires that 

HMDA data submitted on a quarterly 

basis be submitted within 60 days after 

the end of the calendar quarter in which 

final action is taken (such as origination 

or purchase of a covered loan, or denial 

or withdrawal of an application). 

Financial institutions currently record 

all reportable transactions on the loan 

application register within 30 days after 

the end of the calendar quarter.546 The 

Bureau’s proposal retains this 

requirement for all financial 

institutions.547 Under the proposal, 

financial institutions that must report 

on a quarterly basis have an additional 

30 days beyond the date by which they 

must record their HMDA data to submit 

their quarterly loan application 

registers. The Bureau solicits feedback 

on whether this proposal provides 

financial institutions required to report 

on a quarterly basis sufficient time to 

prepare their quarterly data for 

submission. 

As proposed, § 1003.5(a)(1) allows for 

a delay in the effective date of the 

proposed quarterly reporting provision. 

The Bureau has left the effective date 

blank in proposed § 1003.5(a)(1)(ii), but 

is considering a delay of at least one 

year from the effective date of the other 

amendments to Regulation C proposed 

herein. The Bureau solicits feedback on 

the length of time beyond the effective 

date of the other proposed amendments 

to Regulation C, if any, that financial 

institutions would require to develop 

and implement the systems, policies, 

and procedures required to report 

HMDA data on a quarterly basis. 

The Bureau is proposing new 

comment 5(a)–1 to illustrate coverage 

under proposed § 1003.5(a)(1)(ii). The 

Bureau is proposing conforming 

modifications to comment 5(a)–2 to 

clarify when, if the appropriate Federal 

agency for a financial institution 

reporting on a quarterly basis changes, 

the financial institution would report to 

the new agency. The Bureau is 

proposing new comment 5(a)–5 to 

clarify that, for purposes of the 

proposed § 1003.5(a)(1)(ii) requirement 

that a financial institution that reports 

on a quarterly basis must retain a copy 

of its complete loan application register 

for its records for at least three years, the 

complete loan application register is the 

loan application register reflecting all 

data reported for the preceding calendar 

year. The comment explains that a 

financial institution that reports data on 

a quarterly basis may satisfy the 

retention requirement in 

§ 1003.5(a)(1)(ii) by retaining the data 


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548See proposed § 1003.2(g). 

549 If proposed § 1003.2(g) is adopted and the 

Bureau continues to allow a financial institution 

that reports 25 or fewer entries on its loan 

application register to submit its register in paper 

format, only a financial institution that originated 

exactly 25 covered loans would be eligible to 

submit its register in paper format. 

550The Board has published technical 

specification for HMDA reporting annually since 

1998. See Bd. of Governors of the Fed. Reserve Sys., 

2014 HMDA File Specifications 2–3 (Sept. 13, 

2013), http://www.ffiec.gov/hmda/pdf/

spec2014.pdf. 

551 Id. at 2. 

552 Id. at 2, 8. 

for the calendar year combined on one 

loan application register or on four 

quarterly loan application registers. The 

Bureau solicits feedback on whether 

these proposals are appropriate. 

Elimination of Paper Reporting 

Comment 5(a)–2 provides that a 

financial institution that reports 25 or 

fewer entries on its loan application 

register may submit the register in 

paper, rather than electronic, format. 

The Bureau understands that, in recent 

years, very few financial institutions 

have submitted their loan application 

registers in paper format. The FFIEC 

provides the HMDA Data Entry Software 

(DES) at no cost to institutions, and the 

Bureau understands that the vast 

majority of financial institutions with 

small transaction volumes take 

advantage of this free tool to compile 

and securely submit their HMDA data to 

the appropriate agencies. Loan 

application registers that are submitted 

on paper must be manually input by the 

processor into its system, requiring the 

processor to duplicate the work of the 

financial institution, in order for the 

data to be used by the agencies and 

included in the HMDA data products 

later prepared. 

The Bureau notes that, if its proposal 

to exclude from the definition of 

financial institution any institution that 

originated less than 25 covered loans, 

excluding open-end lines of credit, is 

adopted,548 the number of financial 

institutions that would be eligible to 

submit their loan application register in 

paper format would be significantly 

reduced.549 Further, as part of its efforts 

to improve and modernize HMDA 

operations, the Bureau is considering 

various improvements to the HMDA 

data submission process that should 

reduce even further the need for 

institutions to compile and submit their 

HMDA data in paper format. The 

improvements under consideration 

include upgrades to the HMDA DES, 

such as moving DES to the web, which 

would allow financial institutions to use 

the software from multiple terminals in 

different branches and would eliminate 

the need to download and install 

updated software each year. 

Based on these considerations, the 

Bureau believes that preserving an 

option to permit the submission of loan 

application registers in paper format is 

no longer necessary. Accordingly, the 

Bureau is proposing to delete comment 

5(a)–2, which allows a financial 

institution that reports 25 or fewer 

entries on its loan application register to 

submit the register in paper form, and 

to clarify in § 1003.5(a)(1) that the 

register must be submitted in electronic 

format. The Bureau solicits comment on 

this proposal, including concerning any 

additional costs it imposes upon smallvolume financial institutions. 

Retention of Complete Loan Application 

Register in Electronic Format 

Section 1003.5(a)(1) requires that a 

financial institution shall retain a copy 

of its complete loan application register 

for three years, but Regulation C is silent 

concerning the formats in which the 

complete loan application register may 

be retained. During the Small Business 

Review Panel process, the Bureau 

learned that some financial institutions 

have interpreted § 1003.5(a)(1) to 

require that complete loan application 

registers must be retained in paper 

format, and that this can be burdensome 

depending on the size of the complete 

loan application register. Proposed 

comment 5(a)–4 clarifies that retention 

of the loan application register in 

electronic format is sufficient to satisfy 

the requirements of § 1003.5(a)(1). The 

Bureau seeks comment on whether this 

proposal is appropriate. 

Submission Procedures and Related 

Technical Requirements 

As part of its efforts to improve and 

modernize HMDA operations, the 

Bureau is considering various 

improvements to the HMDA data 

submission process. The Bureau is 

proposing to reorganize sections I and II 

of appendix A and portions of the 

commentary so that instructions relating 

to data submission are found in one 

place in the regulation. The Bureau 

expects to publish procedural and 

technical requirements and 

specifications relating to data 

submission separately from this 

proposal.550

The content of section II of appendix 

A and comment 5(a)–1 are inconsistent 

with the Bureau’s plan for data 

submission and the Bureau therefore 

proposes to delete these provisions. The 

Bureau proposes to move the portion of 

comment 4(a)–1.vi concerning officer 

certification to § 1003.5(a)(1)(iii). The 

Bureau proposes to incorporate the 

pertinent remaining portion of comment 

4(a)–1.vi and comments 4(a)–1.vii and 

5(a)–7 and –8 into proposed instructions 

5(a)–2 and –3 in appendix A. The 

Bureau proposes to delete the remaining 

portions of these comments. Proposed 

instruction 5(a)–1 in appendix A 

provides procedural and technical 

information concerning submission 

requirements. When the Bureau 

finalizes this proposed rule, it will make 

conforming technical changes to the 

transmittal sheet and loan application 

register form in appendix A. The Bureau 

solicits feedback on whether these 

proposals are appropriate. 

5(a)(3) Entity Identifier 

Currently the transmittal sheet and 

loan application register in appendix A 

to Regulation C require entry of the 

Reporter’s Identification Number 

(HMDA RID). The HMDA RID consists 

of an entity identifier specified by the 

financial institution’s appropriate 

agency combined with a code that 

designates the agency. For the reasons 

discussed below, pursuant to HMDA 

section 305(a), the Bureau is proposing 

to require financial institutions to 

provide a globally-accepted Legal Entity 

Identifier (LEI) to replace the HMDA 

RID in HMDA submissions. 

Under the current system, each 

Federal agency chooses the entity 

identifier that its financial institutions 

use in reporting their HMDA data. The 

following entity identifiers are currently 

used in generating the HMDA RID: 

• The Research Statistics Supervision 

and Discount (RSSD) number for 

institutions supervised by the Board and 

for depository institutions supervised by 

the Bureau; 

• the Federal Tax Identification 

number for nondepository institutions 

supervised by agencies other than the 

Board; 

• the charter number for depository 

institutions supervised by the NCUA 

and the OCC; and 

• the certificate number for 

depository institutions supervised by 

the FDIC.551

Leading zeroes are added to the extent 

necessary to make this entity identifier 

ten digits for purposes of the transmittal 

sheet and loan application register, and 

the identifier is then amalgamated with 

a one-digit code at the end that 

identifies the agency.552

There is no mechanism to link 

nondepository institutions identified by 

a Federal Tax Identification number to 

related companies. The lack of a 

sufficiently comprehensive 


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553See generally Fin. Stability Bd., A Global Legal 

Entity Identifier for Financial Markets 38–39 (June 

8, 2012), http://www.financialstabilityboard.org/

publications/r_120608.pdf (including a 

recommendation on LEI reference data relating to 

ownership); Fin. Stability Bd., LEI Implementation 

Group, Fourth Progress Note on the Global LEI 

Initiative 4 (Dec. 11, 2012), http://

www.financialstabilityboard.org/publications/r_

121211.pdf (noting that the LEI Implementation 

Group is developing proposals for additional 

reference data on the direct and ultimate parent(s) 

of legal entities and on relationship data more 

generally). 

554The Financial Stability Board is an 

international coordinating body established to 

promote global financial stability and regulatory 

coordination. It is a successor to the Financial 

Stability Forum, which was founded in 1999 by the 

Group of 7 Finance Ministers and Central Bank 

Governors. 

555See, e.g., Matthew Reed, Legal Entity Identifier 

System Gains Global Momentum, Treasury Notes 

Blog (Jan. 14, 2014), http://www.treasury.gov/

connect/blog/Pages/Legal-Entity-IdentifierSystemGains-Global-Momentum.aspx; Fin. Stability Bd., A 

Global Legal Entity Identifier for Financial Markets 

(June 8, 2012), https://www.financial

stabilityboard.org/publications/r_120608.pdf. A 

number of trade associations, including the 

Americans Bankers Association, expressed support 

for creation of the LEI in an April 12, 2011 letter 

to all G–20 finance ministers, which is available at 

http://www.gfma.org/correspondence/

item.aspx?id=159. 

556See ROC, Inaugural Meeting of the Global 

Legal Entity Identifier (LEI) Regulatory Oversight 

Committee (ROC) (Jan. 28, 2013), http://

www.leiroc.org/publications/gls/roc_20130128.pdf. 

557Press Release, GLEIF, Inaugural Meeting of the 

Global Legal Entity Identifier Foundation (GLEIF) 

(Jun. 30, 2014), http://www.leiroc.org/publications/ 

gls/gleif_20140629_2.pdf; ROC, Regulatory 

Oversight Committee Welcomes First Meeting of 

Global LEI Foundation (June 30, 2014), http://

www.leiroc.org/publications/gls/gleif_20140629_

1.pdf. 

558See, e.g., Matthew Reed, Legal Entity Identifier 

System Gains Global Momentum, Treasury Notes 

Blog (Jan. 14, 2014), http://www.treasury.gov/

connect/blog/Pages/Legal-Entity-IdentifierSystemGains-Global-Momentum.aspx. 

559 Id. 

560See Global Fin. Markets Ass’n, Progress and 

Developments in Establishing the Global LEI System 

5–6 (Mar. 2014), http://www.gfma.org/

uploadedFiles/Initiatives/Legal_Entity_Identifier_

(LEI)/GFMAwebinarLEISlideDeck10Mar

2014%20%5bCompatibility%20Mode%5d.pdf 

(listing examples of regulatory acceptance); ROC, 

Endorsed Pre-LOUs of the Interim Global Legal 

Entity Identifier System (GLEIS) (May 2014), http:// 

www.leiroc.org/publications/gls/lou_20131003_

2.pdf. 

561ROC, Regulatory Oversight Committee 

Welcomes First Meeting of Global LEI Foundation 

(June 30, 2014), 

http://www.leiroc.org/publications/gls/gleif_

20140629_1.pdf. 

562Charter of the ROC For the Global LEI System 

2, 18 (Nov. 5, 2012), available at http://

www.financialstabilityboard.org/publications/r_

121105c.pdf. 563See GMEI Utility, Frequently Asked Questions, 

https://www.gmeiutility.org/

frequentlyAskedQuestions.jsp (accessed July 17, 

2014). 

564RSSD numbers are assigned and managed by 

the Board’s National Information Center. As noted 

above, they are currently used by some financial 

institutions as their HMDA RID. 

565NMLSR assigns a unique identifier to each 

entity, branch, and individual loan originator that 

has a record within its system. The NMLSR 

Identifier is required on certain loan documents 

pursuant to the Bureau’s 2013 Loan Originator Rule. 

Regulation Z § 1026.36(g). The Bureau’s 2013 TILA– 

RESPA Final Rule will also require use of the 

NMLSR Identifier when the rule becomes effective 

in August 2015. Regulation Z § 1026.37(k). 

identification system for financial 

institutions that are parties to mortgage 

transactions can result in the same 

financial institution being identified by 

different names or codes across and 

within datasets. As a result, financial 

institutions, regulators, and data users 

can find data aggregation, validation, 

and analysis difficult. 

Requiring financial institutions to 

provide an LEI when they report their 

HMDA data could help to address these 

concerns. The LEI is a unique, 20-digit 

alphanumeric identifier associated with 

a single legal entity and is intended to 

serve as a uniform international 

standard for identifying participants in 

financial transactions. The LEI’s 

alphanumeric identifier does not itself 

contain any embedded information 

about the entity but is linked to 

reference data about the entity. Once the 

LEI is fully implemented, this 

information is projected to include data 

on ownership and corporate 

hierarchies.553

A global LEI standard is currently in 

the implementation stage, with strong 

support from the Financial Stability 

Board,554 the Group of 20 Finance 

Ministers and Central Bank Governors, 

and others.555 The LEI’s Regulatory 

Oversight Committee (ROC)—the top 

tier in the LEI governance structure— 

held its inaugural meeting in early 

2013.556

The second tier in LEI governance— 

the Global LEI Foundation (GLEIF)— 

was recently established as a not-forprofit foundation in Switzerland.557 The 

GLEIF will build the LEI system’s 

technology infrastructure and have 

responsibility for operational and 

quality controls, assuring adherence to 

standards for reliability, quality, and 

uniqueness.558 The third tier of the LEI 

system is the network of local operating 

units (LOUs) that assign LEIs, validate 

and maintain the associated reference 

data, and make these data continuously 

available to the public and regulators.559

The ROC has already endorsed more 

than a dozen pre-LOUs around the 

world, and the LEI identifiers issued by 

these pre-LOUs have been accepted for 

regulatory purposes in various 

jurisdictions represented in the ROC.560

Approximately 300,000 entities have 

been issued LEI identifiers to date.561

In light of the potential benefits that 

a robust and uniform entity identifier 

could provide, the Bureau is proposing 

to add new § 1003.5(a)(3) to require 

financial institutions to provide an LEI 

when reporting HMDA data. Proposed 

§ 1003.5(a)(3) specifies that the LEI must 

be issued by: (i) A utility endorsed by 

the ROC or (ii) a utility endorsed or 

otherwise governed by the GLEIF (or 

any successor of the GLEIF) after the 

GLEIF assumes operational governance 

of the global LEI system. 

The Bureau believes that requiring 

use of the LEI could improve the ability 

to identify the legal entity that is 

reporting data and to link it to its 

corporate family. For these reasons, 

pursuant to HMDA section 305(a), the 

Bureau believes that proposed 

§ 1003.5(a)(3) is necessary and proper to 

effectuate HMDA’s purposes and 

facilitate compliance therewith. By 

facilitating identification, the Bureau’s 

proposal would help data users in 

achieving HMDA’s objectives of 

identifying whether financial 

institutions are serving the housing 

needs of their communities, as well as 

identifying possible discriminatory 

lending patterns. This new requirement 

could also assist in identifying market 

activity and risks by related companies. 

The Bureau recognizes that requiring 

financial institutions to obtain LEIs 

would impose some costs on the 

financial institutions. The LEI system is 

based on a cost-recovery model.562 One 

LOU endorsed by the ROC currently 

charges registrants approximately $200 

for initial registration plus $100 per year 

for maintenance.563 These costs could 

decrease as the LEI identifier is used 

more widely. 

In light of all these considerations, the 

Bureau believes that the benefits of 

having all HMDA reporters obtain and 

report an LEI may justify the associated 

costs. The Bureau solicits feedback on 

whether the LEI would be a more 

appropriate entity identifier than the 

HMDA RID. The Bureau is also seeking 

feedback regarding whether other 

identifiers, such as the RSSD number 564

or the NMLSR Identifier,565 would be an 

appropriate alternative to the LEI. 

5(a)(4) Parent Company 

The transmittal sheet in appendix A 

to Regulation C currently requires 

financial institutions to provide the 

name of their parent company, if any. 

Because information about parent 

companies is not yet available through 

the LEI, the Bureau believes it is 

necessary to maintain this requirement 

to ensure that financial institutions’ 

submissions can be linked with those of 

their corporate parents. The Bureau is 

therefore proposing new § 1003.5(a)(4), 

which provides that when reporting its 


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566 41 FR 23931, 23937–38 (June 14, 1976). 

567HMDA section 304(k)(1)(A) provides that a 

financial institution ‘‘shall make a disclosure 

statement available, upon request, to the public no 

later than 3 business days after the institution 

receives the statement from the Federal Financial 

Institutions Examination Council.’’ 

568See HMDA sections 304(h)(1)(A), 304(k)(1), 

304(m)(2). 569See Small Business Review Panel Report at 43. 

data, a financial institution shall 

identify its parent company, if any. 

Proposed comment 5(a)–3 explains that 

for purposes of § 1003.5(a)(4), an entity 

that holds or controls an ownership 

interest in the financial institution that 

is greater than 50 percent should be 

listed as a parent company. This is the 

same test that is used to determine if a 

financial institution is a subsidiary of a 

bank or savings association for purposes 

of reporting HMDA data to the same 

agency as the parent. 

5(b) Public Disclosure of Statement 

Under Regulation C as originally 

promulgated, the disclosure statement 

was the means by which financial 

institutions made available to the public 

the aggregate data required to be 

disclosed under HMDA section 304.566

At present, the FFIEC prepares an 

individual disclosure statement for each 

financial institution using the HMDA 

data submitted by the institution for the 

previous calendar year. A disclosure 

statement is a series of tables made 

available to the public by a financial 

institution and on the FFIEC Web site. 

Unlike the modified loan application 

register that a financial institution must 

make available to the public under 

HMDA section 304(j) and § 1003.5(c) of 

Regulation C, a financial institution’s 

disclosure statement presents the 

institution’s HMDA data in aggregate 

forms, rather than on the loan level. 

5(b)(1) 

HMDA section 304(k) requires the 

FFIEC to make available a disclosure 

statement for each financial institution 

required to make disclosures under 

HMDA section 304.567 Section 

1003.5(b)(1) of Regulation C requires 

that the FFIEC prepare a disclosure 

statement for each financial institution 

based on the data each financial 

institution submits on its loan 

application register. 

The Bureau proposes to modify 

§ 1003.5(b)(1) to clarify that, although 

some financial institutions will report 

quarterly under proposed 

§ 1003.5(a)(1)(ii), disclosure statements 

for these financial institutions will be 

based on all data submitted by each 

institution for the preceding calendar 

year. The Bureau also proposes to 

replace the word ‘‘prepare’’ with ‘‘make 

available’’ in § 1003.5(b)(1). The Bureau 

believes that advances in technology 

may permit, for example, the FFIEC to 

produce an online tool that would allow 

users of the tool to generate disclosure 

statements. It is the Bureau’s 

interpretation that the FFIEC’s 

obligation under HMDA section 304(k) 

would be satisfied if the FFIEC 

produced such a tool, which in turn 

would produce disclosure statements 

upon request. The Bureau proposes to 

modify the language in § 1003.5(b)(1) to 

clarify that such developments are 

accommodated by this section. Further, 

pursuant to its authority under HMDA 

section 305(a), the Bureau believes that 

permitting the FFIEC to produce a tool 

that allows members of the public to 

generate disclosure statements is 

necessary and proper to effectuate the 

purposes of HMDA and to facilitate 

compliance therewith. The Bureau 

solicits feedback on whether these 

proposals are appropriate. 

5(b)(2) 

HMDA section 304(k)(1) requires that, 

in accordance with procedures 

established by the Bureau, a financial 

institution shall make its disclosure 

statement available to the public upon 

request no later than three business days 

after it receives the statement from the 

FFIEC. HMDA section 304(m), titled 

‘‘Opportunity to reduce compliance 

burden,’’ provides that a financial 

institution shall be deemed to have 

satisfied the public availability 

requirements of section 304(a) if it 

compiles the information required at the 

home office of the institution and 

provides notice at the branch locations 

specified in HMDA section 304(a) that 

such information is available from the 

home office upon written request. The 

Bureau is given broad discretion as to 

the media and format in which 

disclosure statements are made 

available and the procedures for 

disclosing them.568

Section 1003.5(b)(2) of Regulation C 

requires that each financial institution 

make its disclosure statement available 

to the public in its home office within 

three business days of receiving it. In 

addition, § 1003.5(b)(3) requires that a 

financial institution must either (1) 

make the statement available to the 

public in at least one branch office in 

each other MSA and each other MD 

where the institution has offices or (2) 

post the address for sending written 

requests for the disclosure statement in 

the lobby of each branch office in each 

other MSA and each other MD and 

provide a copy of the disclosure 

statement within 15 calendar days of 

receiving a written request. Comment 

5(b)–2 provides that an institution may 

make the disclosure statement available 

in paper form or, if the person 

requesting the data agrees, in electronic 

form. For the reasons described below, 

the Bureau is proposing to allow a 

financial institution to make its 

disclosure statement available to the 

public by making available a notice that 

clearly conveys that the disclosure 

statement may be obtained on the FFIEC 

Web site and that includes the FFIEC’s 

Web site address. 

The current disclosure statement for 

each reporting financial institution is 

comprised of a series of numerous tables 

that are prepared using the HMDA data 

submitted by the financial institution 

for the previous calendar year. The 

Bureau has received feedback from 

financial institutions that the largest 

disclosure statements can exceed 4,000 

pages. The FFIEC posts the disclosure 

statements to the FFIEC Web site in 

September each year and, after receiving 

notice that the statements are available 

on the FFIEC Web site, financial 

institutions download or print the 

statements from the Web site so as to 

have them available for members of the 

public. The Bureau has received 

feedback from financial institutions that 

having to print and download the 

disclosure statements so as to make 

them available is burdensome and often 

wasteful, as disclosure statements are 

infrequently requested. Financial 

institutions have argued that, because 

the source of the disclosure 

statements—the FFIEC Web site—is 

readily available and easily accessible to 

the public at no cost, institutions should 

be permitted to direct members of the 

public who request disclosure 

statements to the FFIEC Web site. 

During the Small Business Review Panel 

process, the Bureau heard from small 

entity representatives that they rarely if 

ever receive requests for their disclosure 

statements and that making them 

available as currently required can be 

burdensome. The Small Business 

Review Panel recommended that the 

Bureau consider whether there may be 

alternative means of providing 

disclosure statements to the public.569

The Bureau believes that costs to 

financial institutions would be reduced 

by allowing institutions to refer 

members of the public who request 

disclosure statements to the FFIEC Web 

site. The Bureau has considered 

whether the provision to the public of 

disclosure statements in paper or 

electronic form by the financial 

institution itself confers any unique 


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570Under current § 1003.5(b)(3), for example, a 

member of the public that requests a disclosure 

statement at a branch office must only be provided 

with a disclosure statement containing data relating 

to the MSA or MD where the branch is located. 

Referral to the FFIEC Web site would allow that 

member of the public to easily view the financial 

institution’s disclosure statements for all MSAs and 

MDs. Also, to the extent a member of the public 

wanted to compare the lending activities of 

financial institutions in a particular MSA or MD, 

the FFIEC Web site allows her to do so all in one 

place, rather than requiring her to obtain disclosure 

statements from multiple institutions. 

571The Bureau notes that, as reflected in 

proposed comment 5(b)–3, its proposal does not 

require financial institutions to update each year 

the notice required under proposed § 1003.5(b)(2). 

Accordingly, the requirement that a financial 

institution make the notice available ‘‘within three 

business days’’ after receiving notice that its 

disclosure statement is available will be meaningful 

for a financial institution only in the year that it 

first reports HMDA data under revised Regulation 

C. 

572 Dodd-Frank Act section 1094(3)(E), 12 U.S.C. 

2803(m)(1). 

573Comment 5(c)–1 allows a financial institution 

to make its modified loan application register 

available in either paper or electronic form. 

574The fields identified in the statute as 

appropriate for deletion are ‘‘the applicant’s name 

and identification number, the date of the 

application, and the date of any determination by 

the institution with respect to such application.’’ 

HMDA section 304(j)(2)(B). 

benefit to the disclosure goals of the 

statute, but does not believe it does. The 

FFIEC Web site provides one, easily 

accessible location where members of 

the public can access all HMDA 

disclosure statements for all financial 

institutions required to report under the 

statute, which the Bureau believes 

furthers the goals of the statute.570 The 

Bureau has also considered whether 

requiring that a member of the public 

seeking a disclosure statement obtain it 

online would be unduly burdensome. 

Given the prevalence of internet access 

today, the Bureau believes that members 

of the public should be able to readily 

access HMDA disclosure statements 

online with minimum inconvenience, if 

any. The Bureau believes that any such 

inconvenience is not greater than, and is 

likely less than, the potential 

inconvenience of receiving a disclosure 

statement on a floppy disc or other 

electronic data storage medium which 

may be used with a personal computer, 

as is contemplated by HMDA section 

304(k)(1)(b). 

The Bureau believes that the burden 

to financial institutions associated with 

the provision of disclosure statements to 

members of the public upon request is 

likely not justified by any benefit to 

maintaining the current disclosure 

statement dissemination scheme. For 

these reasons, the Bureau believes it is 

reasonable to deem that financial 

institutions make disclosure statements 

available, pursuant to HMDA sections 

304(k)(1) and 304(m), by referring 

members of the public seeking 

disclosure statements to the FFIEC Web 

site, as provided under proposed 

§ 1003.5(b)(2). This proposal is also 

proposed pursuant to the Bureau’s 

authority under HMDA 305(a). For the 

reasons given, this proposal is necessary 

and proper to effectuate the purposes of 

HMDA and facilitate compliance 

therewith. 

Accordingly, the Bureau is proposing 

that, no later than three business days 

after receiving notice that its disclosure 

statement is available, a financial 

institution shall make available to the 

public at its home office and each 

branch office located in each MSA and 

each MD a notice that clearly conveys 

that the institution’s disclosure 

statement may be obtained on the FFIEC 

Web site and that includes the FFIEC’s 

Web site address.571 Because this 

proposal requires only that a financial 

institution make available a notice, 

rather than its disclosure statement, the 

Bureau believes it appropriate to require 

that a financial institution make 

available the notice in every branch 

office located in an MSA or MD. The 

Bureau is proposing a new comment 

5(b)–3 to provide an example of notice 

content that would satisfy the 

requirements of proposed § 1003.5(b)(2). 

Because the Bureau intends to make 

disclosure statements also available on 

its Web site, the example in proposed 

comment 5(b)–3 includes the Bureau’s 

Web site address. The Bureau seeks 

feedback on whether these proposals are 

appropriate. 

The Bureau also proposes to modify 

comment 5(b)–2 to conform to proposed 

§ 1003.5(b)(2) and to allow a financial 

institution to provide the proposed 

notice in paper or electronic form. 

Comment 5(b)–2 requires that an 

institution may make its disclosure 

statement available in electronic form to 

a person requesting it only if the person 

agrees. This comment implements a 

requirement previously found in HMDA 

section 304(m)(2), which provided that, 

in complying with its obligation to make 

its HMDA data available to the public as 

required by section 304(m)(1), an 

institution could provide the 

information in electronic form only ‘‘if 

acceptable to the person’’ requesting the 

information. The Dodd-Frank Act 

amended HMDA section 304(m)(2) to 

substitute this language with new 

language providing that, in complying 

with section 304(m)(1), a financial 

institution ‘‘shall provide the person 

requesting the information with a copy 

of the information requested in such 

formats as the Bureau may require.’’ 572

The Bureau believes it is appropriate to 

align the formats in which a financial 

institution may make its disclosure 

statement available to the public with 

the formats in which it may make its 

modified loan application register 

available to the public.573 Accordingly, 

the Bureau is proposing to modify 

comment 5(b)–2 to provide that an 

institution may make the notice 

required under proposed § 1003.5(b)(2) 

available in paper or electronic form. 

The Bureau seeks feedback on this 

proposal. 

5(c) Public Disclosure of Modified Loan 

Application Register 

HMDA section 304(j)(1) requires that 

financial institutions make available to 

the public, upon request, ‘‘loan 

application register information’’ as 

defined by the Bureau and in the form 

required under regulations prescribed 

by the Bureau. HMDA section 304(j)(2) 

provides that the Bureau shall require 

such deletions from the loan application 

register information made available to 

the public as the Bureau may determine 

to be appropriate to protect any privacy 

interest of any applicant and to protect 

financial institutions from liability 

under any Federal or State privacy law, 

and identifies three fields in particular 

as appropriate for deletion.574 HMDA 

section 304(j)(5) requires that the loan 

application register information 

described in section 304(j)(1) must be 

made available as early as March 31 

following the calendar year for which 

the information was compiled. HMDA 

section 304(j)(7) provides that the 

Bureau shall make every effort to 

minimize costs incurred by financial 

institutions in complying with section 

304(j). 

Section 1003.5(c) of Regulation C 

requires a financial institution to make 

its loan application register available to 

the public after removing three fields to 

protect applicant and borrower privacy: 

The application or loan number, the 

date that the application was received, 

and the date action was taken. An 

institution must make this ‘‘modified’’ 

loan application register publicly 

available following the calendar year for 

which the data are compiled by, March 

31 for a request received on or before 

March 1, and within 30 calendar days 

for a request received after March 1. The 

modified loan application register need 

only contain data relating to the MSA or 

MD for which the request is made. 

Comment 5(c)–1 explains that a 

financial institution may make the 

modified loan application register 


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575As discussed above in part II.C, the FFIEC 

releases annually, on behalf of the Bureau and other 

agencies, a public loan-level dataset containing 

reported HMDA data for the preceding calendar 

year (the agencies’ data release). Deleted from this 

release are the same three fields that are deleted 

from the modified loan application register that 

financial institutions make available. 

576See supra note 122 for examples of these 

techniques. 

577The Bureau notes that, as part of its efforts to 

improve and modernize HMDA operations, it is 

exploring technological solutions that may allow 

the Bureau to apply appropriate privacy protections 

to the modified loan application register. These 

solutions, if realized, and would reduce burdens on 

financial institutions related to preparing the 

modified loan application register and otherwise 

impact the considerations described herein. 

578Because the Bureau proposes to modify some 

of the existing HMDA data points, the data 

disclosed on the modified loan application register 

under this proposal will not be exactly the same as 

under current Regulation C in some respects. See 

proposed § 1003.4(a)(5) (replacing property type 

with construction method), 1003.4(a)(6) (providing 

more detail on owner-occupancy status), 

1003.4(a)(10) (modifying and clarifying income 

reporting for various reporting scenarios), 

1003.4(a)(13) (requiring additional information on 

HOEPA status), 1003.4(a)(14) (requiring additional 

information about lien priority). 

579For example, if the modified loan application 

register were to disclose more data fields, or more 

granular data, than was disclosed in the agencies’ 

data release, the modified loan application register 

could be used to reverse engineer the agencies’ data 

release and undermine privacy protections applied 

to that release. Accordingly, limiting the data 

disclosed on the modified loan application register 

would allow the agencies flexibility in their data 

release, including to adjust privacy protections as 

risks evolve. 

580Currently under Regulation C, financial 

institutions report loan amount rounded to the 

nearest thousand. See paragraph I.A.7 of appendix 

A. Proposed instruction 4(a)(7)–1 modifies this 

requirement to provide that loan amount is reported 

in dollars. The Bureau proposes that financial 

institutions round loan amount to the nearest 

thousand before making available to the public their 

available in paper or electronic form 

and that, although institutions are not 

required to make the modified loan 

application register available in census 

tract order, they are strongly encouraged 

to do so in order to enhance its utility 

to users. 

For the reasons discussed below, the 

Bureau is proposing to modify 

§ 1003.5(c) to require that a financial 

institution make available to the public 

a modified loan application register 

showing only the data fields that 

currently are released on the modified 

loan application register. The Bureau is 

proposing new comment 5(c)–3 to 

clarify that a modified loan application 

register made available to the public by 

a financial institution that reports its 

HMDA data on a quarterly basis under 

proposed § 1003.5(a)(1)(ii) must show 

data for the entire calendar year. The 

Bureau seeks comment on whether it 

should except smaller financial 

institutions from the obligation to 

release a modified loan application 

register. 

As discussed above in part II.C, the 

Bureau’s assessment under its balancing 

test of the risks to privacy interests 

created by the disclosure of HMDA data 

and the benefits of such disclosure is 

ongoing. Based on its analysis thus far, 

however, the Bureau believes that some 

of the new data points required or 

permitted by the Dodd-Frank Act and 

proposed by the Bureau may raise 

privacy concerns sufficient to warrant 

some degree of modification, including 

redaction, before they are disclosed to 

the public. This has two implications 

for the future release of loan-level 

HMDA data.575 First, wherever the 

Bureau considers modifying HMDA data 

before it is made available to the public, 

it will consider strategies to preserve the 

utility of the data subject to 

modification. These strategies may 

include, but may not be limited to, 

various disclosure limitation 

techniques, such as techniques aimed at 

masking the precise value of certain 

data points.576 While such techniques 

can address privacy and data utility 

concerns, the Bureau is mindful that 

requiring financial institutions to apply 

them in order to prepare the modified 

loan application register may impose 

undue burden on financial institutions 

and may increase the risk of errors that 

could result in the unintended 

disclosure of data or other error. 

Second, the Bureau believes that any 

privacy risks created by the disclosure 

of loan-level HMDA data may evolve 

over time. For example, technological 

developments in areas such as data 

aggregation and mining and the 

availability of new public sources of 

data may increase, decrease, or 

otherwise alter the likelihood and 

nature of potential privacy harms that 

could result from the public disclosure 

of loan-level HMDA data. Evolving 

privacy risks may warrant changes to 

the privacy protections applied to 

HMDA data disclosed to the public. 

Changing the modifications a financial 

institution must make to the modified 

loan application register in order to 

protect applicant and borrower privacy 

interests would require amendments to 

Regulation C that may impose undue 

costs on financial institutions and delay 

the implementation of the changes. 

Based on these considerations,577 the 

Bureau believes it may be appropriate to 

require that financial institutions 

include on their modified loan 

application registers only the data fields 

that currently are released on the 

modified loan application register.578

The Bureau believes this approach 

would avoid creating new privacy risks 

or liabilities for financial institutions in 

connection with the release of loan-level 

data via the modified loan application 

register. It would also minimize the 

burden to institutions associated with 

preparing their modified loan 

application registers to implement 

amendments to Regulation C. The 

proposed approach would allow the 

Bureau and the other agencies flexibility 

in disclosing new data points in the 

agencies’ data release, including 

flexibility to adjust any privacy 

protections as risks evolve, without 

unduly burdening financial institutions 

or creating opportunities for the 

modified loan application register and 

the agencies’ data release to interact in 

ways that might increase privacy risk.579

The Bureau has concerns about the 

impact such a proposal may have on 

members of the public that regularly use 

modified loan application registers. 

Although the Bureau has received 

feedback that requests for modified loan 

applications registers are infrequently 

received at many institutions, the 

Bureau believes that a small number of 

HMDA data users routinely request 

modified loan application registers from 

large financial institutions. The Bureau 

understands that this practice is driven 

primarily by the timing of the agencies’ 

data release: Whereas a financial 

institution must make available its 

modified loan application register as 

early as March 31, the agencies’ loanlevel HMDA data currently are not 

released until almost six months later, 

in September. The Bureau notes that it 

intends to coordinate with the other 

agencies to explore processing 

improvements that may allow the 

agencies’ data release to be made 

available to the public, in the future, 

closer to March 31 than is the current 

practice. 

For the reasons described above, the 

Bureau is proposing to modify 

§ 1003.5(c) to provide that a financial 

institution shall make its loan 

application register available to the 

public after, for each entry: Removing 

the information required to be reported 

under § 1003.4(a)(1), the date required 

to be reported under § 1003.4(a)(8), the 

postal address required to be reported 

under proposed § 1003.4(a)(9), the age of 

the applicant or borrower required to be 

reported under proposed 

§ 1003.4(a)(10), and the information 

required to be reported under proposed 

§ 1003.4(a)(15) and (a)(17) through (39); 

and rounding the information required 

to be reported under proposed 

§ 1003.4(a)(7) to the nearest 

thousand.580 Proposed comment 5(c)–2 


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modified loan application registers so that loan 

amount is shown on the modified loan application 

register as it is under current Regulation C. 

581The Bureau and the Board before it have 

received feedback that certain data fields disclosed 

in the HMDA loan-level data releases, including 

financial institution name, loan amount, and census 

tract, might be used in some circumstances to 

identify individual applicants or borrowers. See, 

e.g., Small Business Review Panel Report at 35 

(reflecting concern expressed by small entity 

representative that, ‘‘especially in less populated 

areas, the modified loan application register could 

be compared to public records to identify 

borrowers’’). In other contexts, it has been suggested 

that loan-level disclosure of borrower income, 

which is currently disclosed on the modified loan 

application register, may raise privacy concerns. 

See, e.g., Div. of Corp. Fin., U.S. Sec. and Exch. 

Comm’n, Disclosure of Asset-Level Data 14 (Feb. 25, 

2014), available at http://www.sec.gov/comments/

s7-08-10/s70810-258.pdf (suggesting that borrower 

income raises privacy concerns; this memorandum 

relates to the SEC’s decision to re-open the 

comment period for two proposed rules concerning 

the offering, disclosure, and reporting requirements 

for asset-backed securities, see 79 FR 11361, 11362 

n.5 (Feb. 28, 2014)). 

582See Small Business Review Panel Report at 43. 583Proposed § 1003.5(a)(1)(ii) requires a financial 

institution that reported at least 75,000 covered 

loans, applications, and purchased covered loans, 

combined, for the preceding calendar year to submit 

its loan application register to the agencies on a 

quarterly, rather than annual, basis. If the threshold 

to exclude a financial institution from the 

obligation to make available to the public a 

modified loan application register were aligned 

with the threshold proposed in § 1003.5(a)(1)(ii), 

only financial institutions required to report on a 

quarterly basis would be required to make a 

modified loan application register available to the 

public under § 1003.5(c). 

explains how a financial institution 

should round the loan amount on their 

modified loan application register and 

provides an illustrative example. The 

Bureau solicits comment concerning 

whether this proposal is appropriate. 

The Bureau is aware that concerns 

have been raised that data currently 

disclosed on the modified loan 

application register may create risks to 

borrower and applicant privacy.581 As 

discussed above, the Bureau is 

considering all data reported under 

HMDA in its privacy assessment, 

including data currently disclosed. 

However, the Bureau is unaware of any 

misuse of the currently-disclosed loanlevel HMDA data, which has been made 

available to the public annually since 

1991. The Bureau is also aware that 

some of these data are publicly 

available, such as in county land 

transfer records. The Bureau solicits 

comment concerning any risks to 

applicant or borrower privacy interests 

posed by the continued release of 

currently-released data fields on the 

modified loan application register. The 

Bureau also solicits comment 

concerning the benefits of disclosure of 

the currently-released fields for HMDA 

purposes. 

Proposed comment 5(c)–3 clarifies 

that the modified loan application 

register is the loan application register 

reflecting all data reported for a 

calendar year, modified as described in 

§ 1003.5(c)(1), whether the data were 

submitted on a quarterly or annual 

basis. Financial institutions that report 

on a quarterly basis under proposed 

§ 1003.5(a)(1)(ii) must show on their 

modified loan application register data 

reported for the calendar year, not just 

data reported for a particular quarter. 

The Bureau seeks comment on 

whether it should except, pursuant to its 

authority under HMDA section 305(a), 

smaller financial institutions from the 

requirement under § 1003.5(c) that a 

financial institution make available to 

the public its modified loan application 

register. During the Small Business 

Review Panel process, the Bureau heard 

from small entity representatives that 

they rarely if ever receive requests for 

their modified loan application 

registers. The Small Business Review 

Panel recommended that the Bureau 

consider whether there is a continued 

need for small financial institutions to 

make their modified loan application 

registers available to the public.582 The 

Bureau solicits comment on whether 

such an exception from the obligation to 

make a modified loan application 

register available to the public is 

desirable and, if so, which financial 

institutions should qualify for the 

exception, including whether such 

exception should align with the 

quarterly reporting threshold proposed 

in § 1003.5(a)(1)(ii).583

5(d) Availability of Data 

HMDA sections 304(c) and 304(j)(6) 

set forth the time periods for which 

financial institutions must maintain and 

make available information required to 

be disclosed under the statute. HMDA 

sections 304(j)(4) and 304(k)(3) permit a 

financial institution that provides its 

loan application register information or 

its disclosure statement to a member of 

the public to impose a reasonable fee for 

any cost incurred in reproducing the 

information or statement. Section 

1003.5(d) of Regulation C requires that 

a financial institution must make its 

modified loan application register 

available to the public for a period of 

three years and its disclosure statement 

available to the public for a period of 

five years. This section also provides 

that an institution must make these 

disclosures available to the public for 

inspection and copying during the 

hours the office is normally open to the 

public for business and may impose a 

reasonable fee for any cost incurred in 

providing or reproducing the data. The 

Bureau is proposing to delete the 

requirement that a financial institution 

make its HMDA data available for 

inspection and copying and to make 

additional technical modifications to 

§ 1003.5(d). 

Section 1003.5(d) requires that an 

institution shall make its data available 

for inspection and copying during the 

hours the office is normally open to the 

public. This language suggests that a 

member of the public seeking a financial 

institution’s disclosure statement or 

modified loan application register could 

require the financial institution to 

permit him to reproduce these 

documents himself at the financial 

institution’s office. The Bureau believes 

that preserving this option is 

unnecessary and may be burdensome to 

financial institutions. The Bureau 

proposes to modify § 1003.5(d) to delete 

reference to inspection and copying and 

seeks comment on whether this 

proposed modification is appropriate. 

5(e) Notice of Availability 

HMDA section 304(m) provides that a 

financial institution shall be deemed to 

have satisfied the public availability 

requirements of HMDA section 304(a) if 

it compiles its HMDA data at its home 

office and provides notice at certain 

branch locations that its information is 

available upon written request. Section 

1003.5(e) of Regulation C requires that 

a financial institution post a notice 

concerning the availability of its HMDA 

data in the lobby of its home office and 

of each branch office located in an MSA 

and MD. Section 1003.5(e) also requires 

that a financial institution must provide, 

or the posted notice must include, the 

location of the institution’s office where 

its disclosure statement is available for 

inspection and copying. Comment 5(e)– 

1 suggests text for the posted notice 

required under § 1003.5(e). Comment 

5(e)–2 suggests text concerning 

disclosure statements that may be 

included in the posted notice to satisfy 

§ 1003.5(b)(3)(ii). The Bureau is 

proposing conforming, clarifying, and 

technical modifications to § 1003.5(e). 

Under proposed § 1003.5(b)(2), a 

financial institution shall make its 

disclosure statement available to the 

public by making available at its home 

office and at each branch office located 

in each MSA and each MD a notice that 

clearly conveys that the institution’s 

disclosure statement may be obtained 

on the FFIEC Web site and that includes 

the FFIEC’s Web site address. If this 

proposal is adopted, a financial 

institution’s disclosure statement would 

be available online and the notice 

advising of this fact would be available 

in every branch office located in an 


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584See Small Business Review Panel Report at 21. 

585See Small Business Review Panel Report at 21. 

586See Small Business Review Panel Report at 97. 

587See Small Business Review Panel Report at 55. 

MSA or MD, rendering unnecessary the 

current § 1003.5(e) requirement that an 

institution provide the location of the 

office where the disclosure statement is 

available for inspection and copying or 

include the location in the posted 

notice. Accordingly, the Bureau is 

proposing to remove from § 1003.5(e) 

the requirement that an institution 

provide, or its posted notice include, the 

location of the institution’s office where 

its disclosure statement is available for 

inspection and copying. The Bureau 

solicits comment on whether this 

proposal is appropriate. The Bureau is 

proposing to delete comment 5(e)–2 to 

conform to the deletion of proposed 

§ 1003.5(b)(3). 

The Bureau is also proposing to 

clarify that the notice required under 

§ 1003.5(e) must be posted in a financial 

institution’s home office and in each 

branch office located in an MSA or MD. 

Finally, the Bureau is proposing to make 

minor technical modifications to 

comment 5(e)–1. These include adding 

language to the suggested content for the 

notice required under § 1003.5(e) to 

highlight that HMDA data include the 

age of applicants and borrowers and to 

provide additional information about 

the online availability of HMDA data. 

The Bureau solicits feedback on 

whether these changes are appropriate. 

5(f) Aggregation 

HMDA section 310 requires the FFIEC 

to compile aggregate data by census 

tract for all financial institutions 

reporting under HMDA and to produce 

tables indicating aggregate lending 

patterns for various categories of census 

tracts grouped according to location, age 

of housing stock, income level, and 

racial characteristics. HMDA section 

304(f) requires the FFIEC to implement 

a system to facilitate access to data 

required to be disclosed under HMDA 

section 304, including arrangements for 

central depositories where such data are 

made available for inspection and 

copying. Section 1003.5(f) of Regulation 

C provides that the FFIEC will produce 

reports for individual institutions and 

reports of aggregate data for each MSA 

and MD, showing lending patterns by 

property location, age of housing stock, 

and income level, sex, ethnicity, and 

race, and will make these reports 

available at central depositories. Section 

1003.5(f) also contains information 

concerning how to obtain a list of 

central depositories from the FFIEC. For 

the reasons discussed below, the Bureau 

is proposing two modifications to 

§ 1003.5(f). 

The Bureau understands that the 

FFIEC has not made HMDA data 

available at brick-and-mortar central 

depositories since approximately the 

mid-2000s. Instead, since at least the 

early 2000s, the FFIEC has made data 

required to be disclosed under HMDA, 

including the data required under 

HMDA section 310, readily available at 

no cost to the public on its Web site. 

The Bureau concludes that sole reliance 

on the FFIEC Web site to publish HMDA 

data satisfies HMDA section 304(f). The 

Web site provides a single, convenient 

place for public officials and members 

of the public to inspect and copy all 

public HMDA data, and thus qualifies as 

a central depository: Access is available 

through any computer with internet 

connectivity, and the Web site 

constitutes an effective system for 

facilitating access to HMDA data. The 

Bureau also concludes, pursuant to 

HMDA section 305(a), that this means of 

providing access to HMDA data is 

necessary and proper to effectuate 

HMDA’s purposes and facilitate 

compliance therewith. Accordingly, the 

Bureau is proposing to delete reference 

to central depositories in § 1003.5(f) and 

to instead explicitly reference the data’s 

availability on the FFIEC Web site, to 

conform to current practices. 

The Bureau also proposes to replace 

the word ‘‘produce’’ with ‘‘make 

available’’ in § 1003.5(f) for clarity. The 

Bureau believes that advances in 

technology may permit, for example, the 

FFIEC to produce an online tool, such 

as a tabular engine, that would allow 

public officials and members of the 

public to generate the tables described 

in HMDA section 310. It is the Bureau’s 

interpretation that the obligation to 

‘‘produce tables’’ set forth in HMDA 

section 310 would be satisfied if the 

FFIEC produced such a tool, which in 

turn would produce the tables described 

in HMDA section 310 on request. The 

Bureau proposes to modify the language 

in § 1003.5(f) to clarify that such 

developments are accommodated by 

this section. Further, pursuant to HMDA 

section 305(a), the Bureau believes that 

permitting the FFIEC to produce a tool 

that allows members of the public to 

generate tables described in HMDA 

section 310 is necessary and proper to 

effectuate the purposes of HMDA and 

facilitate compliance therewith. 

The Bureau solicits feedback on 

whether these proposed modifications 

to § 1003.5(f) are appropriate. 

Section 1003.6 Enforcement 

6(b) Bona Fide Errors 

During the Small Business Review 

Panel process, some small entity 

representatives raised concerns 

regarding reporting errors. Small entity 

representatives expressed concern that 

adoption of any new data points would 

make financial institutions more 

vulnerable to being cited in 

examinations for reporting errors that 

they consider minor, but in total exceed 

their supervisory agencies’ tolerances 

for reporting accurate HMDA 

information.584 Some small entity 

representatives suggested that tolerances 

for errors be increased if additional data 

points were added to Regulation C.585

One small entity representative 

recommended that error rates be judged 

by the total number of data points 

contained in the loan application 

register entries sampled rather than by 

the number of entries sampled.586

Another small entity representative 

noted that strict tolerances for errors 

increased HMDA compliance costs 

because they required substantial 

review of loan application registers for 

precision.587

Section 1003.6(b) of Regulation C 

provides that an error in compiling and 

recording loan data is not a violation of 

HMDA or Regulation C if the error was 

unintentional and occurred despite the 

maintenance of procedures reasonably 

adapted to avoid such errors; that 

census tract reporting errors are not 

violations if an institution maintains 

procedures reasonably adapted to avoid 

such errors; and that, if an institution 

makes a good faith effort to record all 

data concerning covered transactions 

fully and accurately within thirty 

calendar days after the end of each 

calendar quarter, and some data are 

nevertheless inaccurate or incomplete, 

the error or omission is not a violation 

of HMDA or Regulation C provided that 

the institution corrects or completes the 

information prior to submitting the loan 

application register to its regulatory 

agency. The Bureau is not proposing 

specific changes to § 1003.6(b). 

However, the Bureau is concerned about 

the issues related to errors raised by the 

small entity representatives. The Bureau 

is seeking feedback generally regarding 

whether, in light of the new proposed 

reporting requirements, it would be 

appropriate to add new provisions to 

§ 1003.6 to clarify compliance 

expectations and address compliance 

burdens or operational challenges. The 

Bureau is seeking feedback on whether 

a more precise definition of what 

constitutes an error would be helpful, 

whether there are ways to improve the 

current methods of calculating error 

rates, and whether tolerance levels for 

error rates would be appropriate. 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51819 

588Specifically, section 1022(b)(2)(A) of the 

Dodd-Frank Act calls for the Bureau to consider the 

potential benefits and costs of a regulation to 

consumers and covered persons, including the 

potential reduction of access by consumers to 

consumer financial products or services; the impact 

on depository institutions and credit unions with 

$10 billion or less in total assets as described in 

section 1026 of the Dodd-Frank Act; and the impact 

on consumers in rural areas. 

589These amendments, among other things, 

require financial institutions to itemize their HMDA 

data by: The age of mortgagors and mortgage 

applicants; points and fees payable at origination in 

connection with a mortgage; the difference between 

the annual percentage rate associated with a loan 

and a benchmark rate or rates for all loans; the term 

in months of any prepayment penalty or other fee 

or charge payable on repayment of some portion of 

principal or the entire principal in advance of 

scheduled payments; the value of the real property 

pledged or proposed to be pledged as collateral; the 

actual or proposed term in months of any 

introductory period after which the rates of interest 

may change; the presence of contractual terms or 

proposed contractual terms that would allow the 

mortgagor or applicant to make payments other 

than fully amortizing payments during any portion 

of the loan term; the actual or proposed term in 

months of the mortgage; the channel through which 

the mortgage application was made, including 

retail, broker, and other relevant categories; and the 

credit score of mortgage applicants and mortgagors. 

590These additional data include: The 

construction method for the dwelling related to the 

subject property; mandatory reporting of the 

reasons for denial of a loan application; the total 

origination charges associated with the loan; the 

total points paid to the lender to reduce the interest 

rate of the loan; the interest rate the borrower would 

have received if the borrower had not paid any bona 

fide discount points; the interest rate applicable to 

the covered loan at closing or account open; the 

applicant’s or borrower’s debt-to-income ratio; the 

ratio of the total amount of debt secured by the 

property to the value of the property; whether a 

manufactured home is legally classified as real 

property or as personal property; the land property 

interest for loans or applications related to 

manufactured housing; the total number of 

individual dwelling units contained in the dwelling 

related to the loan; the number of individual 

dwellings units that are income-restricted pursuant 

to Federal, State, or local affordable housing 

programs; information related to the automated 

underwriting system used in evaluating an 

application; whether the loan is a reverse mortgage, 

and whether the reverse mortgage is an open- or 

closed-end transaction; whether the loan is a homeequity line of credit; whether the loan is a qualified 

mortgage; and the amount of the draw on a homeequity line of credit and on an open-end reverse 

mortgage. 

VI. Section 1022(b)(2) of the DoddFrank Act 

The Bureau is considering the 

potential benefits, costs, and impacts of 

the proposed rule.588 The Bureau 

requests comment on the preliminary 

discussion presented below, as well as 

submissions of additional data that 

could inform the Bureau’s consideration 

of the benefits, costs, and impacts of the 

proposed rule. In developing the 

proposed rule, the Bureau has consulted 

with or offered to consult with the 

prudential regulators (the Board of 

Governors of the Federal Reserve 

System, the Federal Deposit Insurance 

Corporation, the National Credit Union 

Administration, and the Office of the 

Comptroller of the Currency), the 

Department of Justice, the Department 

of Housing and Urban Development, the 

Federal Housing Finance Agency, the 

Securities and Exchange Commission, 

and the Federal Trade Commission 

regarding, among other things, 

consistency with any prudential, 

market, or systemic objectives 

administered by such agencies. 

As discussed in greater detail 

elsewhere throughout this 

supplementary information, in this 

rulemaking, the Bureau is proposing to 

amend Regulation C, which implements 

HMDA, and the official commentary to 

the regulation, as part of the Bureau’s 

implementation of the Dodd-Frank Act 

amendments to HMDA regarding the 

reporting and disclosure of mortgage 

loan information. The proposed 

amendments to Regulation C implement 

section 1094 of the Dodd-Frank Act, 

which made certain amendments to 

HMDA.589

In addition, the proposal includes 

additional amendments to Regulation C 

to implement the Dodd-Frank Act’s 

provisions permitting reporting of, as 

the Bureau may determine to be 

appropriate, a unique identifier that 

identifies the loan originator, a 

universal loan identifier, and the parcel 

number that corresponds to the real 

property pledged or proposed to be 

pledged as collateral. The proposed rule 

would also require financial institutions 

to report additional information 

pursuant to authority under sections 

304(b)(5)(D) and 304(b)(6)(J) of HMDA, 

which permit the disclosure of such 

other information as the Bureau may 

require, and section 305(a) of HMDA, 

which, among other things, broadly 

authorizes the Bureau to prescribe such 

regulations as may be necessary to carry 

out HMDA’s purposes. Certain 

additional data points included in the 

proposed rule are not specifically 

identified by the Dodd-Frank Act 

amendments to HMDA.590

The proposed rule would also modify 

the regulation’s institutional and 

transactional coverage by, among other 

things, requiring financial institutions to 

report activity only for dwelling-secured 

loans, regardless of whether the loans 

are for home purchase, home 

improvement, or refinancing; adjusting 

the institutional coverage to adopt a 

uniform loan-volume threshold of 25 

loans applicable to all financial 

institutions; and requiring financial 

institutions to report data on 

applications and accounts opened for 

home-equity lines of credit. 

Furthermore, the Bureau is proposing 

to modify the frequency of reporting for 

certain financial institutions with large 

numbers of transactions, modify the 

requirements regarding the disclosure 

statement, and specify the form required 

for the loan application register 

information that HMDA reporters must 

make available to the public. Financial 

institutions that reported at least 75,000 

covered loans, applications, and 

purchased covered loans, combined, for 

the preceding calendar year, would be 

required to report data quarterly to the 

Bureau or to the appropriate Federal 

agency. Financial institutions would be 

permitted to make their disclosure 

statements available to the public by 

providing, upon request, a notice that 

clearly conveys that the disclosure 

statement may be obtained on the FFIEC 

Web site and that includes the Web site 

address. Under the proposed regulation, 

financial institutions would make 

available to the public a modified loan 

application register showing only the 

data fields that are currently released on 

the modified loan application register. 

The Bureau is also separately 

considering several operational 

improvements designed to reduce the 

burden associated with reporting HMDA 

data. The Bureau is considering 

restructuring the geocoding process, 

creating an improved web-based HMDA 

Data Entry Software (DES), and 

otherwise streamlining the submission 

and editing process to make it more 

efficient. The Bureau is also proposing 

to align the HMDA data requirements 

with the widely-used MISMO data 

standards for residential mortgages to 

the extent practicable. 

As discussed in greater detail 

elsewhere in this supplementary 

information, HMDA requires lenders 

located in metropolitan areas to report 

data about their housing-related lending 

activity. In 2010, Congress responded to 

the mortgage crisis with the Dodd-Frank 

Act, which enacted changes to HMDA 

and directed reforms to the mortgage 

market and the broader financial 

system. In addition to transferring 

rulemaking authority for HMDA from 

the Board to the Bureau, the Dodd-Frank 

Act directed the Bureau to implement 

changes requiring the collection and 

reporting of several new data points and 

such other information as the Bureau 

may require. In doing so, Congress 

sought to ensure that HMDA data 

continue to be useful for determining 

whether institutions are serving the 

housing needs of their communities, for 

identifying potentially discriminatory 

lending patterns, and for helping public 

officials target public investment to 


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51820 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

591Eric S. Belsky & Mark Duda, ‘‘Anatomy of the 

Low-Income Homeownership Boom in the 1990s,’’ 

in Low Income Homeownership: Examining the 

Unexamined Goal 15–63, Joint Center for Housing 

Studies of Harvard University Low-Income 

Homeownership Working Paper Series 01–1 (2001) 

(providing evidence that manufactured housing was 

an important driver of the homeownership boom for 

the low-income population in the 1990s). 

Manufactured housing is also an important source 

of housing for the elderly. See Robert W. Wilden, 

Comm’n on Affordable Housing and Health Facility 

Needs for Seniors in the 21st Century, 

Manufactured Housing and Its Impact on Seniors 

(2002). 

attract private investment where it is 

needed. 

A. Provisions To Be Analyzed 

The proposal contains both specific 

proposed provisions with regulatory or 

commentary language (proposed 

provisions) as well as requests for 

comment on modifications where 

regulatory or commentary language was 

not specifically included (additional 

proposed modifications). The 

discussion below considers the benefits, 

costs, and impacts of the following 

major proposed provisions and the 

additional proposed modifications: 

1. The scope of the institutional 

coverage of the proposed rule. 

2. The scope of the transactional 

coverage of the proposed rule. 

3. The data that financial institutions 

are required to report about each loan or 

application. 

4. The proposed modifications to 

disclosure and reporting requirements. 

With respect to each major proposed 

provision, the discussion considers the 

benefits, costs, and impacts to 

consumers and covered persons. The 

discussion also addresses certain 

alternative provisions that were 

considered by the Bureau in the 

development of the proposed rule. The 

Bureau requests comment on the 

consideration of the potential benefits, 

costs, and impacts of the proposed rule. 

B. Statement of Need 

1. HMDA’s Purposes and the Current 

Deficiencies in Regulation C 

Congress intended HMDA to provide 

the public and public officials with 

information to help determine whether 

financial institutions are serving the 

housing needs of their communities, to 

target public investment to attract 

private investment in communities, and 

to identify possible discriminatory 

lending patterns and enforce 

antidiscrimination statutes. Today, 

HMDA data are the preeminent data 

source for regulators, researchers, 

economists, industry, and advocates 

analyzing the mortgage market both for 

the three stated purposes of HMDA and 

for general market monitoring. For 

example, HMDA data are used by bank 

supervisors to evaluate depository 

institutions for purposes of the CRA; by 

local groups as the basis for discussions 

with lenders about local community 

needs; and by regulators, community 

groups, and researchers to identify 

disparities in mortgage lending that may 

provide evidence of prohibited 

discrimination. In addition, HMDA data 

provide a broadly representative, 

national picture of home lending that is 

unavailable from any other data source. 

This information permits users to 

monitor market conditions and trends, 

such as the supply and demand of 

applications and originations. For 

example, industry uses HMDA data to 

identify and meet the needs of 

underserved markets through 

potentially profitable lending and 

investment opportunities. 

HMDA data include records regarding 

applications by mortgage borrowers and 

records regarding the flow of funding 

from lenders to borrowers. Together, 

these records form a near-census of the 

home mortgage market for covered loans 

and applications, with rich geographical 

detail (down to census tract level) and 

identification of the specific financial 

institution for each transaction. 

Therefore, HMDA allows users to draw 

a detailed picture of the supply and 

demand of mortgage credit at various 

levels of geography and lender 

aggregation. 

Despite past improvements, however, 

serious inadequacies exist in the 

information currently collected under 

Regulation C. HMDA data can generally 

be used to calculate underwriting and 

pricing disparities across various 

protected classes in mortgage lending, at 

the national, market, and individuallender levels. Nevertheless, the data 

lack key fields that explain legitimate 

underwriting and pricing decisions for 

mortgage loans. Therefore, in most 

cases, HMDA data alone cannot 

demonstrate whether borrowers and 

applicants have received 

nondiscriminatory treatment by 

financial institutions. Additional 

proposed data points, such as credit 

score, AUS recommendations, CLTV, 

and DTI, would help users understand 

the reasons for approvals and denials of 

applications and for pricing decisions 

regarding originations. Similarly, 

current HMDA data provide certain 

information about borrowers (race, 

ethnicity, sex, income, and location) 

and loans (loan amount, purpose, loan 

type, occupancy, lien status, and 

property type). However, the current 

data points do not fully characterize the 

types of loans for which consumers are 

applying and do not explain why some 

applications are denied. The additional 

proposed data points, such as nonamortizing features, prepayment 

penalties, and loan terms, would help 

fill these important information gaps. 

Additionally, analysis of the cost of 

credit to mortgage borrowers is 

incomplete without the inclusion of key 

pricing information. The current rate 

spread reporting requirement requires 

financial institutions to report rate 

spread only for higher-priced mortgage 

loans. Currently, such loans comprise 

less than 5 percent of total originations. 

These limited data restrict analysis of 

the cost of credit to a small segment of 

total mortgage originations and create 

severe selection bias as changes in the 

market lead to shifts in the average 

spreads between APR values and APOR. 

Adding the proposed pricing data fields, 

such as discount points, risk-adjusted, 

pre-discounted interest rate, origination 

charges, interest rate, and total points 

and fees, will allow users to better 

understand the price that consumers 

pay for mortgages and more effectively 

analyze the tradeoffs between rates, 

points, and fees. 

HMDA also currently provides 

limited information about the property 

that secures or will secure the loan. 

Despite being one of the most important 

characteristics for underwriting and 

pricing decisions, the value of the 

property securing the loan has not been 

collected under the current HMDA 

reporting requirements. The proposed 

rule would address this deficiency by 

providing for reporting of the value of 

the property securing the covered loan 

or application. Current HMDA data also 

lack information about the 

manufactured housing segment of the 

mortgage market. Manufactured housing 

is an important source of housing for 

many borrowers, such as low-income 

and elderly borrowers, that are often 

financially fragile and possibly more 

vulnerable to unfair and predatory 

practices.591 Multifamily financing for 

both institutional and individual 

borrowers serves the housing needs of 

multifamily unit dwellers who are 

mostly renters and many of whom face 

challenges related to housing 

affordability. The Bureau’s proposal 

would provide for reporting of the 

construction method, number of 

multifamily affordable units, 

manufactured housing security type, 

and property interest. The improved 

data would help community groups, 

government agencies, researchers, 

members of the public, and industry to 

better understand the properties for 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51821 

592Michael LaCour-Little, Wei Yu, and Libo Sun, 

The Role of Home Equity Lending in the Recent 

Mortgage Crisis, 42 Real Estate Economics 153 

(2014). 

593Although limited transactions and institutions 

are excluded from HMDA, these are also typically 

excluded from commercial datasets. 

which borrowers are receiving or being 

denied credit. 

Finally, the transactional coverage 

criteria omit a large proportion of 

dwelling-secured loan products, such as 

home-equity lines of credit. In the leadup to the financial crisis between 2000 

and 2008, the total balance of closedand open-end home-equity loans 

increased by approximately 16.8 percent 

annually, growing from a total of $275.5 

billion to $953.5 billion. Recent research 

has shown that this growth in homeequity lending was correlated with 

subsequent home price depreciation, as 

well as high default and foreclosure 

rates among first mortgages.592 These 

correlations were driven in part by 

consumers using home-equity lines of 

credit to fund investment properties, 

which impacted default rates when 

housing prices began to fall. By 

identifying home-equity lines of credit 

and loan purposes, industry, members 

of the public, and public officials will 

be better able to identify and respond to 

similar patterns in the future. 

Congress recognized the current 

deficiencies in HMDA, and responded 

with the Dodd-Frank Act, which 

amended HMDA and provided broader 

reforms to the financial system. The 

Dodd-Frank Act’s amendments to 

HMDA require the collection and 

reporting of several new data points, 

including information about borrowers 

(age and credit score), information about 

loan features and pricing, and, as the 

Bureau may determine to be 

appropriate, unique identifiers for loans, 

properties, and loan originators. It also 

authorizes the Bureau to require 

financial institutions to collect and 

report ‘‘such other information as the 

Bureau may require.’’ 

2. Improving HMDA Data To Address 

Market Failures 

HMDA does not regulate the 

interactions between lenders and 

borrowers. Instead, HMDA requires 

financial institutions to report detailed 

information to their Federal supervisory 

agencies and to the public about 

mortgage applications and originations 

at the transaction level. Such 

information provides an important 

public good that illuminates the lending 

activities of financial institutions and 

the mortgage market in general. This 

increased transparency allows members 

of the public, community groups, and 

public officials to better assess 

compliance with various Federal laws 

and regulations. In doing so, HMDA 

data help correct the potential market 

failures that those laws and regulations 

were designed to address. 

From the perspective of economics, 

the proposed improvements to HMDA 

would address two market failures: (1) 

The under-production of public 

mortgage data by the private sector, and 

(2) the information asymmetries present 

in credit markets. 

First, HMDA data is a public good in 

that it is both non-rival, meaning that it 

may be used without reducing the 

amount available for others, and nonexcludable, meaning that it cannot be 

withheld from consumers who do not 

pay for it. As with other public goods, 

standard microeconomic principles 

dictate that public mortgage data would 

be under-produced by the private sector, 

creating an outcome that is not socially 

optimal. Not surprisingly, no privately 

produced loan-level mortgage databases 

with comprehensive national coverage 

exist that are easily accessible by the 

public. Private data vendors offer a few 

large databases for sale that typically 

contain data collected from either the 

largest servicers or securitizers. 

However, none of these databases match 

the near-universal coverage of the 

HMDA data.593 Furthermore, 

commercial datasets come at high cost 

to subscribers, creating a substantial 

hurdle for community groups, 

government agencies, and researchers 

that wish to obtain access. Importantly, 

these commercially available datasets 

typically do not identify individual 

lenders and therefore cannot be used to 

study whether specific lenders are 

meeting community needs or making 

nondiscriminatory credit decisions. In 

addition, all privately produced, 

commercially available mortgage 

databases cover only originated loans 

and exclude applications that do not 

result in originations. A crucial feature 

of the HMDA data is that they include 

information about applications in 

addition to originations. In other words, 

in economic terms, private mortgage 

databases only provide information 

about the market outcome resulting 

from the intersection of supply and 

demand, while HMDA data provide 

information about both the market 

outcome and the demand for credit. 

Thus, users can examine both supply 

and demand regarding mortgage credit 

and understand the reasons for 

discrepancies between supply and 

demand at various levels of analysis, 

including by lender, geographic region, 

type of product or feature, credit risk, 

income, and race or ethnicity. 

Second, it is well-accepted that credit 

markets are characterized by 

information asymmetries. Mortgage 

products and transactions are highly 

complex, and lenders have a significant 

information advantage. Such 

information asymmetry affects price and 

quantity allocations and can contribute 

to types of lender behavior, such as 

discrimination or predatory lending, 

that conflict with the best interests of 

consumers. In addition to 

disadvantaging individual consumers, 

information failure may also lead to 

herding behavior by both lenders and 

consumers, creating substantial 

systemic risk to the mortgage market 

and the nation’s overall financial 

system. The recent mortgage crisis 

provides a vivid demonstration of such 

a threat to the overall safety and 

stability of the housing market. 

These market failures are intertwined. 

Following the financial crisis, the 

Bureau and other government regulators 

have attempted to directly address 

misallocation, enhance consumer 

protection, and stem systemic risk in the 

mortgage market through rules that 

regulate the business practices of 

financial institutions. In contrast, the 

proposed rule provides another 

approach to solving failures in the 

mortgage market: Correcting the 

informational market failure. Increased 

mortgage data would provide greater 

transparency about the mortgage market, 

weakening the information advantage 

that lenders possess relative to 

borrowers, community groups, and 

public officials. Greater information 

enables these groups to advocate that 

financial institutions adopt fairer 

practices and increases the prospect that 

self-correction by financial institutions 

would be rewarded. Additional 

information would also help reduce the 

herding behavior of both lenders and 

borrowers, reducing the systemic risk 

that has been so detrimental to the 

nation. Mandatory sharing of 

information may lead to more efficient 

outcomes. Thus, as a public good that 

reduces information asymmetry in the 

mortgage market, HMDA data are 

irreplaceable. 

Finally, the proposed rule would meet 

the compelling public need for 

improved efficiency in government 

operations. The new data would allow 

the government to more effectively 

assess compliance by financial 

institutions with the Equal Credit 

Opportunity Act and the Fair Housing 

Act. The new data will also help 

regulatory agencies assess the 

performance of certain financial 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS2
51822 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

594Public Law 111–203, section 1094(3)(F). 

595See U.S. Consumer Fin. Prot. Bureau, Small 

Business Review Panel for Home Mortgage 

Disclosure Act Rulemaking: Outline of Proposals 

Under Consideration and Alternative Considered 

(Feb. 7, 2014) (Outline of Proposals), available at 

http://files.consumerfinance.gov/f/201402_cfpb_

hmda_outline-of-proposals.pdf. 596NMLSR is a national registry of nondepository financial institutions, including 

mortgage loan originators. 

institutions under the Community 

Reinvestment Act. Improved HMDA 

data would also provide valuable 

information that supports future market 

analyses and optimal policy-making. 

C. Baseline for Consideration of Costs 

and Benefits 

The Bureau has discretion in any 

rulemaking to choose an appropriate 

scope of consideration with respect to 

potential benefits and costs and an 

appropriate baseline. The Bureau does 

not believe the amendments to HMDA 

in section 1094 of the Dodd-Frank Act 

would take effect automatically without 

implementing rules. Financial 

institutions are not required to report 

additional data required by section 

304(b)(5) and (6) of HMDA, as amended, 

‘‘before the first January 1 that occurs 

after the end of the 9-month period 

beginning on the date on which 

regulations are issued by the Bureau in 

final form with respect to such 

disclosures.’’ 594 Furthermore, financial 

institutions are unable to comply with 

the obligation to report data regarding 

the age of mortgagors and mortgage 

applicants, which is required pursuant 

to section 304(b)(4) of HMDA, until the 

Bureau provides the necessary guidance 

on the manner of such reporting, 

including modification of the loan 

application register to accommodate the 

reporting of age data. Therefore, the 

Bureau believes that the requirements to 

report all of the new data elements 

under HMDA section 304(b)(4)–(6) 

cannot be effective until the Bureau 

completes a rulemaking with respect to 

the reporting of such data. Accordingly, 

this analysis considers the benefits, 

costs, and impacts of the major 

provisions of the proposed rule against 

a pre-Dodd-Frank Act baseline, i.e., the 

current state of the world before the 

provisions of the Dodd-Frank Act that 

amended HMDA are implemented by an 

amended Regulation C. The Bureau 

believes that such a baseline will also 

provide the public with better 

information about the benefits and costs 

of the statutory amendments to HMDA. 

D. Coverage of the Proposed Rule 

Each proposed provision applies to 

certain financial institutions, and 

requires these financial institutions to 

report and disclose data regarding 

covered loans secured by a dwelling 

that they originate or purchase, or for 

which they receive applications, as 

described further in each section below. 

E. Basic Approach of the Bureau’s 

Consideration of Benefits and Costs and 

Data Limitations 

This discussion relies on data that the 

Bureau has obtained from industry, 

other regulatory agencies, and publicly 

available sources. However, as 

discussed further below, the data limit 

the Bureau’s ability to quantify the 

potential costs, benefits, and impacts of 

the proposed rule. 

1. Costs to Covered Persons 

Regarding the costs to covered 

persons, the proposed rule generally 

establishes which financial institutions, 

transactions, and data points are 

covered under HMDA’s reporting 

requirements. In order to precisely 

quantify the costs to covered persons, 

the Bureau would need, for both current 

and potential HMDA reporters, 

representative data on the operational 

costs that financial institutions incur to 

gather and report HMDA data, one-time 

costs for financial institutions to update 

reporting infrastructure in response to 

the proposed rule, and information on 

the level of complexity of financial 

institutions’ business models and 

compliance systems. Currently, the 

Bureau does not believe that data on 

HMDA reporting costs with this level of 

granularity is systematically available 

from any source. The Bureau has made 

reasonable efforts to gather data on 

HMDA reporting costs. Through 

outreach efforts with industry, 

community groups, and other regulatory 

agencies, the Bureau has obtained some 

information about ongoing operational 

and one-time compliance costs, and the 

discussion below uses this information 

to quantify certain costs of the proposed 

rule. The Bureau believes that the 

discussion constitutes the most 

comprehensive assessment to date of the 

costs of HMDA reporting by financial 

institutions. However, the Bureau 

recognizes that these calculations may 

not fully quantify the costs to covered 

persons, especially given the wide 

variation of HMDA reporting costs 

among financial institutions. The 

Bureau continues to seek data from 

available sources in order to better 

quantify the costs to covered persons. 

More specifically, in considering the 

benefits, costs, and impacts of the 

proposed rule, the Bureau has engaged 

in a series of efforts to estimate the cost 

of compliance by covered entities. First, 

the Bureau attempted to understand and 

estimate the current cost of reporting for 

financial institutions, i.e. the baseline 

cost at the institution level. Second, the 

Bureau evaluated the change in 

financial institutions’ operational and 

one-time costs in response to the 

proposed changes. Part VI.F, below, 

provides details on the Bureau’s 

approach in performing these 

institution-level analyses. The Bureau 

realizes that costs vary by institution 

due to many factors, such as size, 

operational structure, and product 

complexity, and that this variance exists 

on a continuum that is impossible to 

fully represent. In order to conduct a 

cost consideration that is both practical 

and meaningful, the Bureau has chosen 

an approach that focuses on three 

representative tiers of financial 

institutions. For each tier, the Bureau 

has produced a reasonable estimate of 

the cost of compliance given the 

limitations of the available data. Part 

VI.F.2, below, provides additional 

details on this approach. More 

elaboration is available in the Small 

Business Review Panel Outline of 

Proposals and the Small Business 

Review Panel Report.595

The third stage of the Bureau’s 

consideration of costs involved 

projecting and mapping the total 

number of potentially impacted 

financial institutions to the three tiers 

described above. The Bureau used a 

wide range of data in conducting this 

task, including current HMDA data, call 

reports, and NMLSR data.596 The 

Bureau faced substantial challenges in 

completing this task, because no single 

data source provided complete coverage 

of all the financial institutions that 

could be impacted, and the data quality 

of some sources was less than perfect. 

For example, estimating the number of 

HMDA reporters that would be 

eliminated under the proposed rule was 

relatively easier than estimating the 

number of HMDA reporters that would 

be added. Similarly, the Bureau faced 

certain challenges in mapping the 

financial institutions to the three 

representative tiers. Where the Bureau is 

uncertain about the aggregate impacts, it 

has provided certain range estimates. 

2. Costs to Consumers 

Having generated estimates of the cost 

impact on covered financial institutions, 

the Bureau attempted to estimate the 

costs to consumers. According to 

economic theory, in a perfectly 

competitive market where financial 

institutions are profit maximizers, the 


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affected financial institutions would 

pass on to consumers the marginal, i.e. 

variable, cost per application or 

origination, and absorb the one-time and 

increased fixed costs of complying with 

the rule. The Bureau received feedback 

through the Small Business Review 

Panel process that, if the market 

permitted, some small entities would 

attempt to pass on to consumers the 

entire amount of the increased cost of 

compliance and not just the increase in 

variable costs. Because the 

competiveness, supply-demand 

conditions, and impact of market 

failures may vary across different 

markets, the Bureau seeks additional 

comment on the costs to consumers. 

3. Benefits to Consumers and Covered 

Persons 

Quantifying benefits to consumers 

also presented substantial challenges. 

As discussed above, Congress intended 

for HMDA, including the Dodd-Frank 

Act amendments to the Act and the 

Bureau’s rules implementing HMDA, to 

achieve compelling social benefits. The 

Bureau is unable to readily quantify 

some of these benefits with precision, 

both because the Bureau does not have 

the data to quantify all benefits and 

because the Bureau is not able to assess 

completely how effective the DoddFrank amendments to HMDA will be in 

achieving those benefits. As explained 

elsewhere in this supplementary 

information, the Bureau believes that its 

proposals appropriately implement the 

statutory amendments and are necessary 

and proper to effectuate HMDA’s 

purposes. As discussed further below, 

as a data reporting rule, most provisions 

of the proposal would benefit 

consumers in indirect ways. 

Nevertheless, the Bureau believes that 

the impact of enhanced transparency 

would substantially benefit consumers. 

For example, the proposed rule would 

facilitate the detection and remediation 

of discrimination; promote public and 

private investment in certain underserved markets, potentially increasing 

access to mortgage credit; and promote 

more stable and competitive markets. 

Quantifying and monetizing these 

benefits would require identifying all 

possible uses of HMDA data, 

establishing causal links to the resulting 

public benefits, and then quantifying 

the magnitude of these benefits. The 

Bureau continues to seek data from 

available sources regarding the benefits 

to consumers of the proposed rule. The 

Bureau is particularly interested in the 

quantifiable impact of increased 

transparency on financial institution 

behavior, the need for public and 

private investment, the housing needs of 

communities, the number of lenders 

potentially engaging in discriminatory 

or predatory behavior, and the number 

of consumers currently being unfairly 

disadvantaged and the level of 

quantifiable damage from such 

disadvantage. The Bureau is unaware of 

data that would enable reliable 

quantitative estimates of all of these 

effects. 

Similar issues arise in attempting to 

quantify the benefits to covered persons. 

Certain benefits to covered persons are 

difficult to quantify. For example, the 

Bureau believes that the enhanced 

HMDA data will facilitate improved 

monitoring of the mortgage market in 

order to prevent major disruptions to 

the financial system, which in turn 

would benefit financial institutions over 

the long run. But such effects are hard 

to quantify because they are largely 

related to future events that the 

proposed changes themselves are 

designed to prevent from happening. 

Similarly, the Bureau believes that the 

enhanced HMDA data will provide a 

better analytical basis for financial 

regulators and community groups to 

screen and monitor lenders for possible 

discrimination. Because of limitations 

in the current HMDA data fields, high 

false positive rates have been widely 

cited by financial institutions in various 

HMDA-related fair lending exams, 

complaints, and lawsuits. The proposed 

changes would greatly reduce the rate of 

false positives and therefore reduce the 

associated compliance burden on 

financial institutions. The Bureau 

believes that such benefits to financial 

institutions could be substantial. 

Nevertheless, quantifying them would 

require data that are currently 

unavailable. 

In light of these data limitations, the 

discussion below generally provides a 

qualitative consideration of the benefits, 

costs, and impacts of the proposed rule. 

General economic principles, together 

with the limited data available, provide 

insight into these benefits, costs, and 

impacts. Where possible, the Bureau has 

made quantitative estimates based on 

these principles and the data that are 

available. The Bureau seeks comment 

on the appropriateness of the approach 

described above, including additional 

data relevant to the benefits and costs to 

consumers and covered persons. 

F. Potential Benefits and Costs to 

Consumers and Covered Persons 

1. Overall Summary 

In this section, the Bureau presents a 

concise, high-level overview of the 

benefits and costs considered in the 

remainder of the discussion. This 

overview is not intended to capture all 

details and nuances that are provided 

both in the rest of the analysis and in 

the section-by-section discussion above, 

but rather to provide an overview of the 

major benefits and costs of the proposed 

rule. 

Major benefits of the rule. The 

proposed rule has a number of major 

benefits. First, the proposed changes 

will improve the usefulness of HMDA 

data in identifying possible 

discriminatory lending patterns and 

enforcing antidiscrimination statutes. 

By covering additional transactions, 

including mandatory reporting of openend lines of credit, home-equity loans, 

reverse mortgages, and preapproval 

requests that were approved, but not 

accepted, and by requiring reporting by 

additional nondepository institutions, 

the proposal expands the scope of the 

market that community groups and 

government agencies can include in fair 

lending analyses. The addition of 

pricing data fields such as interest rate, 

discount points, and origination charges 

improves understanding of disparities 

in pricing outcomes beyond that 

permitted by the current rate spread 

data field. The addition of data fields 

such as CLTV, credit score, DTI, and 

AUS recommendations allow for a more 

refined analysis and understanding of 

disparities in both underwriting and 

pricing outcomes. Overall, the proposed 

changes make fair lending analyses 

more comprehensive and accurate. This 

is especially important for the 

prioritization and peer analysis or 

redlining reviews that regulatory 

agencies conduct for fair lending 

supervision and enforcement purposes 

because a consistent and clean dataset 

will be available for all financial 

institutions. 

Second, the proposal will help 

determine whether financial institutions 

are serving the housing needs of their 

communities and help public officials 

target public investment to better attract 

private investment, two of HMDA’s 

stated purposes. The proposed 

expansions of institutional and 

transactional coverage would provide 

additional data helpful to both industry 

and government in identifying 

profitable lending and investment 

opportunities in underserved 

communities. Similarly, the proposed 

data points related to multifamily 

dwellings and manufactured housing 

would reveal more information about 

these segments of the market. Borrowers 

who seek financing for manufactured 

housing are typically more financially 

vulnerable than borrowers financing 

site-built homes, and may deserve closer 

attention from government agencies and 


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597 During the Small Business Review Panel 

Meetings, most small entity representatives selfidentified as tier 3 and tier 2 institutions. There 

were a few non-depository institutions with large 

mortgage loan volume that self-identify as tier 1 

institutions. 

598These estimates come from an annual survey 

conducted by the Mortgage Bankers Association 

and the STRATMORE group as part of the Peer 

Group Program and are available at http://

www.mba.org/ResearchandForecasts/Productsand

Surveys/MBASTRATMORPeerGroupSurveyand

Roundtables.htm. 

599The Bureau notes that these net income 

estimates were reported by the Mortgage Bankers 

Association and the STRATMORE group on perorigination basis. The Bureau estimates the HMDA 

operational cost per application, not per 

origination. 

600The market-level estimates provide lower and 

upper bounds of the impact of the proposed rule 

on the market as a whole. To convey differences in 

impacts across the three representative tiers, we 

present institution-level estimates for each tier and 

do not aggregate up to market-level estimates for 

each tier. The institution-level estimates for each 

tier provide more useful and accurate estimates of 

differences in impacts across the three 

representative financial institutions, because they 

do not require the additional assumptions used to 

map HMDA reporters into tiers. 

community groups. Although financing 

involving multifamily dwellings 

reported under HMDA is typically 

offered to institutional borrowers, the 

ultimate constituents these loans serve 

are mostly low- to mid-income renters 

who live in these financed units. 

Advocacy groups and government 

agencies have raised concerns over 

affordability issues faced by individuals 

living in multifamily dwellings, who 

also tend to be more financially 

vulnerable than individuals living in 

single-family dwellings. Overall, by 

permitting a better and more 

comprehensive understanding of these 

markets, the proposal will improve the 

usefulness of HMDA data for assessing 

the supply and demand of credit, and 

financial institutions’ treatment of 

applicants and borrowers, in these 

communities. 

Third, the proposed changes would 

assist in earlier identification of trends 

in the mortgage market including the 

cyclical loosening and tightening of 

credit. Mandatory reporting of 

additional transactions, such as openend lines of credit, home-equity loans, 

and reverse mortgages, as well as 

additional data fields, such as 

amortization type, prepayment penalty, 

and occupancy type, would improve 

understanding of the types of products 

and product characteristics received by 

consumers. Recent research has 

indicated that certain product types and 

characteristics may have increased the 

likelihood of default and exacerbated 

declines in housing prices during the 

recent financial crisis. In addition to 

being able to better identify some of the 

risk factors that played a role in the 

recent financial crisis, the additional 

transactions and data points would 

improve current research efforts to 

understand mortgage markets. This 

research may identify new risk factors 

that might increase systemic risk to the 

overall economy. Better understanding 

of these risk factors could provide early 

warning signals to the government of 

worrisome market trends. 

Fourth, the proposed changes will 

improve the effectiveness of policymaking efforts. In response to the recent 

financial crisis, the government has 

generated a number of rules and 

implemented a wide array of public 

policy measures to address market 

failures and protect consumers. The 

additional data being proposed, as well 

as the proposed coverage and 

transaction changes, will allow for more 

informed decisions by policy makers 

and improve the consideration of 

benefits, costs, and impacts for future 

policy efforts, resulting in more effective 

policy. 

Quantifying these benefits is difficult 

because the size of each particular effect 

cannot be known in advance. Given the 

number of mortgage transactions and 

the size of the mortgage market, 

however, small changes in behavior can 

have substantial aggregate effects. The 

Bureau seeks comments and suggestions 

on whether such effects can be reliably 

estimated and possible ways of doing 

so. 

Major costs of the rule. The proposed 

rule will increase ongoing operational 

costs and impose one-time costs on 

financial institutions. Financial 

institutions conduct a variety of 

operational tasks to collect the 

necessary data points, prepare the data 

for submission, conduct compliance and 

audit checks, and prepare for HMDArelated exams. These operational costs 

are driven primarily by the time spent 

on each task and the wage of the 

relevant employee. The Bureau 

estimates that current annual 

operational costs of reporting under 

HMDA are approximately $2,200 for a 

representative low-complexity financial 

institution with a loan application 

register size of 50 records; $32,000 for 

a representative moderate-complexity 

financial institution with a loan 

application register size of 1,000 

records; and $267,000 for a 

representative high-complexity financial 

institution with loan application register 

size of 50,000 records. This translates 

into an estimated per-application cost of 

approximately $45, $30, and $5 for 

representative low-, moderate- and highcomplexity financial institutions, 

respectively. These operational cost 

estimates were shared with small entity 

representatives during the Small 

Business Review Panel meeting and 

their general accuracy was confirmed by 

most of the small entity 

representatives.597 Using recent survey 

estimates of net income from the 

Mortgage Bankers Association 598 as a 

frame of reference for these ongoing, 

operational costs, the average net 

income per origination is approximately 

$2,900 for small/mid-size banks, $3,900 

for medium banks, and $2,100 for large 

banks; and approximately $2,300 for 

small/mid-size independent mortgage 

companies, $3,000 for medium 

independent mortgage companies, and 

$1,900 for large independent mortgage 

companies.599

The proposed rule will affect the 

operational tasks associated with 

collecting and reporting HMDA data. 

More time will be required for tasks 

such as transcribing and checking data, 

and more resources will need to be 

devoted to tasks such as internal and 

external audits. The Bureau estimates 

that, absent the mitigation efforts 

discussed below, the addition to 

ongoing, operational costs borne by 

covered persons would be 

approximately $1,600 for a 

representative low-complexity financial 

institution; $10,300 for a representative 

moderate-complexity financial 

institution; and $27,000 for a 

representative high-complexity financial 

institution, per year. For the estimated 

28 financial institutions that reported at 

least 75,000 transactions in the 

preceding year and would be required to 

report HMDA data quarterly, the 

addition to ongoing, operational costs 

would be approximately $54,000 per 

year. This would translate into a marketlevel impact of approximately 

$18,400,000 to $59,000,000 per year. 

Using a 7 percent discount rate, the net 

present value of this impact over five 

years across the entire market would be 

an increase in costs of $75,600,000 to 

$242,000,000.600

With operational improvements the 

Bureau is considering, the net cost 

increase from the proposal would be 

smaller than the above estimates. The 

Bureau’s initial outreach efforts, as well 

as information gathered during the 

Small Business Review Panel process, 

indicated that reportability questions, 

regulatory clarity, geocoding, and 

submission processes and edits were 

significant concerns to financial 

institutions. Along with modifying the 

reporting requirements, the Bureau is 

separately considering operational 

enhancements and modifications to 

address these concerns. For example, 


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601The Bureau realizes that the impact to onetime costs varies by institution due to many factors, 

such as size, operational structure, and product 

complexity, and that this variance exists on a 

continuum that is impossible to fully capture. As 

a result, the one-time cost estimates will be high for 

some financial institutions, and low for others. 

the Bureau is considering working to 

consolidate the outlets for assistance, 

providing guidance support similar to 

the guidance provided for Title XIV 

rules; improving points of contact 

processes for help inquiries; modifying 

the types of edits and when edits are 

approved; exploring opportunities to 

improve the current DES; and 

considering approaches to reduce 

geocoding burdens. All of these 

enhancements would improve the 

submission and processing of data, 

increase clarity, and reduce reporting 

burden. With the inclusion of these 

operational improvements, the net 

impact of the proposed rule on ongoing 

operational costs would be 

approximately $1,000, $2,100, and 

$12,600 per year, for representative 

low-, moderate-, and high-complexity 

financial institutions, respectively. For 

the estimated 28 financial institutions 

that reported at least 75,000 transactions 

in the preceding calendar year would be 

required to report HMDA data quarterly, 

the addition to ongoing operational 

costs would be approximately $31,300 

per year. This would translate into a 

market-level net cost increase of 

$10,200,000 to $14,900,000 per year. 

Using a 7 percent discount rate, the net 

present value of this impact over five 

years would be a cost of $41,900,000 to 

$61,200,000. 

In addition to impacting ongoing, 

operational costs, the proposed rule 

would impose one-time costs necessary 

to modify processes in response to the 

proposal. These one-time costs are 

driven primarily by updating software 

systems, training staff, updating 

compliance procedures and manuals, 

and overall planning and preparation 

time. The Bureau estimates that these 

one-time costs would be approximately 

$3,000 for low-complexity financial 

institutions, $250,000 for moderatecomplexity financial institutions, and 

$800,000 for high-complexity financial 

institutions. 

These estimates exclude the impact of 

expanding transactional coverage to 

include open-end lines of credit, homeequity loans, and reverse mortgages.601

As discussed in more detail below, 

outreach efforts indicated that many 

financial institutions, especially larger 

and more complex institutions, process 

home-equity products in the consumer 

business line using separate procedures, 

policies, and data systems. As a result, 

there would be one-time costs to modify 

processes and systems for home-equity 

products and one-time costs to modify 

processes and systems for other 

mortgage products. The Bureau 

recognizes that the one-time cost from 

reporting dwelling-secured home-equity 

products could be substantial for many 

financial institutions but so far lacks the 

data necessary to accurately quantify it. 

For this discussion, the Bureau assumes 

that the one-time cost of integrating 

home-equity products into HMDA 

reporting processes would be roughly 

equal to 50 percent of the one-time costs 

absent mandatory reporting of such 

products. This estimate accounts for the 

fact that compliance with the reporting 

requirements for these lines of business 

would require some new systems, extra 

start-up training, and new compliance 

procedures and manuals, but that some 

fixed, one-time costs could be shared 

with lines of business currently subject 

to Regulation C because both have to 

undergo systemic changes. For highand moderate-complexity financial 

institutions, the Bureau therefore 

estimates one-time costs to adapt to 

mandatory reporting of open-end lines 

of credit, home-equity loans, and 

reverse mortgages to be $400,000 and 

$125,000, respectively. For lowcomplexity financial institutions, the 

one-time cost associated with 

mandatory reporting of dwellingsecured home-equity products is 

relatively low because these institutions 

are less reliant on information 

technology systems for HMDA 

reporting, and home-equity products are 

often processed on the same system and 

in the same business unit as mortgage 

products. Therefore, for tier 3 financial 

institutions, the Bureau estimates that 

the additional one-time cost created by 

the proposed changes to transactional 

coverage is minimal and is derived 

mostly from new training and 

procedures adopted for the proposed 

changes. 

The specific estimates of one-time 

costs are based on the Bureau’s outreach 

efforts. Specifically, for low-complexity 

financial institutions, these outreach 

efforts indicated that the cost to update 

information technology systems would 

be minimal, because the processes 

involved in reporting are highly manual. 

The estimate of one-time training cost is 

based on estimated ongoing training 

costs of $300 per year for staff directly 

responsible for data reporting. In 

response to the proposed rule, 

additional staff will require one-time 

training, but the intensity of this 

training will be lower than ongoing 

training. To capture this additional, 

less-intensive training, the Bureau used 

five times the annual training cost as the 

estimated one-time training cost 

($1,500). Training costs provide the 

best-available proxy for the one-time 

cost to update compliance procedures 

and manuals, so the Bureau used $1,500 

as an estimate of these costs as well. 

Therefore, the total one-time cost 

estimate for lower-complexity financial 

institutions is approximately $3,000 

(=0+1,500+1,500). This estimate varies 

little with or without the inclusion of 

mandatory reporting of dwellingsecured home-equity products. 

For moderate-complexity financial 

institutions, outreach efforts indicated 

that representative costs to update 

information technology would be 

approximately $225,000. This estimate 

excludes the impact of expanding 

transactional coverage to include 

dwelling-secured home-equity products. 

The estimate of one-time training cost is 

based on the estimate of ongoing 

training costs of $2,500 per year. Again, 

the Bureau used five times the annual 

training cost as the estimated one-time 

training cost ($12,500). Training costs 

provide the best-available proxy for the 

one-time cost to update compliance 

procedures and manuals, so the Bureau 

used $12,500 as an estimate of these 

costs as well. The one-time cost estimate 

for a representative moderatecomplexity financial institution is 

therefore approximately $250,000 

(=225,000+12,500+12,500), excluding 

the costs of mandatory reporting of 

dwelling-secured home-equity products. 

By including the 50 percent multiplier 

discussed above, the Bureau assumes 

that the one-time cost of mandatory 

reporting of dwelling-secured homeequity products is $125,000. Therefore, 

for a representative moderatecomplexity financial institution, the 

one-time cost estimate including 

mandatory reporting of dwellingsecured home-equity products is 

$375,000. 

For high-complexity financial 

institutions, outreach efforts indicated 

that representative costs to update 

information technology would be 

approximately $500,000. This estimate 

excludes the impact of expanding 

transactional coverage to include 

dwelling-secured home-equity products. 

The estimate of one-time training costs 

is based on the estimate of ongoing 

training costs of $30,000 per year. 

Again, the Bureau used five times the 

annual training cost as the estimated 

one-time training cost ($150,000). 

Training costs provide the best available 

proxy for the one-time cost to update 

compliance procedures and manuals, so 

the Bureau used $150,000 as an estimate 


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51826 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

602The Bureau estimated the total non-interest 

expense for banks, thrifts and credit unions that 

reported under HMDA based on Call Report and 

NCUA Call Report data for depository institutions 

and credit unions, and NMLS data for nondepository insitutions, all matched with 2012 

HMDA reporters. 

603For a discussion of this methodology in the 

analysis of the costs of regulatory compliance, see 

Gregory Elliehausen, The Cost of Bank Regulation: 

A Review of the Evidence, Bd. of Governors of the 

Fed. Reserve Sys. Working Paper Series 171 (1998). 

In addition, the Bureau recently conducted a 

Compliance Cost Study as an independent analysis 

of the costs of regulatory compliance. See U.S. 

Consumer Fin. Prot. Bureau, Understanding the 

Effects of Certain Deposit Regulations on Financial 

Institution’s Operations: Findings on Relative Costs 

for Systems, Personnel, and Processes at Seven 

Institutions, (2013), available at http://

files.consumerfinance.gov/f/201311_cfpb_report_

findings-relative-costs.pdf. 

604The financial institutions interviewed were 

selected to provide variation in key characteristics 

like institution type (bank, credit union, 

independent mortgage bank), regulator, record 

count, submission mechanism, number of 

resubmissions, and other designations like 

multifamily lender or rural. However the Bureau 

recognizes that this does not constitute a random 

survey of financial intuitions and the sample size 

might not be large enough to capture all variations 

among financial institutions. Therefore the Bureau 

interprets the findings cautiously. 

605 Internet resources included, among others, 

sites such as Jstor.org, which provides information 

on published research articles; FFIEC.gov, which 

provides information about HMDA, CRA, and the 

financial industry in general; university Web sites, 

which provide information on current research 

related to mortgages, HMDA and the financial 

industry; community group Web sites, which 

provide the perspective of community groups; and 

trade group Web sites which provide the 

perspective of industry. 

of these costs as well. The one-time cost 

estimate for a representative highcomplexity financial institution is 

therefore approximately $800,000 

(=500,000+150,000+150,000). By 

including the 50 percent multiplier 

discussed above, the Bureau assumes 

that the one-time cost of mandatory 

reporting of dwelling-secured homeequity products is $400,000. Therefore, 

for a representative high-complexity 

financial institution, the one-time cost 

estimate including mandatory reporting 

of dwelling-secured home-equity 

products is $1,200,000. 

The Bureau estimates an overall 

market impact on one-time costs of 

between $383,000,000 and 

$2,100,000,000. As a frame of reference 

for all of these market-level, one-time 

cost estimates, the total non-interest 

expenses for current HMDA reporters 

were approximately $420 billion in 

2012. The upper-bound estimate of $2.1 

billion is approximately 0.5 percent of 

the total annual non-interest 

expenses.602 Because these costs are 

one-time investments, financial 

institutions are expected to amortize 

these costs over a period of years. In this 

analysis the Bureau amortizes all costs 

over five years, using a simple straightline amortization. Using a 7 percent 

discount rate and a five-year window, 

the annualized additional one-time cost 

is $93,400,000 to $514,900,000. 

The Bureau has taken a conservative 

approach to estimating the one-time 

costs because of the uncertainty 

regarding how many financial 

institutions belong to each of the three 

representative tiers. Thus the Bureau 

has mapped out all possible 

distributions to arrive at the lower 

bound and higher bound cost estimates, 

as explained in part VI.F.2, below. The 

Bureau hopes to obtain more 

information on the distribution of 

financial institutions across the three 

tiers and to refine its estimate of these 

one-time costs through feedback 

received during the rulemaking process. 

In particular, the Bureau seeks 

additional information on the number of 

HMDA reporters that are moderate 

complexity, tier 2 institutions. 

2. Methodology for Generating Cost 

Estimates 

In connection with the development 

of the proposed rule, the Bureau 

reviewed the current HMDA compliance 

systems and activities of financial 

institutions. The review used a costaccounting, case-study methodology 

consisting, in part, of interviews with 20 

financial institutions of various sizes, 

nine vendors, and 15 governmental 

agency representatives.603 These 

interviews provided the Bureau with 

detailed information about current 

HMDA compliance processes and 

costs.604 This information showed how 

financial institutions gather and report 

HMDA data and provided the 

foundation for the approach the Bureau 

took to consider the benefits, costs and 

impacts of the proposed rule. The 

Bureau augmented this information 

through the Small Business Review 

Panel process, and through relevant 

academic literature, publicly available 

information and data sources available 

through the Internet,605 historical 

HMDA data, Call Report Data, NMLSR 

Data, and the Bureau’s expertise. 

Based on the outreach described 

above, the Bureau classified the 

operational activities that financial 

institutions currently use for HMDA 

data collection and reporting into 

discrete compliance ‘‘tasks.’’ This 

classification consists of 18 ‘‘component 

tasks,’’ which can be grouped into four 

‘‘primary tasks.’’ The level of detail of 

the classification is intended to facilitate 

estimation of baseline costs and to 

enable rigorous analysis of the impact of 

the proposals across a wide range of 

financial institutions. The four primary 

tasks are described briefly below. 

1. Data collection: Transcribing data, 

resolving reportability questions, and 

transferring data to HMDA Management 

System (HMS). 

2. Reporting and resubmission: 

Geocoding, standard annual edit and 

internal checks, researching questions, 

resolving question responses, checking 

post-submission edits, filing postsubmission documents, creating public 

loan application register, distributing 

public loan application register, 

distributing disclosure report, and using 

vendor HMS software. 

3. Compliance and internal audits: 

Training, internal audits, and external 

audits. 

4. HMDA-related exams: Exam 

preparation and exam assistance. 

In addition to collecting information 

about operational activities and costs, 

the Bureau also used outreach efforts 

and the Small Business Review Panel 

process to better understand the 

potential one-time costs that HMDA 

reporters will incur in response to the 

proposed rule. Management, legal, and 

compliance personnel will likely 

require time to learn new reporting 

requirements and assess legal and 

compliance risks. Financial institutions 

that use vendors for HMDA compliance 

will incur one-time costs associated 

with software installation, 

troubleshooting, and testing. The 

Bureau is aware that these activities will 

take time and that the costs may vary 

depending on the time available. 

Financial institutions that maintain 

their own reporting systems will incur 

one-time costs to develop, prepare, and 

implement necessary modifications to 

those systems. In all cases, financial 

institutions will need to update training 

materials to reflect new requirements 

and activities and may have certain onetime costs for providing initial training 

to current employees. 

The Bureau recognizes that the cost 

per loan of complying with the current 

requirements of HMDA, as well as the 

operational and one-time impact of the 

proposed rule will differ by financial 

institution. During the Bureau’s 

outreach with financial institutions, the 

Bureau identified seven key dimensions 

of compliance operations that were 

significant drivers of compliance costs. 

These seven dimensions are: The 

reporting system used; the degree of 

system integration; the degree of system 

automation; the compliance program; 

and the tools for geocoding, performing 

completeness checks, and editing. The 

Bureau found that financial institutions 

tended to have similar levels of 

complexity in compliance operations 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51827 

606The Bureau assumes that the tier 1 

representative financial institution has 50,000 

records, the tier 2 representative has 1,000 records, 

and the tier 3 representative financial institution 

has 50 records on the HMDA loan application 

register. All cost estimates reflect the assumptions 

defining the three representative financial 

institutions, and reflect general characteristics and 

patterns, including man-hours spent on each of the 

18 component tasks and salaries of the personnel 

involved. To the extent that an individual financial 

institution specializes in a given product, or reports 

different numbers of records on its loan application 

register, these representative estimates will differ 

from the actual cost of that particular financial 

institution. 

607See U.S. Consumer Fin. Prot. Bureau, Small 

Business Review Panel for Home Mortgage 

Disclosure Act Rulemaking: Outline of Proposals 

Under Consideration and Alternative Considered 

(Feb. 7, 2014) (Outline of Proposals), available at 

http://files.consumerfinance.gov/f/201402_cfpb_

hmda_outline-of-proposals.pdf. 

across all seven dimensions. For 

example, if a given financial institution 

had less system integration, then it 

would also tend to use less automation 

and less-complex tools for geocoding. It 

was generally not the case that a 

financial institution would use less 

complex approaches on one dimension 

and more complex approaches on 

another. The small entity 

representatives validated this 

perspective during the Small Business 

Review Panel meeting. 

To capture the relationships between 

operational complexity and compliance 

cost, the Bureau used these seven 

dimensions to define three broadly 

representative lenders according to the 

overall level of complexity of their 

compliance operations. Tier 1 denotes a 

representative financial institution with 

the highest level of complexity, tier 2 

denotes a representative financial 

institution with a moderate level of 

complexity, and tier 3 denotes a 

representative financial institution with 

the lowest level of complexity. For each 

tier, the Bureau developed a separate set 

of assumptions and cost estimates. All 

of these assumptions and cost estimates 

apply at the institutional level.606 In the 

Outline of Proposals prepared for the 

Small Business Review Panel, the 

Bureau provided a detailed exposition 

of the analytical approach used for the 

three tiers.607

Table 1 below provides an overview 

of all three representative tiers across 

the seven dimensions of compliance 

operations: 

Tables 2–4 convey the baseline 

estimates of annual ongoing operational 

costs as well as the underlying formulas 

used to calculate these estimates for the 

18 operational tasks for the three 

representative financial institutions. 

The wage rate is $28 per hour, which is 

the national average wage for 

compliance officers based on most 

recent National Compensation Survey 

from the Bureau of Labor Statistics. The 

number of applications for tier 3, tier 2, 

and tier 1 financial institutions is 50, 

1,000, and 50,000, respectively. The 

Bureau used similar breakdowns of the 

18 operational tasks for each 

representative financial institution to 

estimate the impact of the proposal on 

ongoing operational costs. The Bureau 

notes that with the assumed wage rate, 

number of applications, and other key 


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51828 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

assumptions provided in the notes 

following each table, it is possible for 

readers of this discussion to back out all 

elements in the formulas provided 

below using the baseline estimates for 

each task in each tier. 


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Table 2: Baseline Cost J:t:stimates tor 18 Operational Tasks for Tiel' 3 Financial Institutions1 

$230 

Data 

Collection $Dll 

Variable 

$230 

Variable 

$100 

Variable 

$442 

Fixed 

$69 

Variable 

$28 

$28 

Variable 

$7 

Fixed 

$Ill 

Fixed 

$0 

Fixed 

Fixed 

$0 

Fixed 

$276 '\.udit:s Fixed 

$0 

Fixed 

$500 

Fixed 

Exams $7 

FiJ;;ed 

$55 

l'ixed 

Note: Key Assumptimzs iJz the Table 

I. ~ $28. number of aPIPlll:attOJJts 

2. with 5 

3 with 

4. with contrary answers to qucsttort:> 

5. Li\R requests 0 

6. Number report requests 0 

7. Number of lmm officers and proce:~sms :'i 
Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51829 


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Table 3: Baseline Cost Estimates for 18 Operational Tasks for Tier 2 ·Financial Institutions1 

Primary Task ~omponent Tasks 

Baseline Compliance Costs at a Tier 2 FI 

rrranscribing data 'hourly wage) x (hours spent transcribing data per 

Data application) x (number of applications) 

Collection !Resolving (hourly wage) x (hours spent resolving reportability 

eportability questions per application) x (number of applications with ~uestlons eportability questionsi 

rrransfer data to 

IH1![S 

J~1er 2 Fmancml mst1tut1ons use an automated transfer ot 

ata into the HMS 

Reporting and r=;omplete lhourly wa~;eJ Xlhours spent geococtmg per applicatiOn) x 

~eocoding data munl:ier o apphcatwns) 

Resubmission 

Standard annual 

~dit and internal hourly wage) x (hours spent on edits and checks) 

pheck 

!Researching hourly wage) x (hours spent researching questions per 

F~uestions application) x (number of applications with questionsY 

!Resolving (hourly wage) x (hours resolving question responses per 

~uestion responses application) x (number of applications with contrary 

answers to questions)4 

~hecking 

hourly wage) x (hours spent checking post-submission post-submission 

Fdits edits per apphcatwn) 

IF iling post- houri y wage) x (hours spent filing post-submission ~ubmission documents) ~ocuments 

~reating public hourly wage) x (hours spent creating public LAR) fLAR 

pistributing hourly wage) x (hours spent distributing public U\R) 

publicLAR x (number of public LARrequests/ 

Pistributing (hourly wage) x (hours spent distributing disclosure 

~isclosure report eport) x (number of disclosure report requests)6 

IFI uses vendor Estimated annual vendor HMS cost 

ifiMs Software 

Audits rrraining (hourly wage) x (number ofloan officers and processors)7 

x (hours of training received by each) 

ntemal audit hourly wage) x (hours spent on HMDA portion of audit 

!External audit 

f:ost based on representative average of information 

Exams ~xam prep hourlv wage) x (hours spent preparing for exam) 

!Exam assistance 

hourlv wage) x (hours spent assisting during exams) 

Note: Key Assumptions in the Table 

1. Hourly wage $28, number of applications 1,000 

2, Number of applications with reportability questions= 50 

3, Number of applications with questions =50 

4. Number of applications with contrary answers to questions= I 

5, Number of public LAR requests = 3 

6. Number of disclosure report requests 3 

7. Number of!oan officers and processors= 20 

!':IXt:d.or 

Variable ~aseline Estimate 

Cost 

Variable $2,303 

Variable $1,382 

Variable $0 

Variable $691 

Fixed $8,621 

Variable $691 

Variable $28 

Variable $111 

Fixed $7 

Fixed $221 

Fixed $41 

Fixed $41 

Fixed $8,000 

Fixed $2,210 

Fixed $2::1 

Fixed $5.000 

Fixed $2 210 

Fixed $332 
51830 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

To generate cost estimates at the 

market level, the Bureau developed an 

approach to map all HMDA reporters to 

one of three tiers. Because financial 

institutions are arrayed along a 

continuum of compliance cost that 

cannot be precisely mapped to three 

representative tiers, the Bureau has 

adopted a conservative strategy in 

providing a possible range of the 

number of financial institutions in each 

tier. To identify these distributions, the 


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Table 4: Baseline Cost Estimates for 18 Operational Tasks for Tier 1 Fimmcial Institutions1 

!Primary Task "-"omponent Tasks 

Baseline Compliance Costs at a Tier 1 F1 

Transcribing data hourly wage) x (hours spent transcribing data per 

Data application) x (number of applications) 

Collection Resolving hourly wage) x (hours spent resolving reportability 

eportabili ty questions per application) x (number of applications with 

quest10ns eportability questions)2 

Transfer data to ier 1 Financial institutions use an automated transfer of 

HMS data into the HMS 

iReporting and Complete (hour.Iy war;e) x :~~ours spent geocodmg per appllcat10n) x 

geocoding data number o apphcat10ns) 

Resubmission 

Standard annual 

dit and internal hourly wage) x (hours spent on edits and checks) 

check 

Researching hourly wage) x (hours spent researching questions per 

questions application) x (number of applications with questions? 

Resolving hourly wage) x (hours resolving question responses per 

question responses application) x (number of applications with contrary 

answers to questions)4 

Checking 

post-submission ~hourly wage) x (hours spent checking post-submission 

dits ed1ts per apphcahon) 

Filing post- hourly wage) x (hours spent filing post-submission submission documents) documents 

Creating public hourly wage) x (hours spent creating public Li\R) LAR 

Distributing hourly wage) x (hours spent distri~uting public LAR) 

publicLAR x. (numberofpubhc LARrequests)" 

Distributing 'hourly wage) x (hours spent distributing disclosure 

disclosure report eport) x (number of disclosure report requests)6 

FI uses vendor nterviews indicated Tier 3 Fis use free DES instead of 

HMS Software endor :tl1v1S 

Audits Training hourly wage) x (number ofloan officers and processors)7 

x (hours of training received by each) 

nternal audit hourly wage) x (hours spent per year on audit) 

External audit Hlterviews indicated Tier 1 Fis have no external audit of 

MDAdata 

Exams Exam prep hourly wage) x (hours spent preparing for exam) 

Exam assistance ~hourly wage) x (hours spent assisting during exams) 

Note: Key Assumptions in the Table 

L Hourly wage $28, number of applications 50,000 

2, Number of applications with reportability questions 250 

3. Number of applications with questions 250 

4. Number of applications with contrary answers to questions= 1 

5, Number of public LAR requests = 15 

6. Number of disclosure report requests= 15 

7. Number of loan officers and processors 250 

1<'IXed or Baseline 

Variable Estimate 

Cost 

Variable $115,125 

Variable $6,908 

Variable $0 

Variable $2,500 

Fixed $17,904 

Variable $3,454 

Variable $28 

Variable $442 

Fixed $7 

Fixed $442 

Fixed $207 

Fixed $207 

Fixed $13,000 

Fixed $27,630 

Fixed $63,660 

Fixed $0 

Fixed $13 262 

Fixed $2 210 
Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51831 

608Estimates of the number of depository 

institutions that would no longer be required to 

report under HMDA, as well as the reduction in 

loan application register volume can be obtained 

directly from current HMDA data, and are therefore 

relatively reliable. The number of nondepository 

institutions that would be required to start reporting 

based on the proposed rule is more difficult to 

estimate, because it requires data and information 

from an alternative source as these nondepository 

institutions are not currently HMDA reporters. 

There are various data quality issues related to the 

alternative data sources on nondepository 

institutions. As such, the estimates for nondepository institutions are less reliable, and should 

be viewed as the best effort estimates given the data 

limitations. 

Bureau used the total number of 

reporters (7,421) and the total number of 

loan application register records 

(18,723,000) in the 2012 HMDA data. 

As a first step, the Bureau identified 

all possible tier distributions that were 

consistent with these two reporter and 

record counts, using the same loan 

application register sizes adopted in the 

institutional-level analysis (50,000 for 

tier 1 institutions; 1,000 for tier 2 

institutions; and 50 for tier 3 

institutions). Specifically the Bureau set 

the following two constraints: (1) The 

total number of HMDA reporters in all 

three tiers must sum to 7,421; and (2) 

using the assumed loan application 

register size in each tier, the total 

number of loan application register 

records by all reporters in all three tiers 

must sum to 18,723,000. For this step, 

the Bureau imposed an additional 

constraint by classifying all 217 HMDA 

reporters with over 10,000 records as 

tier 1, because the Bureau’s 

investigation led it to believe that these 

large financial institutions all possess a 

high level of complexity in HMDA 

reporting. This assumption helped to 

narrow the range of possible 

combinations. The Bureau also 

substituted the actual loan application 

register size of these 217 largest HMDA 

reporters into this constraint for the loan 

application register size of a tier 1 

financial institution, further narrowing 

the range of possible combinations. The 

Bureau notes that all distributions 

identified are mathematically possible 

based on the Bureau’s assumptions. 

Second, for the subset of tier 

distributions satisfying these reporter 

and count constraints, the Bureau then 

estimated market-level costs based on 

the tier-specific assumptions and cost 

estimates. That is, for a given 

distribution derived in the first step, the 

Bureau multiplied the institutional-level 

cost estimate for each tier by the number 

of institutions in that tier, and then 

summed across all three tiers. The 

distributions with the lowest- and 

highest-estimated market-level costs 

provided the lower and upper bounds 

for the market-level estimates 

throughout the consideration of the 

benefits and costs. Specifically, the 

Bureau arrived at two distributions for 

all HMDA reporters: (1) The first 

distribution has 4 percent of financial 

institutions in tier 1, 0 percent of 

financial institutions in tier 2, and 96 

percent of financial institutions in tier 3; 

and (2) the second distribution has 3 

percent of financial institutions in tier 1, 

66 percent of financial institutions in 

tier 2, and 31 percent of financial 

institutions in tier 3. The Bureau notes 

that these two distributions likely do 

not match the state of the world exactly. 

Nevertheless, for the set of assumptions 

described above, these distributions 

provide upper and lower bounds for the 

market-level estimates. The Bureau 

recognizes that this range estimate does 

not permit perfect precision in 

estimating the impact of the proposed 

rule and will refine the range estimate 

for the final rule to the extent that 

public comments supplement the 

Bureau’s knowledge. The Bureau 

solicits comments and data that might 

assist in producing more precise 

estimates. 

Initial outreach efforts, as well as 

information gathered during the Small 

Business Review Panel process, 

indicated that compliance costs for 

financial institutions were impacted by 

the complexity of the data field 

specifications and the process of 

submitting and editing HMDA data. As 

part of the proposed rule, the Bureau is 

considering enhancements to the 

sources of help and the processing 

procedures. For example, the Bureau is 

considering working to consolidate the 

outlets for assistance, providing 

guidance support similar to the 

guidance provided for title XIV rules; 

and improving points of contact 

processes for help inquiries. In addition, 

the Bureau is separately considering 

possible modifications to data 

submission tools to include loan-type 

specific edits and pre-approved edits. 

All of these enhancements would clarify 

the data field specifications and reduce 

burden. The consideration of benefits 

and costs discusses how these 

enhancements might affect the impact of 

the proposed rule. 

3. The Scope of the Institutional 

Coverage of the Proposed Rule 

The proposed rule would revise the 

threshold that determines which 

financial institutions are required to 

report data under HMDA. Specifically, 

depository and nondepository 

institutions that meet all the other 

criteria for a ‘‘financial institution’’ in 

proposed § 1003.2(g) would only be 

required to report HMDA data if they 

originated at least 25 covered loans, 

excluding open-end lines of credit, in 

the previous calendar year. The Bureau 

is proposing to no longer exempt 

nondepository institutions pursuant to 

its discretionary authority under HMDA 

section 309(a). 

Based on data for 2012 from Call 

Reports, HMDA, and the NMLSR, the 

Bureau estimates that these proposed 

changes would reduce the number of 

reporting depository institutions by 

approximately 1,600 and increase the 

number of reporting nondepository 

institutions by approximately 450.608

The exclusion of depository institutions 

would reduce loan application register 

records by approximately 70,000 and 

the inclusion of additional 

nondepository institutions would add 

approximately 30,000 records. 

Expansions or contractions of the 

number of financial institutions, or 

changes in product offerings between 

now and implementation of the 

proposed rule may alter these estimated 

impacts. 

Benefits to consumers. The proposed 

institutional coverage threshold would 

have several benefits to consumers. 

Traditionally, nondepository 

institutions have been subject to less 

scrutiny by regulators than depository 

institutions and little is known about 

the mortgage lending behavior of 

nondepository institutions that fall 

below the current reporting thresholds. 

By illuminating this part of the mortgage 

market, the proposed rule would 

provide regulators, public officials, and 

members of the public with important 

information. For example, it is possible 

that small nondepository institutions 

are serving particular market segments 

or populations that would benefit from 

more oversight by public officials and 

community groups. This oversight can 

be enhanced only if more information is 

revealed about the segments, and the 

proposed change in institutional 

coverage is designed to fill this vacuum. 

To the extent that such increased 

monitoring and transparency enhances 

social welfare, consumers served by 

these nondepository institutions would 

benefit. 

Similarly, expanding coverage among 

nondepository institutions could 

improve the processes used to identify 

possible discriminatory lending patterns 

and enforce antidiscrimination statutes. 

Financial regulators and enforcement 

agencies use HMDA data in their initial 

prioritization and screening processes to 

select institutions for examination. 

HMDA data also provide information 

that is used in fair lending reviews of 

mortgage lenders for potential violations 


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51832 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

609 If markets are not perfectly competitive or 

financial institutions are not profit maximizers then 

what financial institutions pass on may differ. For 

example, they may attempt to pass on one-time 

costs and increases in fixed costs, or they may not 

be able to pass on variable costs. 

610These cost estimates do not incorporate the 

impact of adding operational changes affecting 

geocoding, DES processing, and help sources. 

Incorporating these additional operational changes 

would reduce the estimated impact on variable 

costs. Therefore, the estimates we provided are 

upper bound estimates of the increase in variable 

costs that financial institutions would pass on to 

consumers. These estimates of the impact of the 

proposed rule on variable cost per application show 

the impact of all components of the proposed rule, 

and therefore differ from estimates of the impact on 

variable cost presented below, which show the 

impact of specific components of the proposed rule. 

In addition, these estimates focus only on the 

variable cost tasks, while other estimates 

incorporate both variable and fixed cost tasks. 

of ECOA and the Fair Housing Act. This 

is especially true for redlining analyses, 

which compare lending patterns across 

lenders within given markets. Current 

deficiencies in HMDA’s institutional 

coverage leave gaps in the data used by 

regulators for conducting fair lending 

prioritization and redlining analyses to 

compare lenders or markets. Because 

many depository and nondepository 

institutions with similar loan volumes 

are similar in other respects, excluding 

some nondepository institutions with 

fewer than 100 loans may weaken the 

understanding of markets needed for 

prioritization and redlining analyses. 

Consequently, increased reporting 

among nondepository institutions may 

increase the ability to identify fair 

lending risk. 

Finally, the proposed rule will also 

improve the ability to determine 

whether financial institutions are 

serving the housing needs of their 

communities. Information from data 

sources such as the United States 

Census, Call Reports, and the NMLSR 

can be used to characterize the housing 

needs of the communities each lender 

serves. HMDA data provide a supplyside picture of how well each lender is 

meeting these housing needs. Indeed, 

HMDA data may be analogized to a 

census of mortgage demand and supply 

for covered financial institutions. 

However, such data currently paints 

only a partial picture of the market 

served by financial institutions with 25 

to 99 loans. The addition of 

nondepository institutions with 

between 25 and 99 originations will 

provide an improved understanding of 

the mortgage markets where these 

financial institutions operate, thereby 

enhancing efforts to assess whether 

these institutions, and financial 

institutions overall, are serving the 

housing needs of their communities. 

Costs to consumers. The revised 

threshold will not impose any direct 

costs on consumers. Consumers may 

bear some indirect costs if 

nondepository institutions that would 

be required to report under the 

proposed rule pass on some or all of 

their costs to consumers. Following 

microeconomic principles, the Bureau 

believes that these nondepository 

institutions will pass on increased 

variable costs to future mortgage 

applicants, but absorb start-up costs, 

one-time costs, and increased fixed 

costs if financial institutions are profit 

maximizers and the market is perfectly 

competitive.609

The Bureau defines variable costs as 

costs that depend on the number of 

applications received. Based on initial 

outreach efforts, the following five 

operational steps affect variable costs: 

Transcribing data, resolving 

reportability questions, transferring data 

to an HMS, geocoding, and researching 

questions. The primary impact of the 

proposed rule on these operational steps 

is an increase in time spent per task. 

Overall, the Bureau estimates that the 

impact of the proposed rule on variable 

costs per application is approximately 

$13 for a representative tier 3 financial 

institution, $0.20 for a representative 

tier 2 financial institution, and $0.11 for 

a representative tier 1 financial 

institution.610 The 450 nondepository 

institutions that would now be required 

to report have small origination 

volumes, so the Bureau expects most of 

them to be tier 3 financial institutions. 

Hence, based on microeconomics 

principles, the Bureau expects the costs 

that a representative financial 

institution affected by this proposal 

would pass on to mortgage applicants 

would be $13 per application. This 

expense will be amortized over the life 

of the loan and represents a negligible 

increase in the cost of a mortgage loan. 

Therefore, the Bureau does not 

anticipate any material adverse effect on 

credit access in the long or short term 

even if the additional reporting 

nondepository institutions pass on these 

costs to consumers. 

During the Small Business Review 

Panel process, some small entity 

representatives noted that they would 

attempt to pass on all increased 

compliance costs associated with the 

proposed rule, but that whether these 

costs were passed on would depend on 

the competiveness of the market in 

which they operate, especially for 

smaller financial institutions. In 

addition, some small entity 

representatives noted that they would 

attempt to pass on costs through higher 

fees on other products, would leave 

geographic or product markets, or 

would spend less time on customer 

service. To the extent that the market is 

less than perfectly competitive and 

financial institutions are able to pass on 

a greater amount of these compliance 

costs, the cost to consumers would be 

slightly larger than the estimates 

described above. Even so the Bureau 

believes that the potential costs that 

would be passed on to consumers are 

small. 

The proposed rule may impose 

additional costs on consumers. 

Reducing the number of depository 

institutions required to report will 

reduce HMDA’s overall coverage of the 

mortgage market. This reduction would 

reduce the usefulness of HMDA data for 

assessing whether lenders are meeting 

the housing needs of their communities 

and highlighting opportunities for 

public and private investment. This 

reduction may also affect the usefulness 

of HMDA for identifying possible 

discriminatory lending patterns— 

especially for redlining analyses, which 

focus on market-level data and data on 

competitors. To better understand these 

potential costs, the Bureau analyzed the 

characteristics of the depository 

institutions that would be excluded by 

the 25-loan threshold, and compared 

these characteristics to depository 

institutions that currently report and 

would not be excluded. This type of 

analysis is possible because the 

proposed rule reduces both the number 

of depository institutions and the 

transactions they report, and the total 

universe reported under the current 

regulation is known. For this exercise, 

the Bureau also excluded purchased 

loans from its comparisons. 

The Bureau analyzed the distribution 

of various HMDA data fields for 

depository institutions that would be 

newly excluded and included under the 

proposal. Overall, the Bureau found 

that, relative to depository institutions 

that would continue to report under the 

proposal, applications for covered loans 

at excluded depository institutions were 

more likely to be (1) made to the 

depository institutions supervised by 

the FDIC or NCUA; (2) unsecured or 

second-lien; (3) home improvement; (4) 

non-owner-occupied; (5) manufactured 

housing or multi-family; (6) portfolio 

loans; (7) higher-priced; and (8) lowerloan amount. Specifically, over 36 

percent and 44 percent of applications 

that would be excluded were submitted 

to depository institutions regulated by 

the FDIC and NCUA, respectively. In 

contrast, for applications at depository 

institutions that would continue to 

report under the proposal, 13.74 percent 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51833 

611This analysis includes purchased loans. 

612Note that the figures above refer to cost 

savings by the newly-excluded small depository 

institutions, assuming costs based on the current 

Regulation C reporting system. With the proposed 

changes, along with the operational improvements 

that the Bureau is separately considering, the 

impact of the proposed rule on operational costs 

would be approximately $1,000 per year for a 

representative tier 3 financial institution. This 

translates into a market-level savings of 

approximately $1,600,000 (=1,000*1,600) per year. 

Using a 7 percent discount rate, the net present 

value of this savings over five years is $6,600,000. 

and 10.15 percent were submitted to 

depository institutions supervised by 

the FDIC and NCUA, respectively. Over 

16 percent and 12 percent of 

applications at depository institutions 

that would be excluded were secondlien or unsecured, respectively, 

compared to 2.92 percent and 2.75 

percent of applications at depository 

institutions not excluded. Over 31 

percent of applications at depository 

institutions that would be excluded 

were for home improvement products, 

compared to 6.78 percent of 

applications at depository institutions 

not excluded. Over 19 percent of 

applications at depository institutions 

that would be excluded were nonowner-occupied, compared to 11.86 

percent of applications at depository 

institutions not excluded. Slightly fewer 

than 4 percent of applications at 

depository institutions that would be 

excluded were manufactured housing 

and just under 4 percent were multifamily, compared to 1.83 percent and 

0.42 percent of applications at 

depository institutions not excluded, 

respectively. Slightly fewer than 13 

percent of originations at depository 

institutions that would be excluded 

were sold in the secondary market, 

compared to 67.26 percent of 

originations at depository institutions 

not excluded. Nearly 9 percent of 

originations at depository institutions 

that would be excluded exceeded 

HMDA’s current rate spread threshold, 

compared to 1.88 percent of originations 

at depository institutions not excluded. 

Finally, the average loan amount for 

applications at depository institutions 

that would be excluded was $184,000, 

compared to $205,333 for applications 

at depository institutions not excluded. 

Excluding small-volume depository 

institutions currently reporting under 

HMDA also impacts the volume of 

records available for analysis at the 

market level. The geographic data fields 

currently in the HMDA data provide 

four possible market levels: State, MSA, 

county, and census tract. Overall, 

analysis 611 of these markets shows that 

for most markets, a small percentage of 

loan application register records would 

be lost by excluding small-volume 

depository institutions. For all but five 

states, less than 1 percent of loan 

application register records reported 

under 2012 HMDA would be excluded. 

The percentage excluded is greater than 

1 percent for Colorado, Texas, Nevada, 

Alaska and Puerto Rico. Alaska and 

Puerto Rico had the highest percentage 

of excluded records at 3.31 percent and 

9.27 percent, respectively. Ranked by 

the percentage of loan application 

register records that would be excluded 

for each MSA, the 75th percentile was 

0.72 percent, suggesting that for 75 

percent of MSAs, excluding small 

depository institutions would exclude 

less than 0.72 percent of total loan 

application register records. The 95th 

percentile was 1.99 percent, suggesting 

that for 5 percent of MSAs, excluding 

small depository institutions would 

exclude more than 1.99 percent of total 

loan application register records. The 

top five MSAs were all in Puerto Rico. 

Counties and census tracts have smaller 

volumes, so the variation in percentages 

is naturally expected to be higher. 

Ranked by the percentage of loan 

application register records that would 

be excluded, the 75th and 95th 

percentiles for counties were 0.61 

percent and 4.55 percent, respectively. 

The 75th and 95th percentiles for 

census tracts were 0.66 percent and 3.23 

percent, respectively 

Benefits to covered persons. The 

proposal would provide some cost 

savings to depository institutions that 

would be excluded under the 25-loan 

threshold. The estimated 1,600 

depository institutions that would be 

excluded under the proposed threshold 

would no longer incur current 

operational costs associated with 

gathering and reporting data. The 

Bureau expects most of these depository 

institutions to be tier 3 financial 

institutions, given the small volume of 

home purchase, refinance and reverse 

mortgage originations for them. The 

Bureau estimates that the current 

annual, operational costs of reporting 

under HMDA are approximately $2,200 

for representative tier 3 financial 

institutions with a loan application 

register sizes of 50 records. This 

translates into a market-level benefit of 

approximately $3,500,000 

(=2,200*1,600) per year. Using a 7 

percent discount rate, the net present 

value of this impact savings over five 

years is $14,400,000.612

In addition to avoiding ongoing costs, 

the 1,600 excluded depository 

institutions would not incur the onetime costs necessary to modify 

processes in response to the proposed 

rule. The Bureau estimates these onetime costs to be, on average, $3,000 for 

tier 3 financial institutions. Assuming 

that all 1,600 depository institutions are 

tier 3 institutions, this yields an overall 

market savings of $4,800,000. Using a 7 

percent discount rate and a five-year 

amortization window, the annualized 

one-time savings is $1,200,000. 

One-time costs to covered persons. 

The estimated additional 450 

nondepository institutions that would 

have to report under the proposal would 

incur start-up costs to develop policies 

and procedures, infrastructure, and 

training. Given the small origination 

volume by these nondepository 

institutions, the Bureau expects most of 

them to be tier 3 financial institutions. 

Based on outreach discussions with 

financial institutions, the Bureau 

believes that these start-up costs would 

be approximately $25,000 for tier 3 

financial institutions. This yields an 

overall market cost of $11,300,000. 

Using a 7 percent discount rate and a 

five-year amortization window, the 

annualized one-time cost is $2,700,000. 

The Bureau hopes to learn more about 

the costs of initiating HMDA reporting 

through comment letters. 

Ongoing costs to covered persons. The 

estimated 450 nondepository 

institutions that would have to report 

under the proposal would incur the 

operational costs of gathering and 

reporting data. Including both current 

operational costs and the impact of the 

proposed rule, the Bureau estimates that 

these operational costs will total 

approximately $3,200 for a 

representative tier 3 financial institution 

per year. This yields an overall market 

impact of $1,400,000. Using a 7 percent 

discount rate, the net present value of 

this cost over five years is $5,900,000. 

These estimates incorporate all of the 

operational improvements that the 

Bureau is considering. 

4. The Scope of the Transactional 

Coverage of the Proposed Rule 

The proposed rule requires financial 

institutions to report activity only for 

dwelling-secured loans, regardless of 

whether the loans are for home 

purchase, home improvement, or 

refinancing. As a result, home 

improvement loans not secured by a 

dwelling would be removed from the 

reporting requirements, while homeequity loans and reverse mortgages 

would be included regardless of 

purpose. Importantly, institutions 

would be required to report data on all 

open-end line of credit. In addition, for 

preapproval requests that are approved, 

but not accepted, reporting would 

change from optional to mandatory. 


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613Michael LaCour-Little, Wei Yu, and Libo Sun, 

The Role of Home Equity Lending in the Recent 

Mortgage Crisis, 42 Real Estate Economics 153 

(2014). 

614See Atif Mian and Amir Sufi, House Prices, 

Home Equity-Based Borrowing, and the U.S. 

Household Leverage Crisis, 101 American Economic 

Review 2132, 2154 (2011); Donghoon Lee, 

Christopher Mayer, and Joseph Tracy, A New Look 

at Second Liens, Fed. Reserve Bank of New York 

Staff Report No. 569, at 11 (2012); Michael LaCourLittle, Wei Yu, and Libo Sun, The Role of Home 

Equity Lending in the Recent Mortgage Crisis, 42 

Real Estate Economics 153 (2014). 

615See Vicki Been, Howell Jackson, and Mark 

Willis, Furman Ctr. for Real Estate and Urban 

Policy, Essay: Sticky Seconds—The Problems 

Second Liens Pose to the Resolution of Distressed 

Mortgages 13–18 (2012). 

Benefits to consumers. The proposed 

revisions to Regulation C’s transactional 

coverage would have several benefits to 

consumers. The Bureau believes that 

data on open-end lines of credit, homeequity loans, reverse mortgages, and 

preapproval requests that were 

approved, but not accepted will provide 

a much more complete picture of the 

dwelling-secured lending market. 

Using home-equity lines of credit and 

home-equity loans as an example, in the 

lead up to the financial crisis between 

2000 and 2008, the balance of homeequity lending increased by 

approximately 16.8 percent annually, 

moving from $275.5 billion to $953.5 

billion in total.613 Various researchers 

have pointed out that rapidly expanding 

lending activities in home-equity lines 

of credit and home-equity loans 

contributed to the housing bubble as 

borrowers and lenders both vigorously 

took on high leverage. Additional 

research has shown that the growth in 

home-equity lending was correlated 

with subsequent home price 

depreciation, as well as high default and 

foreclosure rates among first 

mortgages.614 Researchers have argued 

that these correlations were driven in 

part by consumers using home-equity 

lines of credit to fund investment 

properties, which impacted default rates 

when housing prices began to fall. 

Researchers have also shown evidence 

that distressed homeowners with 

closed-end subordinate-lien mortgage 

loans encountered several challenges 

when seeking assistance from public 

and private mortgage relief programs.615

Data on these loans might have helped 

public officials improve the 

effectiveness of these relief programs. 

However, because HMDA does not 

currently cover all home-equity loans, 

and most financial institutions choose 

not to report home-equity lines of credit, 

this substantial market is almost 

completely missing from the HMDA 

data. Based on information from HUD 

and Moody’s Analytics (May 2013), 

HMDA data currently include 

approximately 1 percent of all homeequity lines of credit and 35 percent of 

home-equity loan originations. Data 

identifying the presence and purpose of 

home-equity lending will enable 

government, industry, and the public to 

potentially avert similar scenarios in the 

future. Secondly, housing equity has 

long been the most important form of 

household savings and consumers often 

resort to tapping their home equity for 

various purposes. Providing a full 

picture of home-equity secured 

consumer lending would be especially 

important for determining whether 

financial institutions are serving the 

housing needs of their communities. 

Again, the optional reporting of these 

transactions under the current 

Regulation C leaves this picture 

incomplete. Finally, mandatory 

reporting of home-equity secured 

lending would guard against regulatory 

gaming by financial institutions. To the 

extent that home-equity lines of credit 

and home-equity loans are largely 

interchangeable for customers applying 

for credit for a given purpose, lenders 

could intentionally recommend openend home-equity lines of credit as 

substitutes for closed-end home-equity 

loans in order to avoid mandatory 

reporting of the home-equity loans. 

Therefore, mandatory reporting of both 

home-equity loans and home-equity 

lines of credit would mitigate such 

misaligned incentives and ultimately 

benefit consumers by closing the data 

reporting gap. 

Including mandatory reporting of 

reverse mortgages also provides benefit 

to consumers. Reverse mortgages are a 

special mortgage product designed to 

satisfy the later-life consumption needs 

of seniors by leveraging their home 

equity while permitting them to 

maintain homeownership. In its Fiscal 

Year 2013, HUD endorsed in total 

60,091 home-equity conversion 

mortgages (HECM), which counted for 

almost all of the reverse mortgage 

market. Various stakeholders and 

advocates have called for closer 

monitoring of the reverse mortgage 

market based on concerns of potential 

abuse to vulnerable seniors. Mandatory 

reporting of all reverse mortgages will 

provide public officials, community 

organizations, and members of the 

public with more information to assist 

consumers age 62 or older. This change 

is consistent with Congress’s decision to 

include age in the Dodd-Frank Act, 

signaling its intention to strengthen 

protections for seniors. 

Additionally, the proposed changes to 

transactional coverage would benefit 

consumers by improving fair lending 

analyses. Regulators, community 

groups, and researchers use HMDA data 

to identify disparities in mortgage 

lending based on race, ethnicity, and 

sex. These analyses are used for 

prioritization and scoping purposes to 

select the institutions and parts of 

institutions to review. Based on 

information from HUD and Moody’s 

Analytics (May 2013), HMDA data 

currently include approximately 1 

percent of home-equity lines of credit 

and 35 percent of home-equity loans. 

The extent of reverse mortgage reporting 

under HMDA is unknown because the 

existing data provide no way to 

distinguish reverse mortgages from 

other loans, but the Bureau believes that 

a substantial number of reverse 

mortgages are not reported under 

HMDA. Because a substantial amount of 

these transactions are not reported, it is 

not possible during prioritization 

analyses to develop a clear assessment 

of the fair lending risk to consumers of 

these specific products. In addition, all 

of these products may have unique 

underwriting and pricing guidelines 

that would merit separate analyses. It is 

not currently possible to identify these 

products in HMDA, however, so most 

fair lending analyses that use HMDA 

data combine these products and other 

products with potentially different 

underwriting and pricing standards. 

This shortcoming reduces the reliability 

of risk assessment analyses, limiting the 

ability to identify consumers that might 

have been impacted by potential 

discrimination. 

Mandatory reporting of preapproval 

requests that are approved but not 

accepted will also benefit consumers 

through improved fair lending analyses. 

Data about preapproval requests that are 

approved but not accepted are 

optionally reported. Thus these data are 

largely absent from the HMDA data that 

regulators and community groups 

analyze. Including these preapproval 

requests would improve fair lending 

analysis by providing a more accurate 

comparison between those applications 

that satisfy a financial institution’s 

underwriting criteria and those that did 

not. 

The proposed rule also improves the 

ability of public officials to distribute 

public-sector investment so as to attract 

private investment to areas where it is 

needed. HMDA data provide a broadlyrepresentative picture of home lending 

in the nation unavailable from any other 

data source. Home-equity lines of credit 

and home-equity loans are important 

forms of lending that are considered in 

evaluations under the CRA. Mandatory 

reporting of all open-end lines of credit, 

home-equity loans, and reverse 


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616These cost estimates do not incorporate the 

impact of adding operational changes affecting 

geocoding, DES processing, and help sources. These 

estimated changes to variable costs are due solely 

to the proposed change to transaction coverage 

requiring reporting of all open-end lines of credit, 

home-equity loans, and reverse mortgages, as well 

as preapproval requests that are approved, but not 

accepted. As such, they differ from estimated 

changes to variable costs presented earlier, which 

reflected the impact of all proposed changes 

including additional data points, alignment with 

industry data standard and changes in transaction 

coverage. 

617These estimates do not include potential cost 

savings from proposed changes in operations 

including geocoding, DES process and help sources. 

mortgages will improve HMDA’s 

coverage of mortgage markets, which in 

turn will enhance its usefulness for 

identifying areas in need of public and 

private investment and thereby benefit 

consumers. 

Similarly, the proposed rule also 

improves the ability to determine 

whether financial institutions are 

serving the housing needs of their 

communities. Mandatory reporting of all 

open-end lines of credit, home-equity 

loans, and reverse mortgages will 

improve HMDA’s coverage of the market 

for these specific products. This will 

enhance the usefulness of the data for 

assessing whether financial institutions 

are serving their communities. 

Costs to consumers. The proposals 

related to transactional coverage would 

eliminate reporting of unsecured homeimprovement loans. The Bureau 

estimates that financial institutions 

reported approximately 340,000 

unsecured home improvement loans 

under HMDA during 2012. This 

comprised 1.8 percent of the total record 

volume. With this proposed revision, 

regulators, community groups, and 

researchers will no longer be able to use 

HMDA data to assess fair lending risks 

for this product, which would reduce 

the likelihood of identifying consumers 

who are potentially disadvantaged when 

taking out unsecured homeimprovement loans. In addition, it is 

also possible that the general loss of 

data may negatively affect research in 

other unexpected ways and thus 

negatively impact consumers. However, 

despite these risks, the Bureau is not 

aware of any instances where HMDA 

data on unsecured home improvement 

loans were used to determine if a 

financial institution was serving the 

housing needs of a community or to 

identify opportunities for public or 

private investment. 

The proposed transactional coverage 

will not impose any direct costs on 

consumers. Consumers may bear some 

indirect costs of the proposed changes if 

financial institutions that would be 

required to report home-equity lines of 

credit, home-equity loans, reverse 

mortgages, and preapproval requests 

that are approved, but not accepted 

passed on some or all of the costs 

imposed on them by the proposed rule. 

Following microeconomic principles, 

the Bureau believes that these financial 

institutions will pass on increased 

variable costs to future mortgage 

applicants, but absorb one-time costs 

and increased fixed costs. The Bureau 

estimates that the overall impact of the 

proposed rule on variable costs per 

application is approximately $2 for a 

representative tier 3 financial 

institution, $0.11 for a representative 

tier 2 financial institution, and $0.07 for 

a representative tier 1 financial 

institution.616 Thus, the Bureau expects 

that a representative tier 3 financial 

institution affected by this proposed 

change would pass on to mortgage 

applicants $2 per application; a 

representative tier 2 financial institution 

affected by this proposed change would 

pass on to mortgage applicants $0.11 per 

application; and a representative tier 1 

financial institution affected by this 

proposed change would pass on to 

mortgage applicants $0.07 per 

application. This expense will be 

amortized over the life of the loan and 

represents a negligible increase in the 

cost of a mortgage loan. Therefore, the 

Bureau does not anticipate any material 

adverse effect on credit access in the 

long or short term if financial 

institutions pass on the costs of 

reporting under the proposed 

transaction coverage to consumers. 

During the Small Business Review 

Panel process, some small entity 

representatives noted that they would 

attempt to pass on all increased 

compliance costs associated with the 

proposed rule, but that this would be 

difficult in the current market where 

profit margins for mortgages are tight, 

especially for smaller financial 

institutions. In addition, some small 

entity representatives noted that they 

would attempt to pass on costs through 

higher fees on other products offered, 

leave geographic or product markets, or 

spend less time on customer service. If 

lenders attempt and are able to pass on 

more than increases in variable costs to 

consumers, these estimates of the cost to 

consumers may be conservative. 

Nevertheless, the Bureau believes any 

such additional costs would be small 

relative to general cost of credit of 

mortgage loans amortized over the life 

of the loans. 

Benefits to covered persons. The 

proposals related to transactional 

coverage would eliminate reporting of 

unsecured home improvement loans. 

Using 2012 HMDA data, as well as 

information from interviews of financial 

institutions, the Bureau estimates that, 

on average, tier 3, tier 2, and tier 1 

financial institutions receive 

approximately 1, 20, and 900 

applications for unsecured home 

improvement products, respectively. 

Excluding those average numbers of 

unsecured home improvement loans 

from reporting would reduce 

operational costs by approximately $70 

for a representative tier 3 financial 

institution, $750 for a representative tier 

2 financial institution, and $5,200 for a 

representative tier 1 financial institution 

per year.617 This translates into a 

market-level savings of $2,000,000 to 

$5,000,000 per year. Using a 7 percent 

discount rate, the net present value of 

this impact over five years would be a 

reduction in cost of $8,300,000 to 

$20,500,000. 

Requiring reporting of all open-end 

lines of credit, home-equity loans, 

reverse mortgages, and preapprovals 

that are approved, but not accepted will 

improve the prioritization process 

regulators and government enforcement 

agencies use to identify institutions at 

higher risk of fair lending violations. 

This improvement will reduce the false 

positives that occur when inadequate 

information causes lenders with low fair 

lending risk to be initially misidentified 

as high risk. Additional information on 

these products will explain some of 

these false positives, so that 

examination resources are used more 

efficiently and that lenders with low fair 

lending risk receive a reduced level of 

regulatory scrutiny. 

One-time costs to covered persons. 

Based on outreach efforts, the Bureau 

believes that many financial institutions 

process applications for home-equity 

products, including reverse mortgages, 

on separate data platforms and data 

systems in different business units than 

purchase and refinance mortgages. 

Financial institutions not currently 

reporting home-equity products under 

HMDA will incur one-time costs to 

develop reporting capabilities for these 

business lines. Financial institutions, 

whether they use vendors for HMDA 

compliance or develop software 

internally, will incur one-time costs 

associated with preparation, 

development, implementation, 

integration, troubleshooting, and testing 

of new systems for these business units. 

Management, operation, legal, and 

compliance personnel in these business 

lines will likely require time to learn the 

new reporting requirements and assess 

legal and compliance risks. In all cases, 

financial institutions will need to 


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51836 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

618The Bureau estimated the total non-interest 

expense for banks, thrifts and credit unions that 

reported to HMDA based on Call Report and NCUA 

Call Report data for depository institutions and 

credit unions, and NMLS data for non-depository 

insitutions, all matched with 2012 HMDA reporters. 

619These estimates do not include potential cost 

savings from proposed changes in operations 

including geocoding, DES process, and help 

sources. 

update training materials to reflect new 

requirements and may incur certain 

one-time costs for providing initial 

training to current employees. The 

Bureau is aware that these activities will 

take time and that the costs may be 

sensitive to the time available for them. 

The Bureau expects these one-time 

costs to be smaller for financial 

institutions that are less complex and 

less likely to have separate business 

lines with separate data platforms and 

data systems for home-equity products. 

These entities use less complex 

reporting processes, so tasks are more 

manual than automated, and new 

requirements may involve greater use of 

established processes. As a result, 

compliance would likely require 

straightforward changes in systems and 

workplace practices and therefore 

impose relatively low one-time costs. 

The Bureau believes that for these lesscomplex financial institutions, the onetime costs associated with the proposed 

change in transactional coverage would 

be captured by the overall estimate of 

the one-time costs the institutions 

would incur in response to the entire 

proposed rule. Thus, the Bureau 

estimates that the proposed rule will 

impose average one-time costs of $3,000 

for tier 3 financial institutions. 

For more complex financial 

institutions, the Bureau expects the onetime costs imposed by the proposed 

change in transactional coverage to be 

relatively large. To estimate these onetime costs, the Bureau views the 

business line responsible for homeequity products as a second business 

line that has to modify its reporting 

infrastructure in response to the 

proposed rule. Industry repeated this 

view of additional costs during the 

Bureau’s outreach prior to this proposal. 

However, no financial institutions or 

trade associations have provided the 

Bureau with specific estimates of the 

one-time cost associated with this 

change. Some industry participants 

generally stated that the one-time cost of 

mandatory reporting of all home-equity 

lines of credit, home-equity loans, and 

reverse mortgages could be twice as 

much as the one-time cost of adapting 

to other parts of the proposed rule, but 

did not provide any further detail. The 

Bureau estimates that the overall 

proposed rule will impose average onetime costs of $250,000 for tier 2 

financial institutions and $800,000 for 

tier 1 financial institutions, excluding 

reporting of home-equity lines of credit, 

home-equity loans, and reverse 

mortgages. The Bureau assumes that the 

one-time cost of integrating home-equity 

products into the HMDA reporting 

processes would be roughly equal to 50 

percent of the one-time costs absent 

mandatory reporting of such products. 

This estimate accounts for the fact that 

some new systems may have to be built 

to facilitate reporting for these lines of 

business but that some fixed, one-time 

costs could be shared with lines of 

business currently subject to Regulation 

C because both have to undergo 

systemic changes. Using this general 

estimate (i.e. one-and-one-half times as 

much) for all tier 1 and tier 2 

institutions, therefore, the Bureau 

estimates one-time costs of $250,000 

and $800,000 for business lines 

responsible for purchase and refinance 

products and an additional $125,000 

and $400,000 for business lines 

responsible for home-equity products. 

In total, this yields an overall market 

impact between $383,000,000 and 

$2,100,000,000. Using a 7 percent 

discount rate and a five-year 

amortization window, the annualized 

one-time cost is $93,400,000 to 

$514,900,000. As a frame of reference 

for these market-level, one-time cost 

estimates, the total non-interest 

expenses of current HMDA reporters 

were approximately $420 billion in 

2012. The upper bound estimate of $2.1 

billion is approximately 0.5 percent of 

the total annual non-interest 

expenses.618 Because these costs are 

one-time investments, financial 

institutions are expected to amortize 

these costs over a period of years. 

The Bureau has taken a conservative 

approach to estimating the one-time 

costs because of the uncertainty 

regarding how many financial 

institutions belong to each of the three 

representative tiers. Thus, the Bureau 

has mapped out all possible 

distributions to arrive at the lower 

bound and higher bound cost estimates, 

as explained in part VI.F.2, above. The 

Bureau hopes to obtain more 

information on the distribution of 

financial institutions across the three 

tiers and to refine its estimate of these 

one-time costs through feedback 

received during the rulemaking process. 

In particular, the Bureau seeks 

additional information on the number of 

HMDA reporters that are moderate 

complexity, tier 2 institutions. 

For proposed mandatory reporting of 

preapproval requests that are approved, 

but not accepted, the Bureau believes 

that the primary impact will be on 

ongoing operational costs rather than on 

one-time costs. Financial institutions 

are currently required to report whether 

a preapproval was requested for home 

purchase loans, and whether the 

preapproval was approved (if accepted) 

or denied, so the infrastructure to report 

preapproval information is already in 

place. Expanding mandatory reporting 

to all outcomes of the preapproval 

process therefore primarily impacts the 

ongoing, operational tasks required to 

gather information and data on 

additional reportable transactions. 

Ongoing costs to covered persons. The 

proposal would mandate reporting of all 

open-end lines of credit, home-equity 

loans, and reverse mortgages, as well as 

preapproval requests that were 

approved, but not accepted. This change 

would potentially increase the number 

of applications and loans that financial 

institutions must report, thereby 

increasing the cost of HMDA reporting. 

Using HMDA data, along with 

information from HUD, Moody’s 

Analytics (May 2013), and industry 

interviews, the Bureau estimated the 

total number of open-end lines of credit, 

home-equity loans, and reverse 

mortgages, as well as preapproval 

requests that were approved, but not 

accepted in the market and the portion 

currently in HMDA. Based on these 

estimates, these transactions were then 

allocated among lenders proportionately 

to the lender’s loan application register 

size. The Bureau estimated that, on 

average, tier 3 financial institutions 

receive approximately two applications 

for open-end lines of credit, one 

application for home-equity loans, no 

applications for reverse mortgages, and 

no preapproval requests that were 

approved, but not accepted. On average, 

tier 2 financial institutions receive an 

estimated 45 applications for open-end 

lines of credit, 15 applications for homeequity loans, no applications for reverse 

mortgages, and five preapproval 

requests that were approved, but not 

accepted. On average, tier 1 financial 

institutions receive an estimated 2,200 

applications for open-end lines of 

credit, 700 applications for home-equity 

loans, five applications for reverse 

mortgages, and 245 preapproval 

requests that were approved, but not 

accepted. 

Reporting data for these additional 

loans would increase operational costs 

by approximately $265, $2,400 and 

$16,500 per year for representative tier 

3, tier 2 and tier 1 financial institutions, 

respectively.619 This translates into a 

market-level cost of $6,800,000 to 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51837 

620These estimates do not include potential cost 

savings from proposed changes in operations 

including geocoding, DES process and help sources. 

621The 35 pieces of information are respondent 

ID, agency code, application number, application 

date, loan type, property type, purpose, occupancy, 

loan amount, preapprovals, action, action date, 

MSA, State, county, census tract, applicant 

ethnicity, applicant sex, five applicant race data 

fields, co-applicant ethnicity, co-applicant sex, five 

co-applicant race data fields, income, purchaser, 

rate spread, HOEPA status, and lien status. 

622These 11 data points consist of total points 

and fees, prepayment penalty term, introductory 

interest rate term, non-amortizing features, loan 

term, application channel, universal loan ID, loan 

originator number, property value, parcel number, 

age and credit score. 

$16,000,000 per year. Using a 7 percent 

discount rate, the net present value of 

this cost over five years is $27,800,000 

to $65,100,000. 

Initial outreach efforts, as well as 

information gathered during the Small 

Business Review Panel process, 

indicated that uncertainty regarding 

reportability generated significant costs 

for financial institutions. In addition to 

the proposed rule, the Bureau is 

separately considering operational 

enhancements and modifications. For 

example, the Bureau is considering 

working to consolidate the outlets for 

assistance, providing guidance support 

similar to the guidance provided for title 

XIV rules; improving point of contact 

processes for help inquiries; modifying 

the types of edits and when edits are 

approved; exploring opportunities to 

improve current DES; and considering 

approaches to reduce geocoding 

burdens. All of these enhancements will 

clarify reportability issues, improve 

processing, and reduce burden. With the 

inclusion of these operational 

improvements, operational costs would 

increase by approximately $180, $1,900, 

and $15,700 per year, for the 

representative entities in tier 3, tier 2 

and tier 1, respectively. This translates 

into a market-level cost of $5,900,000 to 

$13,300,000 per year. Using a 7 percent 

discount rate, the net present value of 

this cost over five years is $24,300,000 

to $54,400,000. 

Alternatives considered. Because 

industry participants raised questions 

regarding the quality of preapproval 

data, the Bureau also considered 

excluding preapprovals from reporting 

requirements. Based on a review of 2012 

HMDA data, the Bureau estimates that 

on average tier 3 financial institutions 

receive 1 request for a preapproval a 

year, tier 2 financial institutions receive 

15 requests a year, and tier 1 financial 

institutions receive 700 requests a year. 

The estimated reduction in the 

operational cost of reporting data for 

these preapprovals is approximately 

$50, $565 and $3,900 per year, for 

representative tier 3, tier 2, and tier 1 

financial institutions, respectively.620

This translates into a market-level 

impact of $1,500,000 to $3,700,000 per 

year. Using a 7 percent discount rate, 

the net present value of this savings 

over five years is $6,200,000 to 

$15,400,000. 

Including the proposed operational 

improvements reduces the estimated 

operational costs of reporting data for 

preapprovals by approximately $45, 

$460 and $3,700 per year for 

representative tier 3, tier 2 and tier 1 

financial institutions, respectively. This 

translates into a market-level savings of 

$1,400,000 to $3,200,000 per year. Using 

a 7 percent discount rate, the net 

present value of this savings over five 

years is $5,800,000 to $12,900,000. 

5. The Data That Financial Institutions 

Are Required To Report About Each 

Loan or Application 

For each application, originated loan, 

or purchased loan submitted as part of 

a financial institution’s loan application 

register, Regulation C currently requires 

reporting of 35 separate pieces of 

information, and allows for optional 

reporting of three denial reasons.621

Throughout this section, the Bureau 

uses the term ‘‘data point’’ to convey 

general data information and ‘‘data 

field’’ to convey the specific information 

financial institutions must report. For 

example, race is one data point with ten 

data fields (five for primary applicant 

race and five for co-applicant race). The 

Dodd-Frank Act amended HMDA by 

enhancing two existing data points (rate 

spread and application ID) and 

identifying 11 new data points.622 As 

part of this rulemaking, the Bureau is 

comprehensively reviewing all current 

data points in Regulation C, carefully 

examining each data point specifically 

mentioned in the Dodd-Frank Act, and 

considering proposals to collect other 

appropriate data points to fill gaps 

where additional information could be 

useful to better understand the HMDA 

data. 

The proposed revisions include 

improvements and technical revisions 

to current Regulation C data 

requirements; the implementation as 

required or appropriate of the categories 

of information specifically identified in 

the Dodd-Frank Act; and the addition of 

other data points that fill existing 

informational gaps and would further 

the purposes of HMDA. To the extent 

practicable, all of these proposed 

changes align new data fields and 

definitions with industry data 

standards. In order to develop this 

proposed alignment, the Bureau 

analyzed each data point currently 

included in Regulation C, each new data 

point identified in the Dodd-Frank Act, 

and each additional data point under 

consideration by the Bureau to 

determine whether analogous data exist 

in the ULDD data set (first preference) 

or the larger MISMO data dictionary 

(second preference). In each instance, 

the MISMO/ULDD definitions would 

need to be adequate to meet the 

objectives of HMDA and Regulation C. 

For data points that cannot be aligned 

with MISMO/ULDD, the Bureau is 

considering aligning data points with 

definitions provided by other 

regulations, or using a completely new 

definition. 

Current HMDA data points. Currently, 

financial institutions are required to 

collect and report information for 35 

data fields, and have the option of 

reporting three additional fields 

conveying denial reasons. For these 35 

mandatory fields, the proposed rule will 

increase the number of required fields 

by four. Three of these additional data 

fields convey denial reasons, for which 

reporting will change from optional to 

mandatory. The fourth additional data 

field is for property type. To align this 

data point with industry data standards, 

the current property type field will be 

replaced by two fields (number of units 

and construction method), both of 

which are in MISMO and ULDD. This 

change yields a net increase of one data 

field for property type. 

In addition to adding four data fields, 

the proposed rule will also change the 

information reported for eight current 

HMDA data fields. These revisions 

address changes required by the DoddFrank Act, align current HMDA fields 

with industry data standards, and close 

information gaps. Specifically, to 

address changes required by the DoddFrank Act, the financial institution’s 

identifier will be replaced by a Legal 

Entity Identifier, application ID will be 

replaced by a unique, robust ID number, 

and rate spread will be required for all 

originations covered by Regulation Z. 

As part of the effort to align current data 

fields with MISMO/ULDD, occupancy 

will be revised to convey primary home, 

second home or investment property, 

and lien status will be expanded to 

allow for third, fourth, and fifth liens. 

Finally, to close information gaps, loan 

amount will be reported in dollars 

instead of thousands of dollars; an 

additional ‘‘other’’ category will be 

added to loan purpose; the HOEPA flag 

will be revised to convey whether 

HOEPA was triggered by rate, points 

and fees, or both; and lien status will be 

required for purchased loans. 


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623See Andrew Haughwout, Donghoon Lee, 

Joseph Tracy, and Wilbert van der Klaauw, Real 

Estate Investors, the Leverage Cycle, and the 

Housing Market Crisis, Fed. Reserve Bank of N.Y. 

York Staff Report No. 514 (2011). 624See comment 5(a)–2. 

Current HMDA data points—benefits 

to consumers. The Bureau believes that 

the proposed revisions to the current 

HMDA data fields, which increase the 

amount of information included in 

HMDA, will improve current processes 

used to identify possible discriminatory 

lending patterns and enforcing 

antidiscrimination statutes. The 

following discussion provides several 

examples of how the revised existing 

variables would ultimately benefit 

consumers by facilitating enhanced fair 

lending analyses. The supplementary 

information contained in part V, above, 

provides more detailed exposition on 

each of the enhanced data points. 

For example, the reason for denial is 

a key data point used to understand 

underwriting decisions and focus fair 

lending reviews. Currently, 

§ 1003.4(c)(1) permits optional reporting 

of the reasons for denial of a loan 

application. Mandatory reporting of this 

information, pursuant to proposed 

§ 1003.4(c)(16), combined with 

enhanced or additional data points 

commonly used in underwriting 

decisions, will provide more consistent 

and meaningful data, thereby improving 

the ability to identify both 

discriminatory lending patterns in 

underwriting decisions and consumers 

who have been disadvantaged so that 

appropriate restitution can be provided. 

In addition, denial reasons combined 

with careful analysis of key 

underwriting variables could help 

reduce the false positive rate of fair 

lending prioritization analyses, leading 

to better targeting of fair lending reviews 

and thereby reducing compliance costs 

to some covered persons subject to fair 

lending exams. 

Additionally, rate spread is currently 

the only quantitative pricing measure in 

HMDA, and it is only available for 

originated loans meeting or exceeding 

the higher-priced mortgage loan 

thresholds for first- and second-lien 

loans. Expanding reporting of rate 

spread to all originations covered by 

Regulation Z, except purchased loans 

and reverse mortgage transactions, 

greatly enhances HMDA’s usefulness for 

analyzing fair lending risk in pricing 

decisions. This proposed change will 

also reduce the false positive rate 

observed during fair lending 

prioritization analyses so that the 

resources of regulators and financial 

institutions are used more efficiently. 

This information will also improve the 

limited picture of the cost of credit 

provided by current HMDA data. 

The proposed rule would revise data 

regarding occupancy status by requiring 

separate itemization of second 

residences and investment properties, 

and data regarding property type by 

adding the total number of units and 

number of units that are incomerestricted pursuant to affordable 

housing programs. These revisions 

would allow more accurate accounting 

of the differences in underwriting and 

pricing policies and outcomes and 

hence would reduce false positive rates 

in current fair lending prioritization 

processes used by regulatory agencies. 

The Bureau also believes that the 

proposed revisions to the current 

HMDA data fields, which increase the 

amount of information included in the 

HMDA dataset, will improve the ability 

to assess whether financial institutions 

are meeting the housing needs of their 

communities and assist public officials 

in making decisions about public-sector 

investments. The denial reason data 

fields will provide greater 

understanding of why credit is denied 

or offered to specific communities, and 

the rate spread data point will provide 

additional information about the 

affordability of the credit offered. 

Additionally, the proposed revisions 

to the occupancy status data field would 

provide finer gradients by separately 

identifying second homes and 

investment properties, which would 

help identify trends involving 

potentially speculative purchases of 

housing units similar to those that 

contributed to the recent financial crisis. 

Recent research suggests that 

speculative purchases by investors were 

one potential driver of the recent 

housing bubble and subsequent 

financial crisis.623 These impacts may 

be especially relevant for areas that are 

experiencing sharp increases in investor 

purchases. Thus, information related to 

second homes and investment 

properties may help communities and 

local officials develop policies tailored 

to the unique characteristics associated 

with these separate segments of the 

mortgage market. 

Finally, proposed revisions to the 

property type data field would be of 

particular interest in the wake of the 

housing crisis as families have 

increasingly turned to rental housing. 

Greater detail about multifamily 

housing finance may provide additional 

information about whether financial 

institutions are serving the housing 

needs of their communities 

Current HMDA data points—costs to 

consumers. The proposed revisions to 

the current HMDA data fields will not 

impose any direct costs on consumers. 

Consumers may bear some indirect costs 

if financial institutions pass on some or 

all of the costs imposed on them by the 

proposed rule. Following 

microeconomic principles, the Bureau 

believes that financial institutions will 

pass on increased variable costs to 

future mortgage applicants, but absorb 

one-time costs and increased fixed costs 

if markets are perfectly competitive and 

financial institutions are profit 

maximizers. The impact of the proposed 

changes to the eight current HMDA data 

fields will affect only one-time costs, as 

financial institutions modify their 

infrastructure to incorporate the 

proposed data point specifications. The 

only proposed revision to current 

HMDA data fields that impacts variable 

costs is the addition of four data fields. 

To construct cost impact estimates, the 

Bureau treated the three denial reason 

variables as new variables and the 

additional property type field as a new 

variable that aligns with MISMO/ULDD. 

The Bureau estimates that the impact of 

this component of the proposed rule on 

variable costs per application is 

approximately $2 for a representative 

tier 3 financial institution, $0.06 for a 

representative tier 2 financial 

institution, and $0.01 for a 

representative tier 1 financial 

institution. This expense will be 

amortized over the life of the loan and 

represents a negligible increase in the 

cost of a mortgage loan. Therefore, the 

Bureau does not anticipate any material 

adverse effect on credit access in the 

long or short term if financial 

institutions pass on these costs to 

consumers. 

During the Small Business Review 

Panel process, some small entity 

representatives noted that they would 

attempt to pass on all increased 

compliance costs associated with the 

proposed rule, but that this would be 

difficult in the current market where 

profit margins for mortgages are tight. In 

addition, some small entity 

representatives noted that they would 

attempt to pass on costs through higher 

fees on other products offered, leave 

geographic or product markets, or spend 

less time on customer service. 

Current HMDA data points—benefits 

to covered persons. Aligning current 

HMDA data fields with industry data 

standards would benefit financial 

institutions. Currently, HMDA data are 

submitted in the loan application 

register format, except for financial 

institutions that report 25 or fewer 

entries, which may submit their loan 

application register entries in paper 

format.624 The current loan application 


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625These estimates do not include potential cost 

savings from proposed changes in operations 

including geocoding, DES process and help sources. 

626These estimates do not include potential cost 

savings from proposed changes in operations 

including geocoding, DES process and help sources. 

register format may not be directly 

compatible with the records of mortgage 

loan applications in loan origination 

systems and may have created extra 

burden on financial institutions that had 

to use additional software and modify 

data in existing systems in order to 

submit HMDA data in the proper 

format. 

The Bureau believes that the burden 

associated with Regulation C 

compliance and data submission can be 

reduced by aligning the requirements of 

Regulation C to existing industry 

standards for collecting and transmitting 

data on mortgage loans and 

applications. Promoting consistent data 

standards for both industry and 

regulatory use has benefits for market 

efficiency, market understanding, and 

market oversight. The efficiencies 

achieved by such alignment should 

grow over time, as the industry moves 

toward common data standards 

platforms. In light of these 

considerations, the Bureau is proposing 

to align the HMDA data requirements, to 

the extent practicable, with the widelyused MISMO standards for residential 

mortgages, including the ULDD that is 

used in the delivery of loans to the 

government-sponsored entities. 

For example, many lenders already 

separately identify second residence 

and investment properties in their 

underwriting process and LOS. Separate 

enumeration of these properties is 

present in MISMO/ULDD. Therefore, 

aligning to industry standards would 

reduce burden for financial institutions 

by maintaining the same definition for 

HMDA reporting that they use in the 

ordinary course of business. Smaller, 

less-complex financial institutions will 

experience fewer potential benefits 

because these institutions rely on more 

manual reporting processes and are 

more likely to originate portfolio loans 

where MISMO/ULDD may have not 

been adopted. 

Among current HMDA data fields, 

property type, occupancy, and lien 

status will be modified to align with 

MISMO/ULDD. This alignment will 

reduce costs for training and researching 

questions. The Bureau estimates that 

this alignment will reduce operational 

costs by approximately $100, $900, and 

$8,600 per year for representative tier 3, 

2, and 1 financial institutions, 

respectively.625 This translates into a 

market-level impact of $3,300,000 to 

$6,500,000 per year. Using a 7 percent 

discount rate, the net present value of 

this savings over five years is 

$13,500,000 to $26,800,000. With the 

inclusion of proposed operational 

improvements, the estimated reduction 

in operational costs is approximately 

$100, $850, and $8,400 per year for 

representative tier 3, tier 2, and tier 1 

financial institutions, respectively. This 

translates into a market-level savings of 

$3,200,000 to $6,200,000 per year. The 

net present value of this savings over 

five years is $13,000,000 to $25,500,000. 

The Bureau seeks comment about the 

potential impact on financial 

institutions of aligning the HMDA data 

requirements with MISMO/ULDD data 

standards. 

Current HMDA data points—ongoing 

costs to covered persons. Specific to the 

current set of HMDA data points, the 

proposed rule increases the number of 

data fields by four and alters the 

information provided for eight other 

fields. The cost impact of these changes 

on covered persons will vary by data 

field. For example, some data fields may 

depend on multiple sub-components or 

information from multiple platforms. To 

capture these potential differences, the 

Bureau estimated different costs 

depending on whether a proposed data 

field is aligned with ULDD, MISMO, or 

another regulation, or is a completely 

new variable. 

Adding three new variables (denial 

reasons) and one variable aligned with 

ULDD (occupancy status) increases 

costs because financial institutions now 

have to report four additional fields. 

Adding these additional data fields 

increases the costs of transcribing data, 

transferring data to HMS, conducting 

annual edits/checks, and conducting 

external audits. The Bureau estimates 

that this component of the proposed 

rule would increase operational costs by 

approximately $135, $860, and $2,200 

per year for representative tier 3, tier 2, 

and tier 1 financial institutions, 

respectively.626 Property type would be 

a new data field for all reporters, while 

denial reason would only be a new data 

field for reporters currently choosing 

not to report it. In the 2012 HMDA data, 

approximately 30 percent of HMDA 

reporters did not provide denial 

reasons, and approximately 20 percent 

of all denials did not have data 

regarding the reason for denial. Further 

analysis reveals that, compared to other 

HMDA reporters, HMDA reporters 

currently providing data regarding 

denial reasons had larger loan 

application registers and reported 

almost twice as many denials. 

Therefore, requiring mandatory 

reporting of denial reasons will only 

impact about 30 percent of reporters, 

and these reporters will likely be 

smaller institutions. With all reporters 

having to start reporting the additional 

property type data field and 30 percent 

of reporters having to start reporting the 

denial reasons, the Bureau estimates the 

market-level cost of this proposed 

change to be between $770,000 and 

$2,400,000. Using a 7 percent discount 

rate, the net present value of the cost 

increase over five years is $3,100,000 to 

$9,800,000. 

With the inclusion of the operational 

improvements the Bureau is 

considering, the proposed rule will 

increase operational costs by 

approximately $105, $550, and $1,680 

per year for representative tier 3, tier 2, 

and tier 1 financial institutions, 

respectively. This translates into a 

market-level cost of between $570,000 

and $1,500,000. Using a 7 percent 

discount rate, the net present value over 

five years would be a cost increase of 

$2,300,000 to $6,000,000. 

The primary cost impact of modifying 

eight existing data fields, three of which 

would align with ULDD, will be 

increases in one-time costs to modify 

current reporting policies and 

procedures, update software systems, 

and conduct training and planning. 

These cost impacts will generally be 

addressed in the discussion of one-time 

costs below, except for the proposed 

requirement that financial institutions 

obtain and report an LEI instead of the 

current reporter’s ID. The Bureau 

estimates that the one-time cost of 

acquiring an LEI is approximately $200 

with an ongoing cost of approximately 

$100 per year. This translates into an 

estimated market-level impact of 

$1,480,000 in one-time costs and an 

increase of $740,000 in ongoing costs 

per year. For one-time costs, using a 7 

percent discount rate and five-year 

window, the annualized cost is 

$361,000. For ongoing costs, using a 7 

percent discount rate, the net present 

value over five years is an increase in 

costs of approximately $3,000,000. 

Current HMDA data points— 

alternatives considered. The Bureau did 

not consider any other alternative 

proposals that would have impacted the 

current HMDA data points. 

New HMDA data points. The 

proposed rule requires financial 

institutions to report 37 additional data 

fields under HMDA. This number does 

not include unique loan ID, rate spread 

for all originations, or total units, each 

of which replaces a data field currently 

reported under HMDA. The Dodd-Frank 

Act identified 13 additional data points. 

Excluding unique loan ID and rate 


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627Some data fields were aligned with multiple 

sources. For example, total points and fees is 

aligned with ULDD and Regulation Z. For the 

consideration of costs and benefits, the Bureau 

assigned each data field to one source. The 

following hierarchy was used for data fields aligned 

to multiple sources: (1) ULDD, (2) MISMO, (3) 

another regulation, and (4) not aligned to another 

source. 

spread, which replace data fields 

currently reported under HMDA, the 

remaining 11 Dodd-Frank Act-identified 

data points translate into 17 data fields 

financial institutions would have to 

report on their loan application 

registers. To fill information and data 

gaps, the Bureau is proposing to add 13 

additional data points, which translates 

into 20 data fields financial institutions 

would have to report on their loan 

application register. For these 37 

additional data fields, 19 are aligned 

with ULDD, two are aligned with 

MISMO, one is aligned with another 

regulation. The remaining 15 data fields 

are not in MISMO or ULDD, or aligned 

with another regulation.627

New HMDA data points—benefits to 

consumers. The proposed additional 

data points would have several benefits 

to consumers. First, the proposed 

additional fields will improve the 

usefulness of HMDA data for analyzing 

mortgage markets by regulators and the 

public. For example, data points such as 

non-amortizing features, introductory 

interest rate, prepayment penalty, and 

home-equity line of credit indicator are 

related to certain high-risk lending 

concerns, and reporting this information 

will enable a better understanding of the 

types of products and features 

consumers are receiving. Recent 

research has indicated that each of these 

products and product characteristics 

have increased likelihoods of default 

and foreclosure and may have 

exacerbated the recent housing crisis. In 

addition to being better able to identify 

some of the risk factors that played a 

role in the recent financial crisis, adding 

additional data points on pricing and 

underwriting will improve current 

research efforts to understand mortgage 

markets. All of these enhancements will 

allow for improved monitoring of trends 

in mortgage markets and help identify 

and prevent problems that could 

potentially harm consumers and society 

overall. 

Second, the additional data points 

will improve current policy efforts 

designed to address various market 

failures. As discussed previously, the 

mortgage market is characterized by 

information asymmetry and this 

inherent deficiency was made apparent 

during the financial crisis. In response 

to the recent financial crisis, the 

government has pursued a number of 

policies aimed at regulating the market 

and protecting consumers. The 

additional data points being proposed 

will help inform future policy-making 

efforts by improving consideration of 

the benefits and costs associated with 

various choices, resulting in more 

effective policy. As an example, many 

recent regulations have limited the 

types of risky mortgage products that 

lenders can make to borrowers without 

fully considering borrowers’ ability to 

repay. New data fields on nonamortizing features, introductory 

interest rate, prepayment penalty, debitto-income ratio, and the qualified 

mortgage indicator can assist future 

assessment of the effectiveness of such 

regulations and facilitate adjustments 

when needed. 

Third, the additional data points will 

help determine whether financial 

institutions are serving the housing 

needs of their communities and help 

public officials target public investment 

to better attract private investment. For 

example, the proposed data points 

related to manufactured housing would 

reveal more information about this 

segment of the market. Borrowers in 

manufactured housing are typically 

more financially vulnerable than 

borrowers in site-built housing and may 

deserve closer attention from 

government agencies and community 

groups. Similarly, the proposed data 

points related to multifamily dwellings 

would reveal more information about 

this segment of the market, which 

mostly serves low- to mid-income 

renters who live in these financed units. 

Advocacy groups and government 

agencies have raised concerns over 

affordability issues faced by individuals 

living in multifamily dwellings, who 

also tend to be more financially 

vulnerable. Overall, by permitting a 

better and more comprehensive 

understanding of these markets, the 

proposal will improve the usefulness of 

HMDA data for assessing the supply and 

demand of credit, and financial 

institutions’ treatment of applicants and 

borrowers in these communities. 

Fourth, the Bureau believes that the 

additional data points will improve 

current processes used to identify 

possible discriminatory lending patterns 

and enforce antidiscrimination statutes. 

Financial regulators and enforcement 

agencies use HMDA data in their initial 

prioritization and screening processes to 

select institutions for examination and 

as the base dataset during fair lending 

reviews. The additional data will allow 

for improved segmentation during these 

analyses, so that applications are 

compared to other applications for 

similar products. For example, 

underwriting and pricing policies often 

differ for open-end lines of credit, 

home-equity loans, reverse mortgages, 

and products with different 

amortization types. Currently, these 

products are all combined during 

prioritization and screening analyses. 

With additional data fields identifying 

these products, separate analyses can be 

conducted for each product, which will 

more accurately reflect outcomes for 

consumers. As a second example, 

pricing often differs across delivery 

channels, because pricing policies and 

processing differ, and because 

intermediaries, such as brokers, add an 

additional layer requiring 

compensation. The addition of the 

origination channel data point will 

permit the separation of originations for 

pricing analyses, allowing for a better 

understanding of the drivers of pricing 

outcomes. Improved segmentation 

improves the accuracy of fair lending 

analyses, which improves the 

usefulness of HMDA to identify 

potentially disadvantaged consumers. 

The additional data points on pricing 

will greatly improve the usefulness of 

HMDA data for assessing pricing 

outcomes. Currently, the rate spread 

data field is the only quantitative 

pricing measure included in the current 

HMDA data . This data field includes 

rate spread data only for higher-priced 

mortgage loans, which currently 

comprise less than 5 percent of 

originated loans in the HMDA data. 

Thus, in today’s environment, and for 

the foreseeable future, the usefulness of 

this data field is highly limited. In 

addition, mortgage products and pricing 

structure are inherently complex. APR 

alone, though useful and recognizable to 

borrowers, fails to capture the true cost 

of a mortgage loan. Adding discount 

points, interest rate, and risk-adjusted, 

pre-discounted interest rate will provide 

a much clearer understanding of the 

trade-offs between rates and points that 

are the foundation of mortgage pricing. 

The total points and fees and 

origination-charge data fields will 

provide a deeper understanding of the 

third component of mortgage pricing: 

Fees. 

Many of the additional data points 

capture legitimate factors financial 

institutions use in underwriting and 

pricing that are currently lacking in the 

HMDA data, helping regulators and 

government enforcement agencies to 

better understand disparities in 

outcomes. Many, if not all, lenders 

consider data points such as credit 

score, CLTV, DTI, and AUS results 

when either underwriting or pricing 

mortgage applications. The addition of 


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628The Bureau realizes that the impact to onetime costs varies by institution due to many factors, 

such as size, operational structure, and product 

complexity, and that this variance exists on a 

continuum that is impossible to fully capture. As 

a result, the one-time cost estimates will be high for 

some financial institutions, and low for others. 

these types of data points will help 

users understand patterns in 

underwriting and pricing outcomes and 

thus better assess the fair lending risk 

presented by those outcomes. 

Finally, the addition of the age data 

field will allow users to analyze 

outcomes for different age groups. 

Although consumers are protected 

against discrimination on the basis of 

age by ECOA and Regulation B, HMDA 

data lack a direct means of measuring 

the age of applicants, which limits the 

ability of government agencies and 

community groups to monitor and 

enforce the ECOA and Regulation B 

against age discrimination in mortgage 

markets. The addition of the age data 

field would provide a clearer 

understanding of different age groups. 

In particular, older individuals are one 

demographic group that is potentially at 

a higher risk of discrimination, as well 

as unfair, deceptive, or abusive acts or 

practices. This data is especially 

important as baby boomers enter 

retirement. The addition of the age data 

field would allow regulatory agencies 

and community groups to identify 

potential differential treatment of older 

Americans for various mortgage 

products. For example, reverse 

mortgages are designed to serve senior 

consumers and are priced based on age 

factors, providing an illustration of the 

importance of adding this data field to 

the HMDA data. The age data field will 

allow users of HMDA data to better 

understand reverse mortgages, 

increasing HMDA’s usefulness for 

assessing whether financial institutions 

are meeting the credit needs of older 

populations in their communities when 

offering these products. Age data might 

also help inform housing policies 

designed to assist seniors in maintaining 

or obtaining home ownership, and 

building or utilizing home equity for 

improved social welfare. 

All of these improvements would 

reduce the false positive rates that occur 

when inadequate information causes 

regulators and enforcement agencies to 

initially misidentify financial 

institutions with low fair lending risk as 

having high risk of fair lending 

violations. Better alignment between the 

degrees of regulatory scrutiny and fair 

lending risk would increase the 

likelihood of identifying any instances 

where consumers are being illegally 

disadvantaged, thereby ultimately 

benefitting consumers. 

New HMDA data points—costs to 

consumers. The proposed addition of 37 

data fields will not impose any direct 

costs on consumers. Consumers may 

bear some indirect costs if financial 

institutions pass on some or all of the 

costs imposed on them by the proposed 

rule. Following microeconomic 

principles, the Bureau believes that 

financial institutions will pass on 

increased variable costs to future 

mortgage applicants, but absorb onetime costs and increased fixed costs if 

markets are perfectly competitive and 

financial institutions are profit 

maximizers. The Bureau estimates that 

the impact of the additional 37 data 

fields on variable costs per application 

is approximately $12 for a 

representative tier 3 financial 

institution, $0.30 for a representative 

tier 2 financial institution, and $0.03 for 

a representative tier 1 financial 

institution. This expense will be 

amortized over the life of the loan and 

represents a negligible increase in the 

cost of a mortgage loan. Therefore, the 

Bureau does not anticipate any material 

adverse effect on credit access in the 

long or short term if financial 

institutions pass on these costs to 

consumers. 

During the Small Business Review 

Panel process, some small entity 

representatives noted that they would 

attempt to pass on all increased 

compliance costs associated with the 

proposed rule, but that this would be 

difficult in the current market where 

profit margins for mortgages are tight. In 

addition, some small entity 

representatives noted that they would 

attempt to pass on costs through higher 

fees on other products offered, leave 

geographic or product markets, or spend 

less time on customer service. 

New HMDA data points—benefits to 

covered persons. The Bureau believes 

that the additional data points will 

improve current processes used to 

identify possible discriminatory lending 

patterns, which could greatly reduce the 

burden of financial institutions subject 

to fair lending examinations or 

investigations. Financial regulators and 

enforcement agencies use HMDA data in 

their initial prioritization and screening 

processes to select institutions for 

examination or investigation, and as the 

base dataset during fair lending reviews. 

During prioritization analyses, the 

additional data points will provide 

information about the legitimate factors 

used in underwriting and pricing that 

are currently lacking in the HMDA data, 

helping government agencies better 

understand disparities in outcomes. 

They will also allow for improved 

segmentation, so that applications are 

compared to other applications for 

similar products. The additional data 

points on pricing will greatly enhance 

screening analyses of pricing decisions. 

All of these improvements will reduce 

false positives resulting from inadequate 

information. Examination resources will 

be used more efficiently, so that lenders 

at low risk of fair lending violations 

receive a reduced level of regulatory 

scrutiny. 

New HMDA data points—one-time 

costs to covered persons. The proposed 

rule will impose one-time costs on 

HMDA reporters. Management, 

operation, legal, and compliance 

personnel will likely require time to 

learn the new reporting requirements 

and assess legal and compliance risks. 

Financial institutions that use vendors 

for HMDA compliance will incur onetime costs associated with software 

installation, troubleshooting, and 

testing. The Bureau is aware that these 

activities will take time and that the 

costs may be sensitive to the time 

available for them. Financial 

institutions that maintain their own 

reporting systems will incur one-time 

costs to develop, prepare, and 

implement the necessary modifications 

to those systems. In all cases, financial 

institutions will need to update training 

materials to reflect new requirements 

and may have certain one-time costs for 

providing initial training to current 

employees. The Bureau expects these 

one-time costs to be relatively small for 

less complex financial institutions. 

These entities use less complex 

reporting processes, so the tasks 

involved are more manual than 

automated and new requirements may 

involve greater use of established 

processes. As a result, compliance 

would likely require straightforward 

changes in systems and workplace 

practices and therefore impose 

relatively low one-time costs. 

The Bureau estimates the additional 

reporting requirements would impose 

on average estimated one-time costs of 

$3,000 for tier 3 financial institutions, 

$250,000 for tier 2 financial institutions, 

and $800,000 for tier 1 financial 

institutions and without considering the 

expansion of transactional coverage to 

include mandatory reporting of all 

open-end lines of credit, home-equity 

loans, and reverse mortgages.628

Including the estimated one-time costs 

to modify processes and systems for 

home-equity products, the Bureau 

estimates that the total one-time costs 

would be $3,000 for tier 3 institutions, 

$375,000 for tier 2 institutions, and 

$1,200,000 for tier 1 institutions. In 

total, this yields an overall market 


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51842 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

629The Bureau estimated the total non-interest 

expense for banks, thrifts and credit unions that 

reported to HMDA based on Call Report and NCUA 

Call Report data for depository institutions and 

credit unions, and NMLS data for non-depository 

insitutions, all matched with 2012 HMDA reporters. 

impact between $383,000,000 and 

$2,100,000,000. Using a 7 percent 

discount rate and a five-year 

amortization window, the annualized 

one-time cost is $93,400,000 to 

$514,900,000. As a frame of reference 

for these market-level, one-time cost 

estimates, the total non-interest 

expenses of current HMDA reporters 

were approximately $420 billion in 

2012. The upper bound estimate of $2.1 

billion is approximately 0.5 percent of 

the total annual non-interest 

expenses.629 Because these costs are 

one-time investments, financial 

institutions are expected to amortize 

these costs over a period of years. 

The Bureau has taken a conservative 

approach to estimating the one-time 

costs because of the uncertainty 

regarding how many financial 

institutions belong to each of the three 

representative tiers. Thus, the Bureau 

has mapped out all possible 

distributions to arrive at the lower 

bound and higher bound cost estimates, 

as explained in part VI.F.2, above. The 

Bureau hopes to obtain more 

information on the distribution of 

financial institutions across the three 

tiers and to refine its estimate of these 

one-time costs through feedback 

received during the rulemaking process. 

In particular, the Bureau seeks 

additional information on the number of 

HMDA reporters that are moderate 

complexity, tier 2 institutions. 

The Bureau has taken a conservative 

approach to estimating the one-time 

costs because of the uncertainty 

regarding how many financial 

institutions belong to each of the three 

representative tiers. Thus, the Bureau 

has mapped out all possible 

distributions to arrive at the lower 

bound and higher bound cost estimates, 

as explained in part VI.F.2, above. The 

Bureau hopes to obtain more 

information on the distribution of 

financial institutions across the three 

tiers and to refine its estimate of these 

one-time costs through feedback 

received during the rulemaking process. 

In particular, the Bureau seeks 

additional information on the number of 

HMDA reporters that are moderate 

complexity, tier 2 institutions. 

New HMDA data points—ongoing 

costs to covered persons. The proposed 

rule requires financial institutions to 

report 37 additional data fields under 

HMDA. Adding these additional data 

fields increases the cost of many 

operational steps required to report 

data, including transcribing data, 

transferring data to HMS, conducting 

annual edits/checks, and conducting 

external audits. The Bureau estimates 

that the impact of the additional 37 data 

fields on annual operational costs is 

approximately $13,200 for a 

representative tier 3 financial 

institution, $8,400 for a representative 

tier 2 financial institution, and $20,800 

for a representative tier 1 financial 

institution. This translates into a 

market-level cost of $15,500,000 to 

$48,400,000 per year. Using a 7 percent 

discount rate, the net present value of 

this cost over five years is $63,500,000 

to $198,500,000. With the inclusion of 

the operational improvements, the 

estimated increase in the operational 

cost of reporting these 37 additional 

data fields is approximately $1,100, 

$5,300 and $15,700 per year for 

representative tier 3, tier 2, and tier 1 

financial institutions, respectively. This 

translates into a market-level cost of 

$12,600,000 to $32,100,000 per year. 

The net present value of this impact 

over five years would be a cost increase 

of $51,800,000 to $131,800,000. 

New HMDA data points—alternatives 

considered. During the rulemaking 

process, the Bureau considered a wide 

range of data fields identified during 

internal discussions, as well as through 

outreach efforts to other regulatory 

agencies, community groups, and 

industry. These alternative data fields 

included such items as identification of 

whether an applicant or borrower is 

self-employed, a military member, or a 

first-time homeowner; loan performance 

indicators; Principal, Interest, Taxes, 

and Insurance payment (PITI); and 

initial pricing offer. Although the cost of 

reporting varies by data field, the 

general estimated impact of an 

additional data field on operational 

costs per year is approximately $35 for 

a representative tier 3 financial 

institution, $230 for a representative tier 

2 financial institution, and $560 for a 

representative tier 1 financial 

institution. The benefits are more 

difficult to measure, so it was not 

possible to identify which data fields to 

include by directly comparing costs and 

benefits. The Bureau believes that the 

proposed data points advance HMDA’s 

statutory purposes while reducing 

unnecessary burden on financial 

institutions. However, the Bureau seeks 

additional comment and data to better 

understand the costs and benefits of 

data points. Specifically, the Bureau 

seeks additional comment and data on 

the one-time and ongoing costs of 

implementing each proposed new data 

point, which data points are more costly 

to gather and report and estimates of the 

amount of this additional cost, and 

supporting explanations. The Bureau is 

also seeking information on what data 

points are applicable to specific 

products, or whether there are any 

alternatives to or adjustments in each 

data point that would reduce burden on 

small while still meeting the purposes 

of HMDA. 

6. The Proposed Modifications to 

Disclosure and Reporting Requirements 

The proposed rule would make 

several changes to the disclosure and 

reporting requirements under 

Regulation C. Regulation C currently 

requires that a financial institution must 

make its ‘‘modified’’ loan application 

register available to the public after 

removing three fields to protect 

applicant and borrower privacy: The 

application or loan number, the date 

that the application was received, and 

the date action was taken. The Bureau’s 

proposal would require that financial 

institutions make available to the public 

a modified loan application register 

showing only the data fields that are 

currently released on the modified loan 

application register. The proposal 

would also permit a financial institution 

to make its disclosure statement 

available to the public by making 

available a notice that clearly conveys 

that the disclosure statement may be 

obtained on the FFIEC Web site and that 

includes the FFIEC’s Web site address. 

The Bureau is also proposing to require 

that a financial institution that reported 

at least 75,000 covered loans, 

applications, and purchased covered 

loans, combined, for the preceding 

calendar year submit its loan 

application registers to the Bureau or 

appropriate agency on a quarterly, 

rather than annual, basis. Finally, the 

proposal would eliminate the option for 

financial institutions with 25 or fewer 

reported transactions to submit the loan 

application register in paper format. 

Benefits to consumers. The proposals 

to require that financial institutions 

make available to the public a modified 

loan application register showing only 

the data fields that are currently 

released on the modified loan 

application register, to eliminate the 

option of paper reporting for financial 

institutions reporting 25 or fewer 

records, and to permit financial 

institutions to make their disclosure 

statements available to the public 

through a notice that clearly conveys 

that the disclosure statement may be 

obtained on the FFIEC Web site would 

have little direct benefit to consumers. 

These proposals do not change in any 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51843 

630See proposed § 1003.2(g). 

631 If proposed § 1003.2(g) is adopted and the 

Bureau continues to allow a financial institution 

that reports 25 or fewer entries on its loan 

application register to submit its register in paper 

format, only a financial institution that originated 

exactly 25 covered loans would be eligible to 

submit its register in paper format. 

significant way either the substance of 

the information required to be reported 

or the manner in which this information 

is collected or released to the public. 

However, quarterly reporting by 

financial institutions that reported at 

least 75,000 transactions in the 

preceding calendar year may have a 

number of benefits to consumers. 

Currently, there is significant delay 

between the time that final action is 

taken on an application and the time 

this information about the application 

or loan is reported to the Bureau and the 

appropriate agencies under HMDA. This 

time delay ranges from 2 months if the 

date of final action occurs during 

December to 14 months if the date of 

final action occurs during January. The 

Bureau believes that timelier data would 

improve the ability of the Bureau and 

the appropriate agencies to identify 

current trends in mortgage markets, 

detect early warning signs of future 

housing finance crises, and determine, 

in much closer to ‘‘real time,’’ whether 

financial institutions are fulfilling their 

obligations to serve the housing needs of 

communities in which they are located. 

Timelier identification of risks to 

mortgage markets and troublesome 

trends by the Bureau and the 

appropriate agencies would allow for 

more effective interventions by public 

officials. Finally, although the Bureau 

currently does not plan for the FFIEC to 

release HMDA data to the public more 

frequently than annually, it believes that 

quarterly reporting may allow the 

Bureau and FFIEC to expedite the 

disclosure of annual HMDA data to the 

public because it would permit the 

processing of a significant volume of 

HMDA data throughout the year. 

Because, based on 2012 data, financial 

institutions that would be subject to 

quarterly reporting likely would report 

approximately 50 percent of all reported 

transactions, the benefits described 

above would relate to a substantial 

segment of the mortgage market. 

Benefits to covered persons. The 

Bureau believes that the proposals to 

require that financial institutions make 

available to the public a modified loan 

application register showing only the 

data fields that are currently released on 

the modified loan application register, 

to eliminate the option of paper 

reporting for financial institutions 

reporting 25 or fewer records, and to 

require quarterly reporting for financial 

institutions that reported at least 75,000 

transactions in the preceding calendar 

year would provide little benefit to 

covered persons. However, the proposal 

to permit a financial institution to make 

its disclosure statements available to the 

public through a notice that clearly 

conveys that the disclosure statement 

may be obtained on the FFIEC Web site 

would free financial institutions from 

having to print and download their 

disclosure statements in order to 

provide them to requesters. Initial 

outreach efforts indicated that tier 3 

financial institutions rarely receive 

requests for disclosure statements. 

However, some tier 3 financial 

institutions indicated that they 

nevertheless download and print a 

disclosure statement in preparation for 

requests. The Bureau has represented 

this cost as equivalent to receiving 1 

request for a disclosure statement each 

year. The Bureau estimates that tier 2 

and tier 1 financial institutions receive 

3 and 15 requests for disclosure 

statements each year, respectively. 

Based on these estimated volumes, the 

Bureau estimates that this proposed 

change would reduce ongoing 

operational costs by approximately $15 

per year for a representative tier 3 

financial institution, approximately $40 

per year for a representative tier 2 

financial institution, and approximately 

$210 per year for a representative tier 1 

financial institution. This translates into 

a market-level reduction in cost of 

approximately $161,000 to $278,000 per 

year. Using a 7 percent discount rate, 

the net present value of this savings 

over five years is $659,000 to 

$1,140,000. 

Costs to consumers. The proposals to 

require that financial institutions make 

available to the public a modified loan 

application register showing only the 

data fields that are currently released on 

the modified loan application register, 

to eliminate the option of paper 

reporting for financial institutions 

reporting 25 or fewer records, and to 

require quarterly reporting by financial 

institutions that reported at least 75,000 

transactions in the preceding year 

would not impose any direct costs on 

consumers. Permitting financial 

institutions to make their disclosure 

statements available to the public 

through notices that clearly convey that 

the disclosure statements may be 

obtained on the FFIEC Web site would 

require consumers to obtain these 

disclosure statements online. Given the 

prevalence of internet access and the 

ease of using the FFIEC Web site, the 

Bureau also believes this proposal will 

impose minimal direct costs on 

consumers. Any potential costs to 

consumers of obtaining disclosure 

statements online are likely no greater 

than the costs of obtaining disclosure 

statements from the physical offices of 

financial institutions, or from a floppy 

disk or other electronic data storage 

medium that may be used with a 

personal computer, as contemplated in 

HMDA section 304(k)(1)(b). 

However, consumers may bear some 

indirect costs of the proposed changes if 

financial institutions pass on some or all 

of their increased costs to consumers. 

Following microeconomic principles, 

the Bureau believes that financial 

institutions will pass on increased 

variable costs to future loan applicants, 

but absorb one-time costs and increased 

fixed costs if financial institutions are 

profit maximizers and the market is 

perfectly competitive. The Bureau 

defines variable costs as costs that 

depend on the number of applications 

received. Based on initial outreach 

efforts, five of the 18 operational tasks 

are variable cost tasks: Transcribing 

data, resolving reportability questions, 

transferring data to an HMS, geocoding, 

and researching questions. The Bureau 

believes that the four proposed changes 

discussed in this section would have 

either no, or only a minimal, effect on 

these variable cost tasks. The proposal 

to require that financial institutions 

make available to the public a modified 

loan application register showing only 

the data fields that are currently 

released on the modified loan 

application register will not impact any 

operational step. Eliminating the option 

of paper reporting for financial 

institutions reporting 25 or fewer 

records may increase transcribing costs 

for financial institutions that qualify for 

this option and currently report HMDA 

data in paper form. However, the 

Bureau believes that the number of 

financial institutions that report in 

paper format is very low. Also, if the 

proposal to exclude from the definition 

of financial institution any institution 

that originated less than 25 covered 

loans, excluding open-end lines of 

credit, is adopted,630 the number of 

financial institutions that would be 

eligible to submit their loan application 

register in paper format would be 

significantly reduced.631 Finally, as part 

of its efforts to improve and modernize 

HMDA operations, the Bureau is 

considering various improvements to 

the HMDA data submission process that 

should reduce even further the need for 

institutions to compile and submit their 

HMDA data in paper format. Given 

these factors and the small loan 

application register size at issue (25 or 


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51844 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

632The Bureau also estimates that this proposed 

change would increase ongoing operational costs by 

approximately $800 and $5000 per year for 

representative tier 3 and 2 institutions, respectively, 

were these institutions required to report quarterly. 

However, since the Bureau believes that all the 

financial institutions subject to quarterly reporting 

under the proposal would be tier 1 institutions, the 

estimates for tier 3 and tier 2 institutions have been 

excluded. 

fewer records), the Bureau estimates 

that the impact of this cost is negligible. 

Permitting financial institutions to make 

their disclosure statements available to 

the public through a notice that clearly 

conveys that the disclosure statement 

may be obtained on the FFIEC Web site 

would impact the ‘‘distributing 

disclosure report’’ task, but none of the 

variable cost tasks. Finally, requiring 

quarterly reporting by financial 

institutions that reported at least 75,000 

transactions in the preceding calendar 

year would affect annual edits and 

internal checks, checking postsubmission edits, filing post-submission 

edits, internal audits, and external 

audits. None of these tasks are variable 

cost tasks and hence would not lead 

financial institutions to pass through 

some of the incremental costs to 

consumers in a perfectly competitive 

market with profit-maximizing financial 

institutions. 

During the Small Business Review 

Panel process, some small entity 

representatives noted that they would 

attempt to pass on all increased 

compliance costs associated with the 

proposed rule, but that whether costs 

were passed on would depend upon the 

competiveness of the market in which 

they operate, especially for smaller 

financial institutions. In addition, some 

small entity representatives noted that 

they would attempt to pass on costs 

through higher fees on other products, 

would leave geographic or product 

markets, or would spend less time on 

customer service. To the extent that 

lenders are able to pass on a greater 

amount of these compliance costs, the 

costs to consumers would be slightly 

larger than the estimates described 

above. Nevertheless, the Bureau still 

believes that the potential costs that 

would be passed on to consumers are 

small. 

Ongoing costs to covered persons. The 

Bureau believes that the proposals to 

require that financial institutions make 

available to the public a modified loan 

application register showing only the 

data fields that are currently released on 

the modified loan application register 

and to permit financial institutions to 

make their disclosure statements 

available through a notice that clearly 

conveys that the disclosure statement 

may be obtained on the FFIEC Web site 

would not impact ongoing costs to 

covered persons. Leaving the modified 

loan application register in its current 

state would require financial 

institutions to redact additional 

proposed data fields, but the ongoing 

costs of doing so are negligible. 

Eliminating the option of paper 

reporting for financial institutions 

reporting 25 or fewer records may 

increase transcribing costs for financial 

institutions that currently maintain all 

HMDA data in paper form. However, as 

discussed above, the Bureau believes 

that the number of financial institutions 

that do this is very low, and given 

proposed changes to the institutional 

coverage criteria, potential 

improvements to the data submission 

process under consideration, and the 

small size of the loan application 

register at issue (25 or fewer records), 

the Bureau estimates that the impact of 

this cost is negligible. 

Requiring quarterly reporting by 

financial institutions that reported at 

least 75,000 transactions in the 

preceding calendar year would increase 

ongoing costs to covered persons, as 

costs would increase for annual edits 

and internal checks, checking postsubmission edits, filing post-submission 

edits, internal audits, and external 

audits. The Bureau estimates that this 

proposed change would increase 

ongoing operational costs by 

approximately $19,000 per year for a 

representative tier 3 financial 

institutions.632

Based on 2012 HMDA data, 28 

financial institutions reported at least 

75,000 transactions in the preceding 

calendar year, which is substantially 

larger than the average loan application 

register sizes of the representative tier 3 

(50 records), tier 2 institutions (1,000 

records), and tier 1 institutions (50,000) 

assumed by the Bureau. Therefore, the 

Bureau believes that it is reasonable to 

regard all of these institutions as tier 1 

HMDA reporters. This yields an 

estimated market cost of $532,000 

(=28*19000). Using a 7 percent discount 

rate, the net present value of this impact 

over five years would be approximately 

an increase in costs of $2,200,000. 

One-time costs to covered persons. 

The Bureau believes that the proposals 

to require that financial institutions 

make available to the public a modified 

loan application register showing only 

the data fields that are currently 

released on the modified loan 

application register, to permit financial 

institutions to make their disclosure 

statements available through a notice 

that clearly conveys that the disclosure 

statement may be obtained on the FFIEC 

Web site, and to require quarterly 

reporting by financial institutions that 

reported at least 75,000 transactions in 

the preceding calendar year would not 

impose any significant one-time costs 

on covered persons. Although leaving 

the modified loan application register in 

its current state would require financial 

institutions to develop the capability to 

redact additional data fields from the 

loan application register, the Bureau 

views the cost of doing so as 

insubstantial because financial 

institutions already possess the 

infrastructure necessary to redact 

information prior to publicly disclosing 

the modified loan application register. 

Reporting HMDA data on a quarterly 

basis would require repetition of 

processes currently in place, and 

eliminating the option of paper 

reporting would only impact ongoing 

transcription costs. 

The proposal to permit financial 

institutions to make their disclosure 

statements available to the public 

through a notice that clearly conveys 

that the disclosure statement may be 

obtained on the FFIEC Web site would 

require a one-time cost to create the 

notice. However the Bureau believes 

that the one-time cost to create this 

notice would be negligible. 

G. Potential Specific Impacts of the 

Proposed Rule 

1. Depository Institutions and Credit 

Unions With $10 Billion or Less in Total 

Assets, as Described in § 1026 

As discussed above, the proposed rule 

would exclude financial institutions 

with fewer than 25 originated covered 

loans, excluding open-end lines of 

credit; require reporting of home-equity 

lines of credit, home-equity loans, and 

reverse mortgages; exclude reporting of 

unsecured home improvement loans; 

modify current HMDA data points to 

address the Dodd-Frank Act 

amendments to HMDA and align the 

data points with industry data standards 

to the extent practicable; and add 

additional data points to implement the 

requirements of the Dodd-Frank Act and 

to fulfill the purposes of HMDA. 

The Bureau believes that the benefits 

of these proposed rules to depository 

institutions and credit unions with $10 

billion or less in total assets will be 

similar to the benefit to creditors as a 

whole, as discussed above. Regarding 

costs, other than as noted here, the 

Bureau also believes that the impact of 

the proposed rule on the depository 

institutions and credit unions with $10 

billion or less in total assets will be 

similar to the impact for creditors as a 

whole. The primary difference in the 

impact on these institutions is likely to 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51845 

633 Keith Wiley, Housing Assistance Council, 

What Are We Missing? HMDA Asset-Excluded 

Filers, (2011); Lance George and Keith Wiley, 

Housing Assistance Council, Improving HMDA: A 

Need to Better Understand Rural Mortgage Markets, 

(2010). 

634Robert B. Avery, Kenneth P. Brevoort, and 

Glenn B. Canner, Opportunities and Issues in Using 

HMDA Data, 29 J. of Real Estate Research 352 

(2007). 

635These counts exclude preapproval requests 

that were denied or approved but not accepted, 

because geographic information is typically not 

available for these transactions. 

636 If markets are not perfectly competitive or 

financial institutions are not profit maximizers then 

what financial institutions pass on may differ. For 

example, they may attempt to pass on one-time 

costs and increases in fixed costs, or they may not 

be able to pass on variable costs. 

637These cost estimates do not incorporate the 

impact of adding operational changes affecting 

geocoding, DES processing, and help sources. 

come from differences in the level of 

complexity of operations, compliance 

systems and software of these 

institutions. 

Based on Call Report data for 

December 2012, 13,998 of 14,110 

depository institutions and credit 

unions had $10 billion or less in total 

assets. The 112 depository institutions 

and credit unions with over $10 billion 

in assets are most likely tier 1 

institutions based on the Bureau’s 

definition. The 28 institutions that 

reported at least 75,000 transactions in 

the preceding calendar year and would 

be required to report quarterly with the 

proposals and are assumed to be tier 1 

institutions. Under these assumptions, 

the Bureau estimates that the marketlevel impact of the proposed rule on 

operational costs for depository 

institutions and credit unions with $10 

billion or less in total assets would be 

a cost of between $6,400,000 and 

$10,500,000. Using a discount rate of 7 

percent, the net present value of this 

cost over five years is between 

$26,200,000 and $42,800,000. Regarding 

one-time costs, the Bureau estimates 

that the market-level impact of the 

proposed rule for depository institutions 

and credit unions with $10 billion or 

less in total assets is between 

$186,400,000 and $1,700,000,000. Using 

a 7 percent discount rate and a five-year 

amortization window, the annualized 

one-time cost is $45,500,000 and 

$410,000,000. 

2. Impact of the Proposed Provisions on 

Consumers in Rural Areas 

The proposed provisions will not 

directly impact consumers in rural 

areas. However, as with all consumers, 

consumers in rural areas may bear some 

indirect costs of the proposal. This 

would occur if financial institutions 

serving rural areas are HMDA reporters 

and if these institutions pass on some or 

all of the cost increase to consumers. 

Recent research suggests that financial 

institutions that primarily serve rural 

areas are generally not HMDA 

reporters.633 The Housing Assistance 

Council (HAC) suggests that the asset 

and geographic coverage criteria 

disproportionately exempt small lenders 

operating in rural communities. For 

example, HAC uses 2009 Call Report 

data to show that approximately 700 

FDIC-insured lending institutions had 

assets totaling less than the HMDA 

institutional coverage threshold and 

were headquartered in rural 

communities. These institutions, which 

would not be HMDA reporters, may 

represent one of the few sources of 

credit for many rural areas. Research by 

economists at the Federal Reserve Board 

also suggests that HMDA’s coverage of 

rural areas is limited, especially areas 

further from MSAs.634 If a large portion 

of the rural housing market is serviced 

by financial institutions that are not 

HMDA reporters, any indirect impact of 

the proposed changes on consumers in 

rural areas would be limited, as the 

proposed changes directly involve none 

of those financial institutions. 

However, although some research 

suggests that HMDA currently does not 

cover a significant number of financial 

institutions serving the rural housing 

market, HMDA data do contain 

information for some covered loans 

involving properties in rural areas. 

These data can be used to estimate the 

number of HMDA reporters servicing 

rural areas, and the number of 

consumers in rural areas that might 

potentially be affected by the proposed 

changes to Regulation C. For this 

analysis, the Bureau uses non-MSA 

areas as a proxy for rural areas, with the 

understanding that portions of MSAs 

and non-MSAs may contain urban and 

rural territory and populations. In 2012, 

5,525 HMDA reporters reported 

applications or purchased loans for 

property located in geographic areas 

outside of an MSA.635 This count 

provides an upper bound of the estimate 

of the number of financial institutions 

that would be impacted by the proposed 

changes and that also might attempt to 

pass on these cost increases to 

consumers in rural areas. In total, these 

5,525 financial institutions reported 

1,925,937 applications or purchased 

loans for properties in non-MSA areas. 

This number provides an upper bound 

estimate of the number of consumers in 

rural areas that could be impacted 

indirectly by the proposed changes. In 

general, individual financial institutions 

report small numbers of covered loans 

from non-MSAs, as approximately 70 

percent reported fewer than 100 covered 

loans from non-MSAs. 

Following microeconomic principles, 

the Bureau believes that financial 

institutions will pass on increased 

variable costs to future mortgage 

applicants, but absorb one-time costs 

and increased fixed costs if financial 

institutions are profit maximizers and 

the market is perfectly competitive.636

The Bureau defines variable costs as 

costs that depend on the number of 

applications received. Based on initial 

outreach efforts, the following five 

operational steps affect variable costs: 

Transcribing data, resolving 

reportability questions, transferring data 

to an HMS, geocoding, and researching 

questions. The primary impact of the 

proposed rule on these operational steps 

is an increase in time spent per task. 

Overall, the Bureau estimates that the 

impact of the proposed rule on variable 

costs per application is $13 for a 

representative tier 3 financial 

institution, $0.20 for a representative 

tier 2 financial institution, and $0.11 for 

a representative tier 1 financial 

institution.637 The 5,525 financial 

institutions that serviced rural areas 

would attempt to pass these variable 

costs on to all future mortgage 

customers, including the estimated 2 

million consumers from rural areas. 

Amortized over the life of the loan, this 

expense would represent a negligible 

increase in the cost of a mortgage loan. 

Therefore, the Bureau does not 

anticipate any material adverse effect on 

credit access in the long or short term 

even if these financial institutions pass 

on these costs to consumers. 

During the Small Business Review 

Panel process, some small entity 

representatives noted that they would 

attempt to pass on all increased 

compliance costs associated with the 

proposed rule, but that this would 

depend upon the competiveness of the 

market in which they operate, especially 

for smaller financial institutions. In 

addition, some small entity 

representatives noted that they would 

attempt to pass on costs through higher 

fees on other products, exit geographic 

or product markets, or spend less time 

on customer service. To the extent that 

the market is less than perfectly 

competitive and the lenders are able to 

pass on a greater amount of these 

compliance costs, the costs to 

consumers would be slightly larger than 

the estimates described above. 

Nevertheless, the Bureau believes that 

the potential costs that would be passed 

on to consumers are small. 


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638 5 U.S.C. 601 et. seq. 

639 5 U.S.C. 603(a). For purposes of assessing the 

impacts of the proposed rule on small entities, 

‘‘small entities’’ is defined in the RFA to include 

small businesses, small not-for-profit organizations, 

and small government jurisdictions. 5 U.S.C. 601(6). 

A ‘‘small business’’ is determined by application of 

Small Business Administration regulations and 

reference to the North American Industry 

Classification System (NAICS) classifications and 

size standards. 5 U.S.C. 601(3). A ‘‘small 

organization’’ is any ‘‘not-for-profit enterprise 

which is independently owned and operated and is 

not dominant in its field.’’ 5 U.S.C. 601(4). A ‘‘small 

governmental jurisdiction’’ is the government of a 

city, county, town, township, village, school 

district, or special district with a population of less 

than 50,000. 5 U.S.C. 601(5). 

640 5 U.S.C. 605(b). 

641 5 U.S.C. 609. 

642 5 U.S.C. 609(b). 

643 5 U.S.C. 609(b)(1). 

644 5 U.S.C. 609(b)(2). 

645 5 U.S.C. 609(b)(3). 

646 5 U.S.C. 609(b)(4). As described in the IRFA 

in part VII.B, below, sections 603(b)(3) through 

(b)(5) and 603(c) of the RFA, respectively, require 

a description of and, where feasible, provision of an 

estimate of the number of small entities to which 

the proposed rule will apply; a description of the 

projected reporting, record keeping, and other 

compliance requirements of the proposed rule, 

including an estimate of the classes of small entities 

which will be subject to the requirement and the 

type of professional skills necessary for preparation 

of the report or record; an identification, to the 

extent practicable, of all relevant Federal rules 

which may duplicate, overlap, or conflict with the 

proposed rule; and a description of any significant 

alternatives to the proposed rule which accomplish 

the stated objectives of applicable statutes and 

which minimize any significant economic impact of 

the proposed rule on small entities. 5 U.S.C. 

603(b)(3)–(5), 603(c). 

647 5 U.S.C. 609(b)(5). 

648 5 U.S.C. 609(b)(6). 

Given the differences between rural 

and non-rural markets in structure, 

demand, supply, and competition level, 

consumers in rural areas may 

experience benefits and costs from the 

proposed rule that are different than 

those experienced by consumers in 

general. To the extent that the impacts 

of the proposal on creditors differ by 

type of creditor, this may affect the costs 

and benefits of the proposal on 

consumers in rural areas. The Bureau 

will further consider the impact of the 

proposed rule on consumers in rural 

areas. The Bureau therefore asks 

interested parties to provide data, 

research results, and other factual 

information on the impact of the 

proposed rule on consumers in rural 

areas. For example, this would include 

any evidence and supporting 

information indicating that access to 

credit would fall or the cost of credit 

would increase. 

H. Additional Analysis Being 

Considered and Request for Information 

The Bureau will further consider the 

benefits, costs and impacts of the 

proposed provisions and additional 

alternatives before finalizing the 

proposed rule. As noted above, there are 

a number of areas where additional 

information would allow the Bureau to 

better estimate the benefits, costs, and 

impacts of this proposed rule and more 

fully inform the rulemaking. The Bureau 

asks interested parties to provide 

comment or data on various aspects of 

the proposed rule, as detailed in the 

section-by-section analysis. 

VII. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (RFA) 

generally requires an agency to conduct 

an initial regulatory flexibility analysis 

(IRFA) and a final regulatory flexibility 

analysis (FRFA) of any rule subject to 

notice-and-comment rulemaking 

requirements.638 These analyses must 

‘‘describe the impact of the proposed 

rule on small entities.’’ 639 An IRFA or 

FRFA is not required if the agency 

certifies that the rule will not have a 

significant economic impact on a 

substantial number of small entities.640

The Bureau also is subject to certain 

additional procedures under the RFA 

involving the convening of a panel to 

consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.641

The Bureau has not certified that the 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities 

within the meaning of the RFA. 

Accordingly, the Bureau convened and 

chaired a Small Business Review Panel 

under the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) to 

consider the impact of the proposed rule 

on small entities that would be subject 

to that rule and to obtain feedback from 

representatives of such small entities. 

The Small Business Review Panel for 

this rulemaking is discussed below in 

part VII.A. 

The Bureau is publishing an IRFA. 

Among other things, the IRFA estimates 

the number of small entities that will be 

subject to the proposed rule and 

describes the impact of that rule on 

those entities. The IRFA for this 

rulemaking is set forth below in part 

VII.B. 

A. Small Business Review Panel 

Under section 609(b) of the RFA, as 

amended by SBREFA and the DoddFrank Act, the Bureau seeks, prior to 

conducting the IRFA, information from 

representatives of small entities that 

may potentially be affected by its 

proposed rules to assess the potential 

impacts of that rule on such small 

entities.642 Section 609(b) sets forth a 

series of procedural steps with regard to 

obtaining this information. The Bureau 

first notifies the Chief Counsel for 

Advocacy (Chief Counsel) of the SBA 

and provides the Chief Counsel with 

information on the potential impacts of 

the proposed rule on small entities and 

the types of small entities that might be 

affected.643 Not later than 15 days after 

receipt of the formal notification and 

other information described in section 

609(b)(1) of the RFA, the Chief Counsel 

then identifies the small entity 

representatives, the individuals 

representative of affected small entities 

for the purpose of obtaining advice and 

recommendations from those 

individuals about the potential impacts 

of the proposed rule.644 The Bureau 

convenes a Small Business Review 

Panel for such rule consisting wholly of 

full-time Federal employees of the office 

within the Bureau responsible for 

carrying out the proposed rule, the 

Office of Information and Regulatory 

Affairs (OIRA) within the OMB, and the 

Chief Counsel.645 The Small Business 

Review Panel reviews any material the 

Bureau has prepared in connection with 

the SBREFA process and collects the 

advice and recommendations of each 

individual small entity representative 

identified by the Bureau after 

consultation with the Chief Counsel on 

issues related to sections 603(b)(3) 

through (b)(5) and 603(c) of the RFA.646

Not later than 60 days after the date the 

Bureau convenes the Small Business 

Review Panel, the panel reports on the 

comments of the small entity 

representatives and its findings as to the 

issues on which the Small Business 

Review Panel consulted with the small 

entity representatives, and the report is 

made public as part of the rulemaking 

record.647 Where appropriate, the 

Bureau modifies the proposed rule or 

the IRFA in light of the foregoing 

process.648

In December 2013, the Bureau 

provided the Chief Counsel with the 

formal notification and other 

information required under section 

609(b)(1) of the RFA. To obtain feedback 

from small entity representatives to 

inform the Small Business Review Panel 

pursuant to sections 609(b)(2) and 

609(b)(4) of the RFA, the Bureau, in 

consultation with the Chief Counsel, 

identified three categories of small 

entities that may be subject to the 

proposed rule for purposes of the IRFA: 

Commercial banks and savings 

institutions, credit unions, and mortgage 

companies (i.e., nondepository mortgage 

lenders). Section 3 of the IRFA, in part 

VII.B.3, below, describes in greater 

detail the Bureau’s analysis of the 


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649The Bureau posted these materials on its Web 

site and invited the public to email remarks on the 

materials. See U.S. Consumer Fin. Prot. Bureau, 

Small Business Review Panel for Home Mortgage 

Disclosure Act Rulemaking: Outline of Proposals 

Under Consideration and Alternative Considered 

(Feb. 7, 2014) (Outline of Proposals), available at 

http://files.consumerfinance.gov/f/201402_cfpb_

hmda_outline-of-proposals.pdf. 

650This written feedback is attached as appendix 

A to the Small Business Review Panel Final Report 

discussed below. 

651 Final Report of the Small Business Review 

Panel on the CFPB’s Proposals Under Consideration 

for Home Mortgage Disclosure Act Rulemaking, 

dated April 28, 2014. As discussed above, this 

report is available on the Bureau’s Web site. 

652 5 U.S.C. 609(b)(5). 

653 5 U.S.C. 603(a). 

654 5 U.S.C. 603(b)(1). 655 5 U.S.C. 603(b)(2). 656 5 U.S.C. 603(b)(3). 657 5 U.S.C. 603(b)(4). 658 5 U.S.C. 603(b)(5). 659 5 U.S.C. 603(b)(6). 660 5 U.S.C. 603(d)(1); Public Law 111–203, 

section 1100G(d)(1). 

number and types of entities that may 

be affected by the proposed rule. Having 

identified the categories of small entities 

that may be subject to the proposed rule 

for purposes of an IRFA, the Bureau 

then, in consultation with the Chief 

Counsel, selected 20 small entity 

representatives to participate in the 

SBREFA process. As discussed in 

chapter 7 of the SBREFA Final Report, 

described below, the small entity 

representatives selected by the Bureau 

in consultation with the Chief Counsel 

included representatives from each of 

the categories identified by the Bureau 

and comprised a diverse group of 

individuals with regard to geography 

and type of locality (i.e., rural, urban, 

suburban, or metropolitan areas). 

On February 27, 2014, the Bureau 

formally convened the Small Business 

Review Panel pursuant to section 

609(b)(3) of the RFA. Afterwards, to 

collect the advice and recommendations 

of the small entity representatives under 

section 609(b)(4) of the RFA, the Small 

Business Review Panel held an outreach 

meeting/teleconference with the small 

entity representatives on March 6, 2014 

(Panel Outreach Meeting). To help the 

small entity representatives prepare for 

the Panel Outreach Meeting beforehand, 

the Small Business Review Panel 

circulated briefing materials prepared in 

connection with section 609(b)(4) of the 

RFA that summarized the proposals 

under consideration at that time, posed 

discussion issues, and provided 

information about the SBREFA process 

generally.649 All 20 small entity 

representatives participated in the 

outreach meeting either in person or by 

telephone. The Small Business Review 

Panel also provided the small entity 

representatives with an opportunity to 

submit written feedback until March 20, 

2014. In response, the Small Business 

Review Panel received written feedback 

from 15 of the representatives.650

On April 24, 2014, the Director of the 

Bureau, Richard Cordray, signed the 

written SBREFA Final Report 651

submitted by the Small Business Review 

panel that includes the following: 

Background information on the 

proposals under consideration at the 

time; information on the types of small 

entities that would be subject to those 

proposals and on the small entity 

representatives who were selected to 

advise the Small Business Review 

Panel; a summary of the Small Business 

Review Panel’s outreach to obtain the 

advice and recommendations of those 

small entity representatives; a 

discussion of the comments and 

recommendations of the small entity 

representatives; and a discussion of the 

Small Business Review Panel findings, 

focusing on the statutory elements 

required under section 603 of the 

RFA.652

In preparing this proposed rule and 

the IRFA, the Bureau has carefully 

considered the feedback from the small 

entity representatives participating in 

the SBREFA process and the findings 

and recommendations in the SBREFA 

Final Report. The section-by-section 

analysis of the proposed rule in part V, 

above, and the IRFA discuss this 

feedback and the specific findings and 

recommendations of the Small Business 

Review Panel, as applicable. The 

SBREFA process provided the Small 

Business Review Panel and the Bureau 

with an opportunity to identify and 

explore opportunities to minimize the 

burden of the rule on small entities 

while achieving the rule’s purposes. It is 

important to note, however, that the 

Small Business Review Panel prepared 

the SBREFA Final Report at a 

preliminary stage of the proposal’s 

development and that the SBREFA Final 

Report—in particular, the Small 

Business Review Panel’s findings and 

recommendations—should be 

considered in that light. Also, any 

options identified in the SBREFA Final 

Report for reducing the proposed rule’s 

regulatory impact on small entities were 

expressly subject to further 

consideration, analysis, and data 

collection by the Bureau to ensure that 

the options identified were practicable, 

enforceable, and consistent with HMDA, 

the Dodd-Frank Act, and their statutory 

purposes. The proposed rule and the 

IRFA reflect further consideration, 

analysis, and data collection by the 

Bureau. 

B. Initial Regulatory Flexibility Analysis 

Under RFA section 603(a), an IRFA 

‘‘shall describe the impact of the 

proposed rule on small entities.’’ 653

Section 603(b) of the RFA sets forth the 

required elements of the IRFA. Section 

603(b)(1) requires the IRFA to contain a 

description of the reasons why action by 

the agency is being considered.654

Section 603(b)(2) requires a succinct 

statement of the objectives of, and the 

legal basis for, the proposed rule.655 The 

IRFA further must contain a description 

of and, where feasible, an estimate of 

the number of small entities to which 

the proposed rule will apply.656 Section 

603(b)(4) requires a description of the 

projected reporting, recordkeeping, and 

other compliance requirements of the 

proposed rule, including an estimate of 

the classes of small entities that will be 

subject to the requirement and the types 

of professional skills necessary for the 

preparation of the report or record.657 In 

addition, the Bureau must identify, to 

the extent practicable, all relevant 

Federal rules which may duplicate, 

overlap, or conflict with the proposed 

rule.658 Furthermore, the Bureau must 

describe any significant alternatives to 

the proposed rule which accomplish the 

stated objectives of applicable statutes 

and which minimize any significant 

economic impact of the proposed rule 

on small entities.659 Finally, as 

amended by the Dodd-Frank Act, RFA 

section 603(d) requires that the IRFA 

include a description of any projected 

increase in the cost of credit for small 

entities, a description of any significant 

alternatives to the proposed rule which 

accomplish the stated objectives of 

applicable statutes and which minimize 

any increase in the cost of credit for 

small entities (if such an increase in the 

cost of credit is projected), and a 

description of the advice and 

recommendations of representatives of 

small entities relating to the cost of 

credit issues.660

1. Description of the Reasons Why 

Agency Action Is Being Considered 

As discussed in the background, part 

II above, for more than 30 years HMDA 

has required financial institutions to 

collect, report to regulators, and disclose 

to the public data about applications 

and originations of home mortgage 

loans. HMDA was intended to provide 

the public with information that can be 

used to help determine whether 

financial institutions are serving the 

housing needs of their communities, to 

assist public officials in distributing 

public-sector investment so as to attract 

private investment, and to assist in 

identifying possible discriminatory 


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lending patterns and enforcing 

antidiscrimination statutes. HMDA data 

represent the primary data source for 

regulators, industry, advocates, 

researchers, and economists studying 

and analyzing trends in the mortgage 

market for a variety of purposes, 

including general market and economic 

monitoring, as well as assessing housing 

needs, public investment, and possible 

discrimination. Historically, HMDA has 

been implemented by the Board through 

Regulation C, 12 CFR part 203. In 2011, 

the Bureau established a new Regulation 

C, 12 CFR part 1003, substantially 

duplicating the Board’s Regulation C, 

making only non-substantive, technical, 

formatting, and stylistic changes. 

Congress has periodically modified the 

law, and the Board routinely updated 

Regulation C, in order to ensure that the 

data continued to fulfill HMDA’s 

purposes. 

Users of HMDA data, however, have 

consistently advocated for expansion of 

HMDA data to keep pace with the 

mortgage market’s evolution, 

particularly during the market’s rapid 

growth into nontraditional lending 

products and its subsequent collapse in 

2008. In 2010, Congress responded to 

the mortgage crisis in the Dodd-Frank 

Act by enacting changes to HMDA as 

well as directing reforms to the 

mortgage market and the broader 

financial system. In addition to 

transferring rulemaking authority for 

HMDA from the Board to the Bureau, 

section 1094 of the Dodd-Frank Act, 

among other things, directed the Bureau 

to implement changes requiring the 

collection and reporting of several new 

data points, and authorized the Bureau 

to require financial institutions to 

collect and report such other 

information as the Bureau may require. 

The proposed rule, therefore, both 

follows on the prior efforts of the Board 

to address shortcomings in HMDA’s 

reporting requirements, and effectuates 

Congress’s specific mandate to the 

Bureau to implement changes regarding 

the collection and reporting of HMDA 

data. For a further description of the 

reasons why agency action is being 

considered, see the background 

discussion for the proposed rule in part 

II, above. 

2. Succinct Statement of the Objectives 

of, and Legal Basis for, the Proposed 

Rule 

This rulemaking has multiple 

objectives. First, the proposed rule is 

designed to improve the usefulness of 

HMDA data for determining whether 

institutions are serving the housing 

needs of their communities, identifying 

potentially discriminatory lending 

patterns and enforcing 

antidiscrimination laws, and helping 

public officials target public investment 

so as to attract private investment to 

areas where it is needed. To achieve 

these objectives, the proposed rule 

requires financial institutions to report 

additional information regarding 

originations and applications of 

mortgage loans, and makes several 

modifications to the institutional and 

transactional coverage of Regulation C. 

To improve the quality and timeliness 

of HMDA data, the Bureau is also 

proposing to require financial 

institutions with large numbers of 

reported transactions to submit their 

HMDA data on a quarterly, rather than 

an annual, basis. 

The Bureau also intends for the 

proposal to reduce unnecessary burden 

on financial institutions. To this end, 

the Bureau is proposing to adjust 

Regulation C’s institutional coverage 

test to simplify the institutional 

coverage requirements by adopting, for 

all financial institutions, a uniform 

loan-volume threshold of 25 loans. The 

proposed rule would also increase the 

clarity of the regulation by, among other 

things, modifying the definitions of 

certain ambiguous terms, adopting 

certain new definitions, and 

consolidating the list of exempt 

institutions and excluded transactions 

in the same section. Under the proposed 

regulation, financial institutions would 

make available to the public a modified 

loan application register showing only 

the data fields that are currently 

released on the modified loan 

application register, and financial 

institutions would be permitted to 

direct members of the public to a 

publicly available Web site to obtain 

their disclosure statements. Finally, the 

proposed rule would modernize and 

streamline the manner in which 

financial institutions collect and report 

HMDA data. Among other things, the 

Bureau is proposing to align the data 

requirements with the widely-used 

MISMO data standards to the extent 

practicable, and is separately 

considering various improvements to 

the HMDA data submission process, 

such as moving the HMDA data entry 

software to the Web and restructuring 

the geocoding process. 

As described above, the Dodd-Frank 

Act transferred to the Bureau the 

‘‘consumer financial protection 

functions’’ previously vested in certain 

other Federal agencies, and authorized 

the Bureau to prescribe rules necessary 

or appropriate to administer and carry 

out the purposes and objectives of the 

Federal consumer financial laws, and to 

prevent evasions thereof, including 

HMDA. As amended by the Dodd-Frank 

Act, HMDA section 305(a) broadly 

authorizes the Bureau to prescribe such 

regulations as may be necessary to carry 

out HMDA’s purposes. These 

regulations can include ‘‘classifications, 

differentiations, or other provisions, and 

may provide for such adjustments and 

exceptions for any class of transactions, 

as in the judgment of the Bureau are 

necessary and proper to effectuate the 

purposes of [HMDA], and prevent 

circumvention or evasion thereof, or to 

facilitate compliance therewith.’’ HMDA 

section 304 requires itemization of 

specified categories of information, 

including information about borrowers 

and loan features and pricing, as well as 

‘‘such other information as the Bureau 

may require.’’ Finally, HMDA also 

grants the Bureau authority over the 

formats required for compilation and 

public disclosure of HMDA data, the 

format required for disclosure to the 

Bureau or other Federal agencies, and 

the improvement of methods of 

matching addresses and census tracts to 

facilitate HMDA compliance. The legal 

basis for the proposed rule is discussed 

in detail in the legal authority analysis 

in part IV and in the section-by-section 

analysis in part V, above. 

3. Description and, Where Feasible, 

Provision of an Estimate of the Number 

of Small Entities to Which the Proposed 

Rule Will Apply 

The following table provides the 

Bureau’s estimate of the number and 

types of entities that may be affected by 

the proposals under consideration: 


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661 12 U.S.C. 2803(h)(1). 

662 12 CFR 1003.4(a). 

663 12 U.S.C. 2803(j). 

664 12 U.S.C. 2803(k); 12 CFR 1003.5(b). 

4. Projected Reporting, Recordkeeping, 

and Other Compliance Requirements of 

the Proposed Rule, Including an 

Estimate of the Classes of Small Entities 

Which Will Be Subject to the 

Requirement and the Type of 

Professional Skills Necessary for the 

Preparation of the Report 

Reporting Requirements. HMDA 

requires financial institutions to report 

certain information related to covered 

loans. Financial institutions are 

required to report HMDA data to the 

Bureau or to the appropriate Federal 

agency.661 All reportable transactions 

must be recorded within 30 calendar 

days 662 after the end of the calendar 

quarter in which final action is taken on 

a loan application register, and a 

modified version of the loan application 

register must be disclosed to the public 

upon request.663 Under the proposed 

regulation, financial institutions would 

make available to the public a modified 

loan application register showing only 

the data fields that are currently 

released on the modified loan 

application register. Additionally, 

financial institutions that reported at 

least 75,000 covered loans, applications, 

and purchased covered loans, 

combined, in the preceding calendar 

year will be required to report HMDA 

data quarterly to the Bureau or to the 

appropriate Federal agency. Financial 

institutions must also make their 

disclosure statements, which are 

prepared by the FFIEC from data 

submitted by the institutions, available 

to the public upon request.664

The proposed rule would modify 

current reporting requirements and 

impose new reporting requirements by 

requiring financial institutions to report 

additional information required by the 

Dodd-Frank Act, as well as certain 

information determined by the Bureau 

to be necessary and proper to effectuate 

HMDA’s purposes. The proposed rule 

also modifies the scope of the 

institutional and transactional coverage 

thresholds. The Bureau is also 

proposing to allow a financial 

institution to make its disclosure 

statement available to the public by 

making available at its home office and 

each branch office located in an MSA 

and MD a notice that clearly conveys 

that the institution’s disclosure 

statement may be obtained on the FFIEC 

Web site and that includes the Web site 

address. The section-by-section analysis 

of the proposed rule in part V, above, 

discusses the additional required data 


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51850 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

665 Final Report of the Small Business Review 

Panel on the CFPB’s Proposals Under Consideration 

for Home Mortgage Disclosure Act Rulemaking, 

dated April 28, 2014. As discussed above, this 

report is available on the Bureau’s Web site. 

666 12 CFR 1003.4(a). 

667 12 CFR 1003.5(a). 

points and the scope of the proposed 

rule in greater detail. More information 

is also available in section 3 of the 

SBREFA Final Report.665

Recordkeeping Requirements. HMDA 

currently requires financial institutions 

to compile and maintain information 

related to certain transactions involving 

covered loans. HMDA section 304(c) 

requires that information required to be 

compiled and made available under 

HMDA section 304, other than loan 

application register information 

required under section 304(j), must be 

maintained and made available for a 

period of five years. HMDA section 

304(j)(6) requires that loan application 

register information for any year shall be 

maintained and made available, upon 

request, for three years. Regulation C 

requires that all reportable transactions 

be recorded within thirty calendar days 

after the end of the calendar quarter in 

which final action is taken on a loan 

application register.666 Regulation C 

further specifies that a financial 

institution shall retain a copy of its loan 

application register for its records for at 

least three years.667 The proposed rule 

would not modify the recordkeeping 

period for covered financial institutions. 

The proposed rule would, however, 

potentially require additional 

recordkeeping in that it would require 

financial institutions to maintain 

additional information as a result of the 

expanded reporting requirements 

described above. Furthermore, the 

proposal would allow financial 

institutions to provide disclosure 

statements by directing members of the 

public to the FFIEC Web site rather than 

requiring the institutions to download 

or print the statements from the Web 

site so as to have them available for 

members of the public that make a 

request. 

Benefits to small entities. HMDA is a 

data reporting statute, so all provisions 

of the proposed rule affect reporting 

requirements. Overall, the proposed rule 

has several potential benefits for small 

entities. First, the proposed revision to 

the institutional coverage criteria, which 

imposes a loan volume threshold of 25 

loans, excluding open-end lines of 

credit, applicable to all financial 

institutions, would benefit depository 

institutions that are not significantly 

involved in originating dwellingsecured loans. The Bureau expects that 

most of these depository institutions are 

small entities. These depository 

institutions would no longer have to 

report under HMDA and would no 

longer have to incur current operational 

costs, or the increase in operational cost 

and the one-time costs, created by the 

proposed rule. 

Second, the proposed revisions to the 

transactional coverage criteria would 

eliminate reporting of unsecured home 

improvement loans. The Bureau 

believes most small entities will be 

comparable to the representative tier 3 

institution based on the Bureau’s 

assumptions discussed extensively in 

part VI.E of this supplementary 

information, and that the volume of 

applications for unsecured home 

improvement loans for these financial 

institutions is small. Therefore, the 

benefit from this change will be small 

for most small entities. However, some 

small entities may receive larger 

volumes of applications for unsecured 

home improvement products, and the 

benefit will be larger for these financial 

institutions. 

Third, the proposed revisions 

requiring mandatory reporting of all 

home-equity lines of credit, homeequity loans, reverse mortgages, and 

preapproval requests that have been 

approved but not accepted, combined 

with the additional data points being 

proposed, will improve the 

prioritization process that regulators 

and enforcement agencies use to 

identify institutions with higher fair 

lending risk. During prioritization 

analyses, the additional transactions 

and data points will allow for improved 

segmentation, so that applications are 

compared to other applications for 

similar products. In addition, the data 

points will add to the legitimate factors 

used in underwriting and pricing that 

are currently lacking in the HMDA data, 

helping regulators and government 

enforcement agencies better understand 

disparities in outcomes. These 

improvements will reduce false 

positives that occur when inadequate 

information causes lenders with low fair 

lending risk to be initially misidentified 

as having high-risk. The additional 

information on these products and data 

points will explain some of these false 

positives, so that examination resources 

can be used more efficiently and lenders 

with low fair lending risk receive a 

reduced level of regulatory scrutiny. For 

small entities currently receiving 

regulatory oversight, this could greatly 

reduce the burden from fair lending 

examinations and enforcement actions. 

Fourth, incorporating into the 

proposed rule alignment of current 

HMDA data fields with industry data 

standards provides a benefit to small 

entities. The Bureau believes that the 

burden associated with Regulation C 

compliance and data submission can be 

reduced by aligning to the extent 

practicable the requirements of 

Regulation C to existing industry 

standards for collecting and transmitting 

data on mortgage loans and 

applications. The Bureau believes that 

promoting consistent data standards for 

both industry and regulatory use has 

benefits for market efficiency, market 

understanding, and market oversight. 

The efficiencies achieved by aligning 

HMDA data with widely used industry 

data standards should grow over time. 

Specific to small entities, outreach 

efforts have determined that aligning 

HMDA with industry data standards 

will reduce costs for training and 

researching questions. 

Finally, the proposed additional fields 

will improve the usefulness of HMDA 

data for analyzing mortgage markets by 

the regulators and the public. For 

instance, data points such as nonamortizing features, introductory 

interest rate, and prepayment penalty 

that are commonly related to higher risk 

lending will provide a better 

understanding of the types of products 

and features consumers are receiving. 

This will allow for improved monitoring 

of trends in mortgage markets and help 

identify problems that could potentially 

harm consumers and society overall. 

Lowering the likelihood of future 

financial crises benefits all financial 

institutions, including small entities. 

Costs to small entities. The proposed 

revision to the coverage criteria raises 

the reporting threshold for depository 

institutions from 1 to 25 originations 

and lowers the reporting thresholds for 

nondepository institutions from 100 to 

25 originations. The Bureau expects 

most of the affected nondepository 

institutions to be small entities. The 

additional nondepository institutions 

that would now be required to report 

under HMDA would incur one-time 

start-up costs to develop the necessary 

reporting infrastructure, as well as the 

ongoing operational costs to report. 

The proposed revisions to transaction 

coverage would make reporting of openend lines of credit mandatory, rather 

than optional; require reporting of all 

home-equity loans, not just those to be 

used for home purchase, refinancing, or 

home improvement; and require 

reporting of all reverse mortgages. These 

additional reporting requirements 

would increase operational costs for 

small entities as costs increase to 

transcribe data, resolve reportability 

questions, transfer data to HMS, and 

research questions. 


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The proposed rule adds additional 

data points identified by the DoddFrank Act and that the Bureau believes 

are necessary to close information gaps. 

As part of this proposal, the Bureau is 

aligning all current and proposed data 

points to industry data standards to the 

extent practicable. The additional data 

points will increase ongoing operational 

costs, and impose one-time costs as 

small entities modify reporting 

infrastructure to incorporate additional 

fields. The transition to industry data 

standards would offset this cost slightly 

through reduced costs of researching 

questions and training. 

Estimate of the classes of small 

entities that will be subject to the 

requirement and the type of professional 

skills necessary for the preparation of 

the report or record. 

The following table conveys the 

classes of small entities affected: 

Type of professional skills required. 

Section 603(b)(4) of the RFA also 

requires an estimate of the type of 

professional skills necessary for the 

preparation of the reports or records. 

The recordkeeping and compliance 

requirements of the proposed rule that 

would affect small entities are 

summarized above. 

Based on outreach with financial 

institutions, vendors, and governmental 

agency representatives, the Bureau 

classified the operational activities that 

financial institutions currently use for 

HMDA data collection and reporting 

into 18 operational ‘‘tasks’’ which can 

be further grouped into four ‘‘primary 

tasks.’’ These are: 

1. Data collection: Transcribing data, 

resolving reportability questions, and 

transferring data to an HMS. 

2. Reporting and resubmission: 

Geocoding, standard annual edit and 

internal checks, researching questions, 

resolving question responses, checking 

post-submission edits, filing postsubmission documents, creating public 

loan application register, distributing 

public loan application register, 

distributing disclosure report, and using 

vendor HMS software. 

3. Compliance and internal audits: 

Training, internal audits, and external 

audits. 

4. HMDA-related exams: Exam 

preparation and exam assistance. 

All these tasks are related to the 

preparation of reports or records and 

most of them are performed by 

compliance personnel in the 

compliance department of financial 

institutions. For some financial 


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668Rules are duplicative or overlapping if they 

are based on the same or similar reasons for the 

regulation, the same or similar regulatory goals, and 

if they regulate the same classes of industry. Rules 

are conflicting when they impose two conflicting 

regulatory requirements on the same classes of 

industry. 

institutions, however, the data intake 

and transcribing stage could involve 

loan officers or processors whose 

primary function is to evaluate or 

process loan applications. For example, 

the loan officers would take in 

government monitoring information 

from the applicants and input that 

information into the reporting system. 

However, the Bureau believes that such 

roles generally do not require any 

additional professional skills related to 

recordkeeping or other compliance 

requirements of this proposed rule that 

are not otherwise required during the 

ordinary course of business for small 

entities. 

The type of professional skills 

required for compliance varies 

depending on the particular task 

involved. For example, data transcribing 

requires data entry skills. Transferring 

data to an HMS and using vendor HMS 

software requires knowledge of 

computer systems and the ability to use 

them. Researching and resolving 

reportability questions requires a more 

complex understanding of the 

regulatory requirements and the details 

of the relevant line of business. 

Geocoding requires skills in using the 

geocoding software, web systems, or, in 

cases where geocoding is difficult, 

knowledge of the local area in which the 

property is located. Standard annual 

editing, internal checks, and postsubmission editing require knowledge 

of the relevant data systems, data 

formats, and HMDA regulatory 

requirements in addition to skills in 

quality control and assurance. Filing 

post-submission documents, creating 

public loan application registers, and 

distributing public loan application 

registers and disclosure reports requires 

skills in information creation, 

dissemination, and communication. 

Training, internal audits, and external 

audits requires communications skills, 

educational skills, and regulatory 

knowledge. HMDA-related exam 

preparation and exam assistance involve 

knowledge of regulatory requirements, 

the relevant line of business, and the 

relevant data systems. 

The Standard Occupational 

Classification (SOC) code has 

compliance officers listed under code 

13–1041. The Bureau believes that most 

of the skills required for preparation of 

the reports or records related to this 

proposal are the skills required for job 

functions performed in this occupation. 

However, the Bureau recognizes that 

under this general occupational code 

there is a high level of heterogeneity in 

the type of skills required as well as the 

corresponding labor costs incurred by 

the financial institutions performing 

these functions. 

During the SBREFA process, some 

small entity representatives noted that 

due to the small size of their 

institutions, they do not have separate 

compliance departments exclusively 

dedicated to HMDA compliance. Their 

HMDA compliance personnel are often 

engaged in other corporate compliance 

functions. To the extent that the 

compliance personnel of a small entity 

are divided between HMDA compliance 

and other functions, the skills required 

for those personnel may differ from the 

skills required for fully-dedicated 

HMDA compliance personnel. For 

instance, some small entity 

representatives noted that high-level 

corporate officers such as CEOs and 

senior vice presidents could be directly 

involved in some HMDA tasks. The 

Bureau seeks comment regarding the 

skills required for the preparation of the 

reports or records related to this 

proposed rule. 

Due to the proposed changes, the 

Bureau acknowledges the possibility 

that certain aspects of the proposed rule 

may require some small entities to hire 

additional compliance staff. The Bureau 

has no evidence that such additional 

staff will possess a qualitatively 

different set of professional skills than 

small entity staff employed currently for 

HMDA purposes. It is possible, 

however, that compliance with the 

proposed rule may emphasize certain 

skills. For example, additional data 

points may increase demand for skills 

involved in researching questions, 

standard annual editing, and postsubmission editing. On the other hand, 

the Bureau is separately considering 

operational enhancements and 

modifications to alleviate some of the 

compliance burden. For example, the 

Bureau is considering working to 

consolidate the outlets for assistance, 

providing guidance support similar to 

the guidance provided for Title XIV 

rules; improving points of contact 

processes for help inquiries; modifying 

the types of edits and when edits are 

approved; exploring opportunities to 

improve the current DES; and 

considering approaches to reduce 

geocoding burdens. Such enhancements 

may also change the relative 

composition of HMDA compliance 

personnel and the skills involved in 

recording and reporting data. 

Nevertheless, the Bureau believes that 

compliance would still involve the 

general set of skills identified above. 

The recordkeeping and reporting 

requirements associated with this 

proposal would also involve skills for 

information technology system 

development, integration, and 

maintenance. Financial institutions 

often use the HMS for HMDA purpose. 

HMS could be developed by the 

institution internally or purchased from 

a third-party vendor. Under the 

proposed rule, the Bureau anticipates 

that most of these systems would need 

substantial upgrades to comply with the 

proposed requirements. It is possible 

that other systems used by financial 

institutions, such as loan origination 

systems, might also need upgrades to be 

compatible with the upgraded HMS. 

The professional skills required for this 

one-time upgrade would be related to 

software development, testing, system 

engineering, information technology 

project management, budgeting and 

operation. 

Based on feedback from the small 

entity representatives, many small 

business HMDA reporters rely on FFIEC 

DES tools and do not use a dedicated 

HMS. The Bureau is separately 

considering upgrades to the HMDA 

DES, such as moving DES to the web, 

which would allow financial 

institutions to use the software from 

multiple terminals in different branches 

and might reduce the required 

information technology implementation 

cost for small financial institutions that 

choose to employ this new web-based 

DES. 

5. Identification, to the Extent 

Practicable, of All Relevant Federal 

Rules Which May Duplicate, Overlap, or 

Conflict With the Proposed Rule 

The proposed rule contains 

requirements related to the disclosure of 

mortgage loan information by certain 

financial institutions. The Bureau has 

identified certain other Federal rules 

that relate in some fashion to these areas 

and has considered the extent to which 

they may duplicate, overlap, or conflict 

with this proposal.668 Each of these is 

discussed below. 

The Community Reinvestment Act 

(CRA), implemented by Office of 

Comptroller of the Currency, Board, and 

Federal Deposit Insurance Corporation 

regulations requires some financial 

institutions to collect, maintain, and 

report certain data about small business, 

farm, and consumer lending to ensure 

they are serving their communities. 

HMDA data are frequently used in CRA 

exams as part of evaluating home 

mortgage lending under the CRA 


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669See 12 CFR 128.6 (requiring certain financial 

institutions to report denial reasons to OCC for 

nondiscriminatory lending purposes. Certain 

financial institutions supervised by the FDIC are 

also required to report denial reasons under 12 CFR 

390.147. 670 5 U.S.C. 603(d). 

lending test, and many CRA definitions 

and concepts are aligned with HMDA. 

The Bureau intends to work with CRA 

regulatory agencies to ensure that 

HMDA and the CRA do not conflict and 

that HMDA data can continue to be used 

as part of the CRA compliance process. 

The Equal Credit Opportunity Act 

(ECOA), implemented by the Bureau’s 

Regulation B (12 CFR part 1002), among 

other things, prohibits creditors from 

discriminating in credit transactions 

and requires creditors to notify 

applicants of reasons for denial and 

provide copies of appraisals for certain 

home-secured loans. Regulation B 

requires creditors to collect race, 

ethnicity, sex, marital status, and age of 

applicants for some home purchase 

loans and refinancings and to maintain 

that information for 25 months for 

purposes of monitoring compliance 

with antidiscrimination laws. One of 

HMDA’s purposes is to provide data 

that can be used to assist in enforcing 

antidiscrimination statutes, which 

include ECOA. 

The Truth in Lending Act (TILA) and 

Real Estate Settlement Procedures Act 

(RESPA), implemented by the Bureau’s 

Regulation Z (12 CFR part 1026) and 

Regulation X (12 CFR part 1024), 

provide protections to consumers who 

apply for and receive mortgage loans. 

These protections include disclosures 

and restrictions on certain types of 

transactions. The Bureau recently issued 

a final rule on integrated mortgage 

disclosures under the Real Estate 

Settlement Procedures Act (Regulation 

X) and the Truth in Lending Act 

(Regulation Z). The Bureau has 

considered the definitions, 

requirements, and purposes of TILA and 

RESPA as it developed its proposals 

under Regulation C. 

Proposed Regulation AB II (17 CFR 

part 229, subpart 229.1100) from the 

Securities and Exchange Commission 

(SEC) would require private issuers of 

asset-backed securities, including 

mortgage-backed securities, to disclose 

certain asset-level information. 

The Fair Housing Home Loan Data 

System (12 CFR part 27), promulgated 

by the OCC, provides for a data 

collection system for monitoring 

national bank compliance with the Fair 

Housing Act and ECOA. Under the 

regulations governing the Fair Housing 

Loan Data System, financial institutions 

generally maintain these data in a 

format similar to that currently 

prescribed under Regulation C, except 

that financial institutions are required to 

report the reasons for denial on the loan 

application register.669 Under section 

1003.4(a)(16) of the proposed rule, 

financial institutions would report the 

reasons for denial of a loan application. 

The Bureau requests comment to 

identify any additional such Federal 

rules that impose duplicative, 

overlapping, or conflicting requirements 

on servicers and potential changes to 

the proposed rules in light of 

duplicative, overlapping, or conflicting 

requirements. 

6. Description of Any Significant 

Alternatives to the Proposed Rule 

Which Accomplish the Stated 

Objectives of Applicable Statutes and 

Minimize Any Significant Economic 

Impact of the Proposed Rule on Small 

Entities 

The small entity representatives 

generally were receptive to the Bureau’s 

proposals to modernize and streamline 

the HMDA data collection and reporting 

processes, but expressed some concerns 

about the proposals under consideration 

to add new data points to the HMDA 

reporting requirements. Where the small 

entity representatives expressed concern 

about the costs of complying with a 

proposed provision, the Bureau 

considered alternatives that might 

impose lower costs on small entities. 

One component of this consideration 

was to ensure that any alternative would 

accomplish the stated objectives of 

HMDA. 

Institutional coverage threshold. As 

described above, Regulation C’s 

institutional coverage is determined by 

complicated tests based on assets, loan 

volume, geographic location, and 

whether the financial institution makes 

loans that are federally related. The 

institutional coverage tests differ 

depending on whether the financial 

institution is a depository institution or 

nondepository institution. The proposed 

regulation would adopt a uniform 25- 

loan volume threshold for both 

depository and nondepository 

institutions. 

The uniform standard promotes 

simplicity and clarity, an objective of 

the proposal, and was generally favored 

by the small entity representatives. 

Many small entity representatives 

suggested a higher coverage threshold, 

with recommendations ranging from 

100 to 500 loans. The Bureau 

understands that some burden reduction 

may result from a threshold higher than 

25 loans. However, the Bureau was 

concerned that a higher threshold 

would result in the elimination of data 

that are important in fulfilling the 

purposes of HMDA. Therefore, the 

Bureau is proposing a threshold of 25 

loans. 

Disclosure and reporting 

requirements. As described above, 

Regulation C currently requires that a 

financial institution must make its loan 

application register available to the 

public after removing three fields to 

protect applicant and borrower privacy: 

The application or loan number, the 

date that the application was received, 

and the date action was taken. An 

institution must make this ‘‘modified 

loan application register’’ available 

following the calendar year for which 

the data are compiled, by March 31 for 

a request received on or before March 1, 

and within 30 calendar days for a 

request received after March 1. 

The Bureau is seeking comment on 

whether it should eliminate the 

requirement that the modified loan 

application register be made available to 

the public by smaller institutions. 

During the Small Business Review Panel 

process, the Bureau heard from small 

entity representatives that they rarely, if 

ever, receive requests for their modified 

loan application registers. The Small 

Business Review Panel recommended 

that the Bureau consider whether there 

is a continued need for small 

institutions to make their modified loan 

application registers available. 

Accordingly, the Bureau is soliciting 

comment on whether institutions 

should be excluded from the obligation 

to make their modified loan application 

registers available to the public, and, if 

so, which institutions should be 

excluded. 

7. Discussion of Impact on Cost of 

Credit for Small Entities 

Section 603(d) of the RFA requires the 

Bureau to consult with small entities 

regarding the potential impact of the 

proposed rule on the cost of credit for 

small entities and related matters.670 To 

satisfy these statutory requirements, the 

Bureau provided notification to the 

Chief Counsel for Advocacy of the SBA 

in December 2013 that the Bureau 

would collect the advice and 

recommendations of the same small 

entity representatives identified in 

consultation with the Chief Counsel for 

Advocacy of the SBA through the Small 

Business Review Panel outreach 

concerning any projected impact of the 

proposed rule on the cost of credit for 

small entities as well as any significant 

alternatives to the proposed rule which 


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671See 5 U.S.C. 603(d)(2). The Bureau provided 

this notification as part of the notification and other 

information provided to the Chief Counsel for 

Advocacy of the SBA with respect to the Small 

Business Review Panel outreach pursuant to RFA 

section 609(b)(1). 

672See 5 U.S.C. 603(d)(2)(B). 

673See Small Business Review Panel Report at 35. 674 44 U.S.C. 3501 et seq. 

675 44 U.S.C. 3506(c)(2)(A). 

676 12 CFR 1003. 

677See 12 U.S.C. 2801 et seq. 

accomplish the stated objectives of 

applicable statutes and which minimize 

any increase in the cost of credit for 

small entities.671 The Bureau sought to 

collect the advice and recommendations 

of the small entity representatives 

during the Panel Outreach Meeting 

regarding these issues because, as small 

financial service providers, the small 

entity representatives could provide 

valuable input on any such impact 

related to the proposed rule.672

Following microeconomic principles, 

the Bureau believes that financial 

institutions will pass on increased 

variable costs to future mortgage 

applicants, but absorb one-time costs 

and increased fixed costs if financial 

institutions are profit maximizers and 

the market is perfectly competitive. 

Overall, the Bureau estimates that the 

impact of the proposed rule on variable 

costs per application is approximately 

$13 for a representative tier 3 financial 

institution, $0.20 for a representative 

tier 2 financial institution, and $0.11 for 

a representative tier 1 financial 

institution. 

At the time the Bureau circulated the 

Small Business Review Panel outreach 

materials to the small entity 

representatives in advance of the Panel 

Outreach Meeting, it believed that the 

proposals under consideration would 

result in a minimal increase in the cost 

of business credit for small entities. 

Although the proposals would apply 

primarily to mortgage loans obtained by 

consumers for personal, family, or 

household purposes, the proposals 

under consideration would also cover 

certain dwelling-secured loans used for 

business purposes. 

At the Small Business Review Panel 

Outreach Meeting, the Bureau asked the 

small entity representatives a series of 

questions regarding the cost of business 

credit.673 These questions were focused 

on determining which proposals, if any, 

might impact the cost of credit for small 

entities, and whether feasible 

alternatives existed that would 

minimize the impact on small entities 

while accomplishing the statutory 

objectives addressed by the proposed 

rule. Specifically, the Bureau asked the 

small entity representatives whether 

they extended consumer mortgage loans 

used secondarily to finance small 

businesses. For nondepository 

institutions, the Bureau asked whether 

they had taken out a consumer mortgage 

loan that was also used secondarily to 

finance a small business. 

The small entity representatives had 

few comments on the impact on the cost 

of business credit. Not all of the small 

entity representatives made loans to 

small businesses. One credit union 

small entity representatives, however, 

noted that many of its home-equity 

loans are used by individuals to fund a 

business. Two bank small entity 

representatives stated that a high 

percentage of their loans are small 

business or commercial loans where 

homes are typically used as additional 

collateral. These two small entity 

representatives explained that, because 

competition for loans currently is 

strong, they have to absorb extra costs. 

One of these small entity representatives 

also stated that so far it has improved 

efficiency to cut costs and has not 

imposed a regulatory compliance fee or 

marketed its data, as have other 

financial institutions, to offset 

compliance costs. A few small entity 

representatives noted that they would 

likely have to pass additional costs on 

to business customers. A third bank 

small entity representative stated that it 

charges a loan documentation fee to its 

commercial clients, but because 

borrowers are fee-sensitive, the financial 

institution could lose business with 

additional fees. When asked, the small 

entity representatives did not identify 

significant alternatives to any of the 

proposals under consideration that 

might minimize the impact on the cost 

of credit for small entities while 

accomplishing the statutory objectives 

addressed by the proposals under 

consideration. 

Based on the feedback obtained from 

small entity representatives at the Panel 

Outreach Meeting, the Bureau currently 

anticipates that the proposed rule will 

result in a minimal increase in the cost 

of credit for small business entities. To 

further evaluate this question, the 

Bureau solicits comment on whether the 

proposed rule will have any impact on 

the cost of credit for small entities. 

VIII. Paperwork Reduction Act 

Under the Paperwork Reduction Act 

of 1995 (PRA),674 Federal agencies are 

generally required to seek approval from 

the Office of Management and Budget 

(OMB) for information collection 

requirements prior to implementation. 

Further, the Bureau may not conduct or 

sponsor a collection of information 

unless OMB approves the collection 

under the PRA and displays a currently 

valid OMB control number. 

Notwithstanding any other provision of 

law, no person is required to comply 

with, or is subject to penalty for failure 

to comply with, a collection of 

information if the collection instrument 

does not display a currently valid OMB 

control number. The information 

collection requirements contained in 

Regulation C are currently approved by 

OMB under OMB control number 3170– 

0008. 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Bureau conducts a 

preclearance consultation program to 

provide the general public and Federal 

agencies with an opportunity to 

comment on the revised information 

collection requirements in accordance 

with the PRA.675 This helps ensure that 

the public understands the Bureau’s 

requirements or instructions, that 

respondents can provide the requested 

data in the desired format, that reporting 

burden (time and financial resources) is 

minimized, that collection instruments 

are clearly understood, and that the 

Bureau can properly assess the impact 

of collection requirements on 

respondents. 

As described below, the proposal 

would amend the information collection 

requirements contained in Regulation 

C676 and currently approved under 

OMB control number 3170–0008. The 

revised information collection 

requirements are contained in sections 

1003.4 and 1003.5 of the prosed rule. 

The Bureau’s information collection 

requirements contained in this proposal, 

and identified as such, will be 

submitted to OMB for review under 

section 3507(d) of the PRA on or before 

publication of this proposal in the 

Federal Register. 

The title of this information collection 

is Home Mortgage Disclosure 

(Regulation C). The frequency of 

response is annually, quarterly, and onoccasion. The Bureau’s regulation 

would require covered financial 

institutions that meet certain thresholds 

to maintain data about originations and 

purchases of mortgage loans, as well as 

mortgage loan applications that do not 

result in originations, to update the 

information quarterly, and to report the 

information annually or quarterly. 

Financial institutions must also make 

certain information available to the 

public upon request. 

The information collection 

requirements in this proposed rule 

would be mandatory.677 Certain of data 

fields are redacted before they are made 


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678 5 U.S.C. 552(b)(6). 

679The count of 6,250 is constructed as the 

number of HMDA reporters in 2012 (7,400) less the 

estimated 1,600 depository institutions that would 

no longer have to report under the proposed 

coverage rules plus the additional 450 estimated 

non-depository institutions that would have to 

begin reporting under the proposed coverage rules. 

680The Bureau estimates that, for all HMDA 

reporters, the burden hours will be approximately 

3,356,000 to 5,953,000 hours per year. 4,700,000 is 

approximately the mid-point of this estimated 

range. 

681The Bureau’s estimation methodology is fully 

described in section VI, above. 

682A detailed analysis of the burdens and costs 

described in this section can be found in the 

Paperwork Reduction Act Supporting Statement 

that corresponds with this proposal. The 

Supporting Statement is available at 

www.reginfo.gov. 

683 12 U.S.C. 2803(h)(1). 

684 12 CFR 1003.4(a). 

685 12 U.S.C. 2803(j). 

available to the public, as required by 

the statute and regulation. The nonredacted data are made publicly 

available and are not considered 

confidential. The rest of the data, 

including information that might 

identify an individual borrower or 

applicant, such as loan number, date the 

application was received, and the date 

the application was taken, is considered 

confidential under the Bureau’s 

confidentiality regulations, 12 CFR part 

1070 et seq., and the Freedom of 

Information Act.678 The likely 

respondents will be financial 

institutions—specifically banks, savings 

associations, or credit unions 

(depository institutions), and for-profit 

mortgage-lending institutions 

(nondepository institutions)—that meet 

the tests for coverage under Regulation 

C. These respondents would be required 

under the proposal to maintain, disclose 

to the public, and report to Federal 

agencies, information regarding covered 

loans and applications for covered 

loans. 

For the purposes of this PRA analysis, 

the Bureau estimates that, under the 

proposal, approximately 1,600 

depository institutions that currently 

report HMDA data would no longer be 

required to report, and that 

approximately 450 more nondepository 

institutions would now be required to 

report. In 2012, approximately 7,400 

financial institutions reported data 

under HMDA. The proposed coverage 

changes would reduce the number of 

reporters by an estimated 1,150 

reporters for an estimated total of 

approximately 6,250. Under the 

proposal, the Bureau generally would 

account for the paperwork burden for all 

respondents under Regulation C. Using 

the Bureau’s burden estimation 

methodology, which projects the 

estimated burden on several types of 

representative respondents to the entire 

market, the Bureau believes the total 

estimated industry burden for the 

approximately 6,250 respondents 679

subject to the proposed rule would be 

approximately 4,700,000 hours per 

year.680 The Bureau expects that the 

amount of time required to implement 

each of the proposed changes for a given 

institution may vary based on the size, 

complexity, and practices of the 

respondent. 

197 financial institutions reported 

HMDA data to the Bureau in 2012. 

Currently, only depository institutions 

with over $10 billion in assets and their 

affiliates report their HMDA data to the 

Bureau. Given their large asset size, it is 

reasonable to believe that Bureau 

reporters are most likely aligned with 

the representative tier 1 institution.681

Therefore, to calculate burden hours, 

the Bureau assumes all 197 financial 

institutions that reported HMDA data to 

the Bureau are tier 1 institutions. The 

Bureau estimates that the current time 

burden for the Bureau reporters is 

approximately 1,787,000 hours per year. 

18 of these 197 institutions reported 

over 75,000 HMDA loan application 

register records, and would therefore be 

required to report data quarterly. 

Including the modifications to the 

information collection requirements 

contained in the proposed rule, and the 

operations modernization measures, the 

Bureau estimates that the time burden 

for annual and quarterly Bureau 

reporters would be 1,694,000 and 

183,000 hours per year, respectively, for 

a total estimated burden hours of 

1,877,000 per year. This represents an 

increase of approximately 90,000 

burden hours. 

A. Information Collection 

Requirements 682

The Bureau believes the following 

aspects of the proposed rule would be 

information collection requirements 

under the PRA: (1) The requirement that 

financial institutions maintain loan 

application register information for 

three years, disclosure statements for 

five years, and update information 

regarding reportable transactions 

quarterly; (2) the requirement that 

financial institutions report HMDA data 

annually—or, in the case of financial 

institutions with at least 75,000 loan 

application register entries for the 

preceding calendar year, quarterly—to 

the Bureau or to the appropriate Federal 

agency; and (3) the requirement that 

financial institutions provide modified 

loan application registers to the public 

upon request, and provide notices that 

clearly convey that disclosure 

statements may be obtained on the 

FFIEC Web site. 

1. Recordkeeping Requirements 

Financial institutions are required to 

maintain loan application register 

information for three years and 

disclosure statements for five years. The 

proposed rule would not modify the 

recordkeeping period for covered 

financial institutions, or increase the 

documentation or non-data-specific 

information that financial institutions 

would have to maintain. The proposed 

rule would increase the number of data 

fields, and possibly the number of 

records, that financial institutions are 

required to gather and report. The 

Bureau estimates that the current time 

burden of reporting for the Bureau 

reporters is approximately 810,000 

hours per year. The Bureau estimates 

that, with the proposed changes and the 

operations modernization, the time 

burden for annual and quarterly Bureau 

reporters would be approximately 

766,000 and 77,000 hours per year, 

respectively, for a total estimate of 

approximately 843,000 burden hours 

per year. This represents an increase of 

approximately 33,000 burden hours. 

2. Reporting Requirements 

HMDA is a data reporting statute, so 

most provisions of the proposed rule 

affect reporting requirements, as 

described above. Specifically, financial 

institutions are required to report 

HMDA data to the Bureau or to the 

appropriate Federal agency.683 All 

reportable transactions must be 

recorded within 30 calendar days 684

after the end of the calendar quarter in 

which final action is taken on a loan 

application register, and a modified 

version of the loan application register 

must be disclosed to the public upon 

request.685 Under the proposed 

regulation, financial institutions would 

make available to the public a modified 

loan application register showing only 

the data fields that are currently 

released on the modified loan 

application register. Additionally, 

financial institutions that reported at 

least 75,000 covered loans, applications, 

and purchased covered loans, 

combined, in the preceding calendar 

year will be required to report HMDA 

data quarterly to the Bureau or the 

appropriate Federal agency. 

The Bureau estimates that the current 

time burden of reporting for the Bureau 

reporters is approximately 971,000 

hours per year. The Bureau estimates 

that, with the proposed changes and the 

operations modernization, the time 

burden for annual and quarterly Bureau 


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686The Bureau realizes that the impact to onetime costs varies by institution due to many factors, 

such as size, operational structure, and product 

complexity, and that this variance exists on a 

continuum that is impossible to fully capture. As 

a result, the one-time cost estimates will be high for 

some financial institutions, and low for others. 

reporters would be approximately 

921,000 and 105,000 hours per year, 

respectively, for a total estimate of 

approximately 1,026,000 burden hours 

per year. This represents an increase of 

approximately 55,000 burden hours. 

3. Disclosure Requirements 

The proposed rule would modify 

Regulation C’s requirements for 

financial institutions to disclose 

information to third parties. Covered 

financial institutions would continue to 

make their modified loan application 

registers available to the public upon 

request, but, as described above, the 

modified loan application register 

would be limited to the data that are 

currently released under Regulation C. 

Additionally, the proposed rule would 

allow financial institutions to provide 

their disclosure statements to the public 

by making available a notice that clearly 

conveys that the disclosure statement 

may be obtained on the FFIEC Web site 

and that includes the FFIEC’s Web site 

address. 

The Bureau estimates that the current 

time burden of disclosure for the Bureau 

reporters is approximately 6,000 hours 

per year. The Bureau estimates that, 

with the proposed changes and the 

operations modernization, the time 

burden for annual and quarterly Bureau 

reporters would be approximately 7,000 

and 1,000 hours per year, respectively, 

for a total estimate of approximately 

8,000 burden hours per year. This 

represents an increase of approximately 

2,000 burden hours. 

4. One-Time Costs Associated With the 

Proposed Information Collections 

Financial institutions’ management, 

legal, and compliance personnel will 

likely take time to learn new reporting 

requirements and assess legal and 

compliance risks. Financial institutions 

that use vendors for HMDA compliance 

will incur one-time costs associated 

with software installation, 

troubleshooting, and testing. The 

Bureau is aware that these activities will 

require time and that the costs may be 

sensitive to the time available for them. 

Financial institutions that maintain 

their own reporting systems will incur 

one-time costs to develop, prepare, and 

implement necessary modifications to 

those systems. In all cases, financial 

institutions will need to update training 

materials to reflect new requirements 

and activities and may have certain onetime costs for providing initial training 

to current employees. 

For current HMDA reporters, the 

Bureau estimates that the proposed rule 

will impose on average one-time costs of 

$3,000 for tier 3 financial institutions, 

$250,000 for tier 2 financial institutions 

and $800,000 for tier 1 financial 

institutions without considering the 

expansion of transactional coverage to 

include open-end lines of credit and 

reverse mortgages.686 Including the 

estimated one-time costs to modify 

processes and systems for home-equity 

products, the Bureau estimates that the 

total one-time costs would be $3,000 for 

tier 3 institutions, $375,000 for tier 2 

institutions, and $1,200,000 for tier 1 

institutions. This yields an overall 

estimated market impact of between 

$383,000,000 and $2,100,000,000. Using 

a 7 percent discount rate and a five-year 

window, the annualized one-time, 

additional cost is $93,400,000 to 

$514,900,000. The Bureau expects to 

obtain more information about these 

one-time costs through this NPRM 

process and other outreach efforts. 

The proposed revisions to the 

institutional coverage criteria will 

require an estimated 450 nondepository 

institutions that are currently not 

reporting under HMDA to begin 

reporting. These nondepository 

institutions will incur start-up costs to 

develop policies and procedures, 

infrastructure, and training. Based on 

outreach discussions with financial 

institutions, the Bureau believes that 

these start-up costs will be similar to the 

one-time costs current reporters will 

incur in response to the proposed rule, 

which average $3,000 for tier 3 financial 

institutions, $375,000 for tier 2 financial 

institutions, and $1,200,000 for tier 1 

financial institutions. Although 

origination volumes for these 450 

nondepository institutions are slightly 

higher, the Bureau still expects most of 

these nondepository institutions to be 

tier 3 financial institutions. Under this 

assumption, the estimated overall 

market cost would be $1,350,000. 

B. Summary of Burden Hours 

The tables below summarize the 

estimated annual burdens under 

Regulation C associated with the 

information collections described above 

for Bureau reporters and all HMDA 

reporters, respectively. The tables 

combine all three aspects of information 

collection: Reporting, recordkeeping, 

and disclosure requirements. The 

Paperwork Reduction Act Supporting 

Statement that corresponds with this 

proposal provides more information as 

to how these estimates were derived and 

further detail regarding the burden 

hours associated with each information 

collection. The first table presents 

burden hour estimates for financial 

institutions that report HMDA data to 

the Bureau, and the second table 

provides information for all HMDA 

reporters. 


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C. Comments 

Comments are specifically requested 

concerning: (i) Whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the Bureau, including 

whether the information will have 

practical utility; (ii) the accuracy of the 

estimated burden associated with the 

proposed collections of information; (iii) 

how to enhance the quality, utility, and 

clarity of the information to be 

collected; and (iv) how to minimize the 

burden of complying with the proposed 

collections of information, including the 

application of automated collection 

techniques or other forms of information 

technology. Comments regarding the 

burden estimate, or any other aspect of 

these collections of information, 

including suggestions for reducing the 

burden, should be sent to: The Office of 

Management and Budget (OMB), 

Attention: Desk Officer for the 

Consumer Financial Protection Bureau, 

Office of Information and Regulatory 

Affairs, Washington, DC, 20503, or by 

the Internet to submissions@

omb.eop.gov. If you wish to share your 

comments with the Bureau, please send 

a copy of these comments to the docket 

for this proposed rule at 

www.regulations.gov. The ICR 

submitted to OMB requesting approval 

under the PRA for the information 

collection requirements contained 

herein is available both at 

www.regulations.gov as well as OMB’s 

public-facing docket at www.reginfo.gov. 

List of Subjects in 12 CFR Part 1003 

Banks, Banking, Credit unions, 

Mortgages, National banks, Savings 

associations, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

For the reasons set forth above, the 

Bureau of Consumer Financial 

Protection proposes to amend 

Regulation C, 12 CFR part 1003, as set 

forth below: 


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51858 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

PART 1003—HOME MORTGAGE 

DISCLOSURE (REGULATION C) 

■ 1. The authority citation for part 1003 

continues to read as follows: 

Authority: 12 U.S.C. 2803, 2804, 2805, 

5512, 5581. 

■ 2. Section 1003.1 is amended by 

revising paragraph (c) to read as follows: 

§ 1003.1 Authority, purpose, and scope. 

* * * * * 

(c) Scope. This part applies to 

financial institutions as defined in 

§ 1003.2(g). The regulation requires a 

financial institution to report data to the 

Bureau or to the appropriate Federal 

agency for the financial institution 

about covered loans secured by a 

dwelling located in a State of the United 

States of America, the District of 

Columbia, or the Commonwealth of 

Puerto Rico that it originates or 

purchases, or for which it receives 

applications; and to disclose certain 

data to the public. 

■ 3. Section 1003.2 is amended by 

adding paragraph numbers to the 

existing definitions, by adding 

paragraphs (d), (e), (k), (n), (o), and (q), 

and by revising newly designated 

paragraphs (b), (c), (f), (g), (h), (i), (l), 

and (p) to read as follows: 

§ 1003.2 Definitions. 

* * * * * 

(b) Application. (1) In general. 

Application means an oral or written 

request for a covered loan that is made 

in accordance with procedures used by 

a financial institution for the type of 

credit requested. 

(2) Preapproval programs. A request 

for preapproval for a home purchase 

loan is an application under this section 

if the request is reviewed under a 

program in which the financial 

institution, after a comprehensive 

analysis of the creditworthiness of the 

applicant, issues a written commitment 

to the applicant valid for a designated 

period of time to extend a home 

purchase loan up to a specified amount. 

The written commitment may not be 

subject to conditions other than: 

(i) Conditions that require the 

identification of a suitable property; 

(ii) Conditions that require that no 

material change has occurred in the 

applicant’s financial condition or 

creditworthiness prior to closing; and 

(iii) Limited conditions that are not 

related to the financial condition or 

creditworthiness of the applicant that 

the financial institution ordinarily 

attaches to a traditional home mortgage 

application. 

(c) Branch office means: 

(1) Any office of a depository 

financial institution, as defined in 

paragraph (g)(1) of this section, that is 

considered a branch by the Federal or 

State supervisory agency applicable to 

that financial institution, excluding 

automated teller machines and other 

free-standing electronic terminals; and 

(2) Any office of a nondepository 

financial institution, as defined in 

paragraph (g)(2) of this section, that 

takes applications from the public for 

covered loans. A nondepository 

financial institution is also deemed to 

have a branch office in an MSA or in an 

MD, if, in the preceding calendar year, 

it received applications for, originated, 

or purchased five or more covered loans 

related to property located in that MSA 

or MD, respectively. 

(d) Closed-end mortgage loan means a 

debt obligation secured by a lien on a 

dwelling that is not an open-end line of 

credit under paragraph (o) of this 

section, a reverse mortgage under 

paragraph (q) of this section, or 

excluded from this part pursuant to 

§ 1003.3(c). 

(e) Covered loan means a transaction 

that is, as applicable, a closed-end 

mortgage loan under paragraph (d) of 

this section, an open-end line of credit 

under paragraph (o) of this section, or a 

reverse mortgage under paragraph (q) of 

this section. 

(f) Dwelling means a residential 

structure, whether or not attached to 

real property. The term includes but is 

not limited to a detached home, an 

individual condominium or cooperative 

unit, a manufactured or other factorybuilt home, or a multifamily residential 

structure. 

(g) Financial institution means a 

depository financial institution or a 

nondepository financial institution, 

where: 

(1) Depository financial institution 

means a bank, savings association, or 

credit union that: 

(i) On the preceding December 31 had 

assets in excess of the asset threshold 

established and published annually by 

the Bureau for coverage by the Act, 

based on the year-to-year change in the 

average of the Consumer Price Index for 

Urban Wage Earners and Clerical 

Workers, not seasonally adjusted, for 

each twelve month period ending in 

November, with rounding to the nearest 

million; 

(ii) On the preceding December 31, 

had a home or branch office in an MSA; 

(iii) In the preceding calendar year, 

originated at least one home purchase 

loan or refinancing of a home purchase 

loan, secured by a first lien on a one-to 

four-unit dwelling; 

(iv) Meets one or more of the 

following three criteria: 

(A) The institution is Federally 

insured or regulated; 

(B) The loan referred to in paragraph 

(g)(1)(iii) of this section was insured, 

guaranteed, or supplemented by a 

Federal agency; or 

(C) The loan referred to in paragraph 

(g)(1)(iii) of this section was intended by 

the institution for sale to the Federal 

National Mortgage Association or the 

Federal Home Loan Mortgage 

Corporation; and 

(v) In the preceding calendar year, 

originated at least 25 covered loans, 

excluding open-end lines of credit; and 

(2) Nondepository financial 

institution means a for-profit mortgagelending institution (other than a bank, 

savings association, or credit union) 

that: 

(i) On the preceding December 31, 

had a home or branch office in an MSA; 

and 

(ii) In the preceding calendar year, 

originated at least 25 covered loans, 

excluding open-end lines of credit. 

* * * * * 

(i) Home improvement loan means a 

covered loan that is for the purpose, in 

whole or in part, of repairing, 

rehabilitating, remodeling, or improving 

a dwelling or the real property on which 

it is located. 

(j) Home purchase loan means a 

covered loan that is for the purpose of 

purchasing a dwelling. 

(k) Loan application register means a 

register in the format prescribed in 

appendix A to this part. 

(l) Manufactured home means any 

residential structure as defined under 

regulations of the U.S. Department of 

Housing and Urban Development 

establishing manufactured home 

construction and safety standards (24 

CFR 3280.2). 

* * * * * 

(n) Multifamily dwelling means a 

dwelling, regardless of construction 

method, that contains five or more 

individual dwelling units. 

(o) Open-end line of credit means a 

transaction that: 

(1) Is an open-end credit plan as 

defined in § 1026.2(a)(20) of Regulation 

Z, but without regard to whether the 

credit is for personal, family, or 

household purposes, without regard to 

whether the person to whom credit is 

extended is a consumer, and without 

regard to whether the person extending 

credit is a creditor, as those terms are 

defined under Regulation Z, 12 CFR part 

1026; 

(2) Is secured by a lien on a dwelling, 

as defined under paragraph (f) of this 

section; 


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(3) Is not a reverse mortgage under 

paragraph (q) of this section; and 

(4) Is not excluded from this part 

pursuant to § 1003.3(c). 

(p) Refinancing means a covered loan 

in which a new debt obligation satisfies 

and replaces an existing debt obligation 

by the same borrower, in which both the 

existing debt obligation and the new 

debt obligation are secured by liens on 

dwellings. 

(q) Reverse mortgage means a 

transaction that: 

(1) Is a reverse mortgage transaction as 

defined in Regulation Z, 12 CFR 

1026.33(a); and 

(2) Is not excluded from this part 

pursuant to § 1003.3(c). 

■ 4. Section 1003.3 is amended by 

revising the section heading and adding 

paragraph (c) to read as follows: 

§ 1003.3 Exempt institutions and excluded 

transactions. 

* * * * * 

(c) Excluded transactions. The 

requirements of this part do not apply 

to: 

(1) A loan originated or purchased by 

the financial institution acting in a 

fiduciary capacity; 

(2) A loan secured by a lien on 

unimproved land; 

(3) Temporary financing; 

(4) The purchase of an interest in a 

pool of loans; 

(5) The purchase solely of the right to 

service loans; 

(6) The purchase of loans as part of a 

merger or acquisition, or as part of the 

acquisition of all of the assets and 

liabilities of a branch office as defined 

in § 1003.2(c); 

(7) A loan or application for which 

the total dollar amount is less than 

$500; 

(8) The purchase of a partial interest 

in a covered loan; or 

(9) A loan used primarily for 

agricultural purposes. 

■ 5. Section 1003.4 is amended by: 

■ a. Revising the section heading; 

■ b. Revising paragraphs (a) 

introductory text, (a)(1) through (7), 

(a)(9) through (11), (a)(12)(i), and (a)(13) 

and (14); 

■ c. Adding paragraphs (a)(15) through 

(39) and (b); 

■ d. Revising paragraph (b); 

■ e. Removing and reserving paragraphs 

(c)(1) through (3) and (d); and 

■ f. Adding paragraph (f). 

The revisions and addtions read as 

follows: 

§ 1003.4 Compilation of reportable data. 

(a) Data format and itemization. A 

financial institution shall collect data 

regarding applications for covered loans 

which it receives, originations of 

covered loans on which it makes a 

credit decision, and covered loans it 

purchases for each calendar year. A 

financial institution shall collect data 

regarding requests under a preapproval 

program, as defined in § 1003.2(b)(2), 

only if the preapproval request is 

denied, is approved by the financial 

institution but not accepted by the 

applicant, or results in the origination of 

a home purchase loan. The data 

collected shall include the following 

items: 

(1)(i) A universal loan identifier (ULI) 

for the covered loan or application that 

can be used to retrieve the covered loan 

or application file. For covered loans or 

applications for which any financial 

institution has previously reported a 

ULI under this part, the ULI shall 

consist of the ULI that was previously 

reported for the covered loan or 

application under this part. For all other 

covered loans and applications, the ULI 

shall: 

(A) Begin with the financial 

institution’s Legal Entity Identifier 

described in § 1003.5(a)(3); and 

(B) Follow the Legal Entity Identifier 

described in § 1003.5(a)(3) with up to 25 

additional characters to identify the 

covered loan or application, which: 

(1) May be letters, numerals, symbols, 

or a combination of any of these; 

(2) Must be unique within the 

financial institution; and 

(3) Must not include any information 

that could be used to directly identify 

the applicant or borrower. 

(ii) Except for purchased covered 

loans, the date the application was 

received or the date shown on the 

application form. 

(2) Whether the covered loan or 

application is insured under title II of 

the National Housing Act, is insured 

under title V of the Housing Act of 1949, 

or is guaranteed under chapter 37 of 

title 38 of the United States Code. 

(3) Whether the covered loan is, or the 

application is for, a home purchase 

loan, a home improvement loan, a 

refinancing, or for a purpose other than 

home purchase, home improvement, or 

refinancing. 

(4) Whether the application is a 

request for preapproval for a home 

purchase loan. 

(5) Whether the construction method 

for the dwelling related to the property 

identified in paragraph (a)(9) of this 

section is site built or a manufactured 

home. 

(6) Whether the property identified in 

paragraph (a)(9) of this section is or will 

be used by the applicant or borrower as 

a principal residence, as a second 

residence, or as an investment property. 

(7) The amount of the covered loan or 

the amount applied for, as applicable. 

(i) For a closed-end mortgage loan, 

other than a purchased loan or an 

assumption, the amount of the covered 

loan is the amount to be repaid as 

disclosed on the legal obligation. For a 

purchased closed-end mortgage loan or 

an assumption of a closed-end mortgage 

loan, the amount of the covered loan is 

the unpaid principal balance on the 

covered loan or assumption at the time 

of purchase or assumption. 

(ii) For an open-end line of credit, 

including a purchased open-end line of 

credit or an assumption of an open-end 

line of credit, the amount of the covered 

loan is the amount of credit available to 

the borrower under the terms of the 

plan. 

(iii) For a reverse mortgage, the 

amount of the covered loan is the initial 

principal limit, as determined pursuant 

to section 255 of the National Housing 

Act (12 U.S.C. 1715z–20) and 

implementing regulations and 

mortgagee letters prescribed by the U.S. 

Department of Housing and Urban 

Development. 

* * * * * 

(9) The following information about 

the location of the property securing the 

covered loan or, in the case of an 

application, proposed to secure the 

covered loan: 

(i) The postal address; and 

(ii) If the property is located in an 

MSA or MD in which the financial 

institution has a home or branch office, 

the location of the property by: 

(A) State; 

(B) County; 

(C) MSA or MD; and 

(D) Census tract if the property is 

located in a county with a population of 

more than 30,000 according to the most 

recent decennial census conducted by 

the U.S. Census Bureau. 

(10) The following information about 

the applicant or borrower: 

(i) Ethnicity, race, sex, and age; and 

(ii) Gross annual income relied on in 

making the credit decision requiring 

consideration of income or, if a credit 

decision requiring consideration of 

income was not made, the gross annual 

income collected as part of the 

application process. 

(11) The type of entity purchasing a 

covered loan that the financial 

institution originates or purchases and 

then sells within the same calendar 

year. 

(12)(i) For covered loans subject to 

Regulation Z, 12 CFR part 1026, other 

than purchased covered loans and 

reverse mortgages, the difference 

between the covered loan’s annual 


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percentage rate and the average prime 

offer rate for a comparable transaction as 

of the date the interest rate is set. 

* * * * * 

(13) For covered loans subject to the 

Home Ownership and Equity Protection 

Act of 1994, as implemented in 

Regulation Z, 12 CFR 1026.32, whether 

the covered loan is a high-cost mortgage 

under Regulation Z, 12 CFR 1026.32(a), 

and the reason that the covered loan is 

a high-cost mortgage, if applicable. 

(14) The priority of the lien against 

the property identified under paragraph 

(a)(9) of this section. 

(15)(i) Except for purchased covered 

loans, the credit score or scores relied 

on in making the credit decision and the 

name and version of the scoring model 

used to generate each credit score. 

(ii) ‘‘Credit score’’ has the meaning set 

forth in 15 U.S.C. 1681g(f)(2)(A). 

(16) The reason(s) the financial 

institution denied the application. 

(17) For covered loans or applications 

subject to the Home Ownership and 

Equity Protection Act of 1994, as 

implemented in Regulation Z, 12 CFR 

1026.32, or covered loans or 

applications subject to Regulation Z, 12 

CFR 1026.43(e)(2)(iii), other than 

purchased covered loans, the total 

points and fees payable in connection 

with the covered loan or application, 

expressed in dollars and calculated in 

accordance with Regulation Z, 12 CFR 

1026.32(b)(1) or (2), as applicable. 

(18) For covered loans subject to the 

disclosure requirements in Regulation 

Z, 12 CFR 1026.19(f), the total of all 

itemized amounts that are designated 

borrower-paid at or before closing, 

expressed in dollars, as disclosed 

pursuant to Regulation Z, 12 CFR 

1026.38(f)(1). 

(19) For covered loans subject to the 

disclosure requirements in Regulation 

Z, 12 CFR 1026.19(f), the points 

designated as paid to the creditor to 

reduce the interest rate, expressed in 

dollars, as described in Regulation Z, 12 

CFR 1026.37(f)(1)(i). 

(20) For covered loans subject to the 

disclosure requirements in Regulation 

Z, 12 CFR 1026.19(f), other than 

purchased covered loans, the interest 

rate that the borrower would receive if 

the borrower paid no bona fide discount 

points, as calculated pursuant to 

Regulation Z, 12 CFR 1026.32. 

(21) The interest rate that is or would 

be applicable to the covered loan at 

closing or account opening. 

(22) Except for purchased covered 

loans, the term in months of any 

prepayment penalty, as defined in 

Regulation Z, 12 CFR 1026.32(b)(6)(i) or 

(ii), as applicable. 

(23) For a covered loan that is not, or 

an application that is not for, a reverse 

mortgage, the ratio of the applicant’s or 

borrower’s total monthly debt to the 

total monthly income relied on in 

making the credit decision. 

(24) The ratio of the total amount of 

debt secured by the property to the 

value of the property, determined as 

follows: 

(i) For a covered loan that is a homeequity line of credit, by dividing the 

sum of the unpaid principal balance of 

the first mortgage, the full amount of 

any home-equity line of credit (whether 

drawn or undrawn), and the balance of 

any other subordinate financing by the 

property value identified in paragraph 

(a)(28) of this section; 

(ii) For a covered loan that is not a 

home-equity line of credit, by dividing 

the combined unpaid principal balance 

amounts of the first and all subordinate 

mortgages, excluding undrawn homeequity lines of credit amounts, by the 

property value identified in paragraph 

(a)(28) of this section. 

(25) The scheduled number of months 

after which the legal obligation will 

mature or would have matured. 

(26) The number of months until the 

first date the interest rate may change 

after loan origination. 

(27) Whether the contractual terms 

include or would have included any of 

the following: 

(i) A balloon payment as defined in 

Regulation Z, 12 CFR 1026.18(s)(5)(i); 

(ii) Interest-only payments as defined 

in Regulation Z, 12 CFR 

1026.18(s)(7)(iv); 

(iii) A contractual term that would 

cause the covered loan to be a negative 

amortization loan as defined in 

Regulation Z, 12 CFR 1026.18(s)(7)(v); 

or 

(iv) Any other contractual term that 

would allow for payments other than 

fully amortizing payments, as defined in 

Regulation Z, 12 CFR 1026.43(b)(2), 

during the loan term, other than the 

terms described in paragraphs (a)(27)(i), 

(ii), and (iii) of this section. 

(28) The value of the property 

securing the covered loan or, in the case 

of an application, proposed to secure 

the covered loan relied on in making the 

credit decision. 

(29) If the dwelling related to the 

property identified in paragraph (a)(9) of 

this section is a manufactured home, 

whether it is legally classified as real 

property or as personal property. 

(30) If the dwelling related to the 

property identified in paragraph (a)(9) of 

this section is a manufactured home, 

whether the applicant or borrower owns 

the land on which it is or will be located 

through a direct or indirect ownership 

interest or leases the land through a 

paid or unpaid leasehold. 

(31) The number of individual 

dwelling units related to the property 

securing the covered loan or, in the case 

of an application, proposed to secure 

the covered loan. 

(32) If the property securing the 

covered loan or, in the case of an 

application, proposed to secure the 

covered loan includes a multifamily 

dwelling, the number of individual 

dwelling units related to the property 

that are income-restricted pursuant to 

Federal, State, or local affordable 

housing programs. 

(33) Except for purchased covered 

loans, the following information about 

the application channel of the covered 

loan or application: 

(i) Whether the applicant or borrower 

submitted the application for the 

covered loan directly to the financial 

institution; and 

(ii) Whether the obligation arising 

from the covered loan was, or in the 

case of an application, would have been 

initially payable to the financial 

institution. 

(34) For a covered loan or application, 

the unique identifier assigned by the 

Nationwide Mortgage Licensing System 

and Registry (NMLSR ID) for the 

mortgage loan originator, as defined in 

Regulation G, 12 CFR 1007.102, or 

Regulation H, 12 CFR 1008.23, as 

applicable. 

(35)(i) Except for purchased covered 

loans, the name of the automated 

underwriting system used by the 

financial institution to evaluate the 

application and the recommendation 

generated by that automated 

underwriting system. 

(ii) For purposes of this section, an 

automated underwriting system means 

an electronic tool developed by a 

securitizer, Federal government insurer, 

or guarantor that provides a 

recommendation regarding whether the 

application is eligible to be purchased, 

insured, or guaranteed by that 

securitizer, Federal government insurer, 

or guarantor. 

(36) Whether the covered loan is, or 

the application is for, a reverse 

mortgage, as defined in § 1003.2(q), and 

whether the reverse mortgage is an 

open- or closed-end transaction. 

(37) Whether the covered loan is, or 

the application is for, an open-end line 

of credit, as defined in § 1003.2(o), and 

whether the covered loan is, or the 

application is for, a home-equity line of 

credit, as defined in § 1003.2(h). 

(38) Whether the covered loan is 

subject to the ability-to-repay provisions 

of Regulation Z, 12 CFR 1026.43, and 

whether the covered loan is a qualified 


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mortgage, as described under Regulation 

Z, 12 CFR 1026.43(e) or (f). 

(39) For a home-equity line of credit 

and an open-end reverse mortgage, the 

amount of the draw on the covered loan, 

if any, made at account opening. 

(b) Collection of data on ethnicity, 

race, sex, age, and income. (1) A 

financial institution shall collect data 

about the ethnicity, race, sex, and age of 

the applicant or borrower as prescribed 

in appendices A and B to this part. 

(2) Ethnicity, race, sex, age, and 

income data may but need not be 

collected for covered loans purchased 

by the financial institution. 

* * * * * 

(f) Quarterly recording of data. A 

financial institution shall record the 

data collected pursuant to this section 

on a loan application register within 30 

calendar days after the end of the 

calendar quarter in which final action is 

taken (such as origination or purchase of 

a covered loan, or denial or withdrawal 

of an application). 

■ 6. Section 1003.5 is amended by 

revising paragraph (a)(1), adding 

paragraphs (a)(3) and (4), and revising 

paragraphs (b) through (f) to read as 

follows: 

§ 1003.5 Disclosure and reporting. 

(a) Reporting to agency. (1)(i) Except 

as described in paragraph (a)(1)(ii) of 

this section, by March 1 following the 

calendar year for which data are 

compiled and recorded as required by 

§ 1003.4, a financial institution shall 

submit its complete loan application 

register in electronic format to the 

Bureau or to the appropriate Federal 

agency for the financial institution in 

accordance with the instructions in 

appendix A to this part. The financial 

institution shall retain a copy of its 

complete loan application register for its 

records for at least three years. 

(ii) Effective [x], within 60 calendar 

days after the end of each calendar 

quarter, a financial institution that 

reported at least 75,000 covered loans, 

applications, and purchased covered 

loans, combined, for the preceding 

calendar year shall submit its loan 

application register containing all data 

required to be recorded for that quarter 

pursuant to § 1003.4(f). The financial 

institution shall submit its quarterly 

loan application register in electronic 

format to the Bureau or to the 

appropriate Federal agency for the 

financial institution in accordance with 

the instructions in appendix A to this 

part. The financial institution shall 

retain a copy of its complete loan 

application register for its records for at 

least three years. 

(iii) An officer of the financial 

institution shall certify to the accuracy 

of data submitted. 

* * * * * 

(3) When reporting its data, a 

financial institution shall provide a 

Legal Entity Identifier (LEI) for the 

financial institution issued by: 

(i) A utility endorsed by the LEI 

Regulatory Oversight Committee; or 

(ii) A utility endorsed or otherwise 

governed by the Global LEI Foundation 

(GLEIF) (or any successor of the GLEIF) 

after the GLEIF assumes operational 

governance of the global LEI system. 

(4) When reporting its data, a 

financial institution shall identify its 

parent company, if any. 

(b) Disclosure statement. (1) The 

Federal Financial Institutions 

Examination Council (FFIEC) will make 

available a disclosure statement based 

on the data each financial institution 

submits for the preceding calendar year. 

(2) No later than three business days 

after receiving notice that its disclosure 

statement is available, a financial 

institution shall make its disclosure 

statement available to the public by 

making available at its home office and 

each branch office located in each MSA 

and each MD a notice that clearly 

conveys that the institution’s disclosure 

statement may be obtained on the FFIEC 

Web site and that includes the FFIEC’s 

Web site address. 

(c) Public disclosure of modified loan 

application register. (1) A financial 

institution shall make its loan 

application register available to the 

public after, for each entry: 

(i) Removing the information required 

to be reported under § 1003.4(a)(1), the 

date required to be reported under 

§ 1003.4(a)(8), the postal address 

required to be reported under 

§ 1003.4(a)(9), the age of the applicant or 

borrower required to be reported under 

§ 1003.4(a)(10), and the information 

required to be reported under 

§ 1003.4(a)(15) and (a)(17) through (39); 

and 

(ii) Rounding the information 

required to be reported under 

§ 1003.4(a)(7) to the nearest thousand. 

(2) A financial institution shall make 

available its loan application register, 

modified as required by paragraph (c)(1) 

of this section, following the calendar 

year for which the data are compiled, as 

follows: 

(i) By March 31 for a request received 

on or before March 1; and 

(ii) Within 30 calendar days for a 

request received after March 1. 

(3) The modified loan application 

register made available pursuant to this 

paragraph (c) need contain data relating 

to only the MSA or MD for which the 

request is made. 

(d) Availability of data. (1) A financial 

institution shall make its modified loan 

application register available to the 

public for a period of three years and its 

disclosure statement available to the 

public for a period of five years. An 

institution shall make its data available 

during the hours the office is normally 

open to the public for business. 

(2) A financial institution may impose 

a reasonable fee for any cost incurred in 

providing or reproducing its data. 

(e) Notice of availability of data. A 

financial institution shall post a general 

notice about the availability of its 

HMDA data in the lobby of its home 

office and of each branch office located 

in each MSA and each MD. 

(f) Aggregated data. Using the data 

submitted by financial institutions, the 

FFIEC will make available reports for 

individual institutions and reports of 

aggregate data for each MSA and MD, 

showing lending patterns by property 

location, age of housing stock, and 

income level, sex, ethnicity, and race. 

These reports will be made available to 

the public online at the FFIEC’s Web 

site (www.ffiec.gov/hmda). 

■ 7. Appendix A to Part 1003 is revised 

to read as follows: 

Appendix A to Part 1003—Form and 

Instructions for Completion of HMDA 

Loan Application Register 

Paperwork Reduction Act Notice 

This report is required by law (12 U.S.C. 

2801–2810 and 12 CFR 1003). An agency 

may not conduct or sponsor, and an 

organization is not required to respond to, a 

collection of information unless it displays a 

valid Office of Management and Budget 

(OMB) Control Number. See 12 CFR 

1003.1(a) for the valid OMB Control Numbers 

applicable to this information collection. 

Send comments regarding this burden 

estimate or any other aspect of this collection 

of information, including suggestions for 

reducing the burden, to the respective 

agencies and to OMB, Office of Information 

and Regulatory Affairs, Paperwork Reduction 

Project, Washington, DC 20503. Be sure to 

reference the applicable agency and the OMB 

Control Number, as found in 12 CFR 

1003.1(a), when submitting comments to 

OMB. 

I. Instructions for Completion of Loan 

Application Register 

1. Instructions and designations. This part 

to this appendix contains instructions for the 

completion of the loan application register. 

Each instruction in this appendix is 

identified by a number and the regulatory 

section and paragraph which provides the 

reporting requirement. The instructions are 

designated according to the particular 

regulatory provision addressed. For example, 

the first instruction in this appendix for 

reporting the action taken under 


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§ 1003.4(a)(8) may be cited as instruction 

4(a)(8)–1. This paragraph may be cited as 

instruction I–1. 

Paragraph 4(a)(1)(i)—ULI 

1. Enter the ULI assigned to the covered 

loan or application. 

Paragraph 4(a)(1)(ii)—Date Application 

Received 

1. Enter the date the application was 

received or the date shown on the 

application form by year, month, and day, 

using numerals in the form YYYYMMDD. 

Enter ‘‘NA’’ for covered loans purchased by 

your institution. 

Paragraph 4(a)(2)—Loan or Application Type 

1. Indicate the type of covered loan or 

application by entering the applicable Code 

from the following: 

Code 1—Conventional 

Code 2—FHA 

Code 3—VA 

Code 4—USDA Rural Development 

a. Use Code 2 if the covered loan or 

application is insured under title II of the 

National Housing Act. 

b. Use Code 3 if the covered loan or 

application is guaranteed under chapter 37 of 

title 38 of the United States Code. 

c. Use Code 4 if the covered loan or 

application is insured under title V of the 

Housing Act of 1949. 

d. Use Code 1 if the covered loan or 

application is not insured under title II of the 

National Housing Act, not insured under title 

V of the Housing Act of 1949, and not 

guaranteed under chapter 37 of title 38 of the 

United States Code. 

Paragraph 4(a)(3)—Purpose of Loan or 

Application 

1. Indicate the purpose of the loan or 

application by entering the applicable Code 

from the following: 

Code 1—Home purchase 

Code 2—Home improvement 

Code 3—Refinancing 

Code 4—Other 

a. For refinancings, enter Code 4 if, under 

the terms of the agreement, you were 

unconditionally obligated to refinance the 

obligation, or you were obligated to refinance 

the obligation subject to conditions within 

the borrower’s control. 

Paragraph 4(a)(4)—Preapproval 

1. Indicate whether the application or 

covered loan involved a request for 

preapproval for a home purchase loan by 

entering the applicable Code from the 

following: 

Code 1—Preapproval requested 

Code 2—Preapproval not requested 

Code 3—Not applicable 

a. Enter Code 1 if your institution has a 

preapproval program as defined in 

§ 1003.2(b)(2) and the applicant requests a 

preapproval for a home purchase loan. Do 

not use Code 1 if a request for preapproval 

is withdrawn or for requests for preapproval 

that are closed for incompleteness; such 

preapproval requests are not reported under 

HMDA as implemented by Regulation C. 

b. Enter Code 2 if your institution has a 

preapproval program as defined in 

§ 1003.2(b)(2) but the applicant does not 

request a preapproval. 

c. Enter Code 3 if your institution does not 

have a preapproval program as defined in 

§ 1003.2(b)(2). 

d. Enter Code 3 for applications for or 

originations of home improvement loans, 

refinancings, open-end lines of credit, homeequity lines of credit, reverse mortgages, and 

for purchased loans. 

Paragraph 4(a)(5)—Construction Method 

1. Indicate the construction method for the 

dwelling related to the covered loan or 

application by entering the applicable Code 

from the following: 

Code 1—Site Built 

Code 2—Manufactured Home 

Code 3—Other 

a. Enter Code 1 if most of the dwelling’s 

elements were created at the dwelling’s 

permanent site (including the use of 

prefabricated components), or if the dwelling 

is a modular or other factory-built home 

(including a modular home with a permanent 

metal chassis) that does not meet the 

definition of a manufactured home under 

§ 1003.2(l). 

b. Enter Code 2 if the dwelling meets the 

definition of a manufactured home under 

§ 1003.2(l). 

c. Enter Code 3 for a dwelling that is not 

site built or a manufactured home under 

§ 1003.2(l). 

Paragraph 4(a)(6)—Occupancy Type 

1. Indicate the occupancy status of the 

property to which the covered loan or 

application relates by entering the applicable 

Code from the following: 

Code 1—Principal residence 

Code 2—Second residence 

Code 3—Investment property with rental 

income 

Code 4—Investment property without rental 

income 

a. For purchased loans, use Code 1 unless 

the application or documents for the covered 

loan indicate that the property will not be 

occupied as a principal residence. 

b. Use Code 2 for second homes or vacation 

homes. 

c. Use Code 3 for investment properties 

that are owned for the purpose of generating 

income by renting the property. 

d. Use Code 4 for investment properties 

that are not owned for the purpose of 

generating income by renting the property. 

Paragraph 4(a)(7)—Loan Amount 

1. Enter the amount of the covered loan or 

the amount applied for, as applicable, in 

dollars. 

Paragraph 4(a)(8)—Action Taken 

1. Type of Action. Indicate the type of 

action taken on the application or covered 

loan by using one of the following Codes. 

Code 1—Loan originated 

Code 2—Application approved but not 

accepted 

Code 3—Application denied 

Code 4—Application withdrawn 

Code 5—File closed for incompleteness 

Code 6—Loan purchased by your institution 

Code 7—Preapproval request denied 

Code 8—Preapproval request approved but 

not accepted 

a. Use Code 1 for a covered loan that is 

originated, including one resulting from a 

request for preapproval. 

b. For a counteroffer (your offer to the 

applicant to make the covered loan on 

different terms or in a different amount from 

the terms or amount applied for), use Code 

1 if the applicant accepts. Use Code 3 if the 

applicant turns down the counteroffer or 

does not respond. 

c. Use Code 2 when the application is 

approved but the applicant (or the party that 

initially received the application) fails to 

respond to your notification of approval or 

your commitment letter within the specific 

time. Do not use this Code for a preapproval 

request. 

d. Use Code 4 only when the application 

is expressly withdrawn by the applicant 

before satisfying all underwriting or 

creditworthiness conditions and before the 

institution denies the application or closes 

the file for incompleteness. Do not use Code 

4 if a request for preapproval is withdrawn; 

preapproval requests that are withdrawn are 

not reported under HMDA. 

e. Use Code 5 if you sent a written notice 

of incompleteness under § 1002.9(c)(2) of 

Regulation B (Equal Credit Opportunity Act) 

and the applicant did not respond to your 

request for additional information within the 

period of time specified in your notice. Do 

not use this Code for requests for preapproval 

that are incomplete; these preapproval 

requests are not reported under HMDA. 

2. Date of Action. Enter the date of action 

taken by year, month, and day, using 

numerals in the form YYYYMMDD. 

a. For covered loans originated, enter the 

settlement or closing date. 

b. For covered loans purchased, enter the 

date of purchase by your institution. 

c. For applications and preapprovals 

denied, applications and preapprovals 

approved but not accepted by the applicant, 

and files closed for incompleteness, enter the 

date that the action was taken by your 

institution or the date the notice was sent to 

the applicant. 

d. For applications withdrawn, enter the 

date you received the applicant’s express 

withdrawal, whether received in writing or 

orally, or enter the date shown on the 

notification from the applicant, in the case of 

a written withdrawal. 

e. For preapprovals that lead to a loan 

origination, enter the date of the origination. 

Paragraph 4(a)(9)—Postal Address and 

Location of Subject Property 

1. Property Location Information. Enter the 

following information about the location of 

the property securing the covered loan or, in 

the case of an application, proposed to secure 

the covered loan: 

a. Street Address. Enter the street address 

of the property. 

i. For originations and purchases, the 

address must correspond to the property 

identified on the legal obligation related to 

the covered loan. For applications that did 

not result in an origination, the address must 


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correspond to the property identified by the 

applicant. 

ii. Include, as applicable, the address 

number, the street name, the street direction, 

address unit designators, and the address 

unit value, using U.S. Postal Service official 

abbreviations. For example, 100 N Main St 

Apt 1. 

iii. Do not enter a post office box. 

iv. Enter ‘‘NA’’ only if the street address is 

not known. For example, if the property does 

not have a postal address at closing or if the 

applicant did not provide the postal address 

of the property to the financial institution 

before the application was denied, 

withdrawn, or closed for incompleteness. 

b. City Name. Enter the name of the city. 

i. Enter ‘‘NA’’ only if the city location is 

not known. For example, if the property does 

not have a postal address at closing or if the 

applicant did not provide the postal address 

of the property to the financial institution 

before the application was denied, 

withdrawn, or closed for incompleteness. 

c. State Code. Enter the two letter State 

code for the applicable State, using the U.S. 

Postal Service official State abbreviations. 

d. Zip Code. Enter the zip code. The zip 

code may be five or nine digits. Do not enter 

dashes. 

i. Enter ‘‘NA’’ only if the zip code is not 

known. For example, if the property does not 

have a postal address at closing or if the 

applicant did not provide the postal address 

of the property to the financial institution 

before the application was denied, 

withdrawn, or closed for incompleteness. 

e. Metropolitan Statistical Area (MSA) or 

Metropolitan Division (MD). Enter the fivedigit MSA or MD number if the MSA is 

divided into MDs. MSA and MD boundaries 

and five-digit codes are defined by the U.S. 

Office of Management and Budget. Use the 

boundaries and codes that were in effect on 

January 1 of the calendar year for which you 

are reporting. 

i. Enter ‘‘NA’’ if the property is not located 

in an MSA or an MD. 

f. County. Enter the Federal Information 

Processing Standards (FIPS) three-digit 

numerical code for the county. These codes 

are available from the appropriate Federal 

agency to which you report data. 

g. Census Tract. Enter the census tract 

number. Census tract numbers are defined by 

the U.S. Census Bureau. Use the boundaries 

and codes that were in effect on January 1 of 

the calendar year for which you are 

reporting. 

i. You may enter ‘‘NA’’ if the property is 

located in a county with a population of 

30,000 or less according to the most recent 

decennial census conducted by the U.S. 

Census Bureau. 

2. Certain Location Information not 

Required. If your institution is not required 

to report data for CRA purposes under 

§ 1003.4(e), you may elect to enter ‘‘NA’’ for 

County, MSA, and census tract for entries 

related to properties that are not located in 

the MSAs or MDs in which you have a home 

or branch office. 

Paragraph 4(a)(10)—Applicant or Borrower 

Information 

1. Appendix B to this part contains 

instructions for the collection of data on 

ethnicity, race, and sex, and also contains a 

sample form for data collection. 

2. Applicability. Report this information 

for covered loans that you originate as well 

as for applications that do not result in an 

origination. 

a. You need not collect or report this 

information for covered loans purchased. If 

you choose not to report this information for 

covered loans that you purchase, use the 

Codes for ‘‘not applicable.’’ 

b. If the borrower or applicant is not a 

natural person (a corporation, partnership, or 

trust, for example), use the Codes for ‘‘not 

applicable.’’ 

Paragraph 4(a)(10)(i)—Ethnicity, Race, Sex, 

and Age 

1. Ethnicity of Borrower or Applicant. Use 

the following Codes to indicate the ethnicity 

of the applicant or borrower under column 

‘‘A’’ and of any co-applicant or co-borrower 

under column ‘‘CA.’’ 

Code 1—Hispanic or Latino 

Code 2—Not Hispanic or Latino 

Code 3—Information not provided by 

applicant in mail, internet, or telephone 

application 

Code 4—Not applicable 

Code 5—No co-applicant 

2. Race of Borrower or Applicant. Use the 

following Codes to indicate the race of the 

applicant or borrower under column ‘‘A’’ and 

of any co-applicant or co-borrower under 

column ‘‘CA.’’ 

Code 1—American Indian or Alaska Native 

Code 2—Asian 

Code 3—Black or African American 

Code 4—Native Hawaiian or Other Pacific 

Islander 

Code 5—White 

Code 6—Information not provided by 

applicant in mail, internet, or telephone 

application 

Code 7—Not applicable 

Code 8—No co-applicant 

a. If an applicant selects more than one 

racial designation, enter all Codes 

corresponding to the applicant’s selections. 

b. Use Code 3 (for ethnicity) and Code 6 

(for race) if the applicant or co-applicant does 

not provide the information in an application 

taken by mail, internet, or telephone. 

c. Use Code 4 (for ethnicity) and Code 7 

(for race) for ‘‘not applicable’’ only when the 

applicant or co-applicant is not a natural 

person or when applicant or co-applicant 

information is unavailable because the 

covered loan has been purchased by your 

institution. 

d. If there is more than one co-applicant, 

provide the required information only for the 

first co-applicant listed on the application 

form. If there are no co-applicants or coborrowers, use Code 5 (for ethnicity) and 

Code 8 (for race) for ‘‘no co-applicant’’ in the 

co-applicant column. 

3. Sex of Borrower or Applicant. Use the 

following Codes to indicate the sex of the 

applicant or borrower under column ‘‘A’’ and 

of any co-applicant or co-borrower under 

column ‘‘CA.’’ 

Code 1—Male 

Code 2—Female 

Code 3—Information not provided by 

applicant in mail, internet, or telephone 

application 

Code 4—Not applicable 

Code 5—No co-applicant 

a. Use Code 3 if the applicant or coapplicant does not provide the information in 

an application taken by mail, internet, or 

telephone. 

b. Use Code 4 for ‘‘not applicable’’ only 

when the applicant or co-applicant is not a 

natural person or when applicant or coapplicant information is unavailable because 

the covered loan has been purchased by your 

institution. 

c. If there is more than one co-applicant, 

provide the required information only for the 

first co-applicant listed on the application 

form. If there are no co-applicants or coborrowers, use Code 5 for ‘‘no co-applicant’’ 

in the co-applicant column. 

4. Age of Borrower or Applicant. Enter the 

age of the applicant or borrower, as of the 

date of application, derived from the date of 

birth as shown on the application form, in 

number of years under column ‘‘A’’ and of 

any co-applicant or co-borrower under 

column ‘‘CA.’’ Or, use the following Codes as 

applicable. 

Code 1—Not applicable 

Code 2—No co-applicant 

a. Use Code 1 for ‘‘not applicable’’ only 

when the applicant or co-applicant is not a 

natural person or when applicant or coapplicant information is unavailable because 

the covered loan has been purchased by your 

institution. 

b. If there is more than one co-applicant, 

provide the required information only for the 

first co-applicant listed on the application 

form. If there are no co-applicants or coborrowers, use Code 2 for ‘‘no co-applicant’’ 

in the co-applicant column. 

Paragraph 4(a)(10)(ii)—Income 

1. Income. Enter the gross annual income 

that your institution relied on in making the 

credit decision requiring consideration of 

income or, if the application was denied or 

withdrawn or the file was closed for 

incompleteness before a credit decision 

requiring consideration of income was made, 

the gross annual income collected as part of 

the application process. 

a. Round all dollar amounts to the nearest 

thousand (round $500 up to the next $1,000), 

and show in thousands. For example, report 

$35,500 as 36. 

b. For a covered loan or application related 

to a multifamily dwelling, enter ‘‘NA.’’ 

c. If no income information is collected as 

part of the application process or the covered 

loan applied for would not or did not require 

consideration of income, enter ‘‘NA.’’ 

d. If the applicant or co-applicant is not a 

natural person or the applicant or coapplicant information is unavailable because 

the covered loan has been purchased by your 

institution, enter ‘‘NA.’’ 

Paragraph 4(a)(11)—Type of Purchaser 

1. Enter the applicable Code to indicate 

whether a covered loan that your institution 

originated or purchased was then sold to a 

secondary market entity within the same 

calendar year: 


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Code 0—Covered loan was not originated or 

was originated or purchased but was not 

sold to a secondary market entity in 

calendar year covered by register. 

Code 1—Fannie Mae 

Code 2—Ginnie Mae 

Code 3—Freddie Mac 

Code 4—Farmer Mac 

Code 5—Private securitization 

Code 6—Commercial bank, savings bank, or 

savings association 

Code 7—Life insurance company, credit 

union, mortgage bank, or finance company 

Code 8—Affiliate institution 

Code 9—Other type of purchaser 

a. Use Code 0 for applications that were 

denied, withdrawn, or approved but not 

accepted by the applicant; and for files 

closed for incompleteness. 

b. Use Code 0 if you originated or 

purchased a covered loan and did not sell it 

during that same calendar year. For purposes 

of recording the type of purchaser within 30 

calendar days after the end of the calendar 

quarter pursuant to § 1003.4(f), use Code 0 if 

you originated or purchased a covered loan 

and did not sell it during the calendar quarter 

for which you are recording the data. If you 

sell the covered loan in a subsequent quarter 

of the same calendar year, use the 

appropriate code for the type of purchaser on 

your loan application register for the quarter 

in which the covered loan was sold. If you 

sell the covered loan in a succeeding year, 

you need not report the sale. 

c. Use Code 2 if you conditionally assign 

a covered loan to Ginnie Mae in connection 

with a mortgage-backed security transaction. 

d. Use Code 5 for private securitizations by 

purchasers other than by one of the 

government-sponsored enterprises identified 

in Codes 1 through 4. If you know or 

reasonably believe that the covered loan you 

are selling will be securitized by the 

institution purchasing the covered loan, then 

use Code 5 regardless of the type or 

affiliation of the purchasing institution. 

e. Use Code 8 for covered loans sold to an 

institution affiliated with you, such as your 

subsidiary or a subsidiary of your parent 

corporation. For purposes of § 1003.4(a)(11), 

the term ‘‘affiliate’’ means any company that 

controls, is controlled by, or is under 

common control with, another company, as 

set forth in the Bank Holding Company Act 

of 1956 (12 U.S.C. 1841 et seq.). 

Paragraph 4(a)(12)—Rate Spread 

1. Enter the rate spread to three decimal 

places and use a leading zero, or two leading 

zeroes, if the rate is less than 1 percent. If the 

APR exceeds the APOR, enter a positive 

value. For example, enter 03.295. If the 

APOR exceeds the APR, enter a negative 

value. For example, enter ¥03.295. If the 

difference between the annual percentage 

rate and the average prime offer rate is a 

figure with more than three decimal places, 

round the figure to three decimal places. 

2. Enter ‘‘NA’’ in the case of a covered loan 

not subject to Regulation Z, 12 CFR part 

1026, a reverse mortgage, a loan that you 

purchased or assumed, or an application that 

does not result in a loan origination or the 

opening of a line of credit, except for 

applications that have been approved but not 

accepted by the applicant. 

Paragraph 4(a)(13)—HOEPA Status 

1. For a covered loan that you originated 

or purchased that is a high-cost mortgage 

under the Home Ownership and Equity 

Protection Act of 1994 (HOEPA), as 

implemented in Regulation Z § 1026.32, use 

the following Codes as applicable: 

Code 1—HOEPA loan because of APR 

Code 2—HOEPA loan because of points and 

fees 

Code 3—HOEPA loan because of both APR 

and points and fees 

Code 4—Other 

a. Enter Code 1 if the annual percentage 

rate for the transaction exceeds the high-cost 

mortgage thresholds. 

b. Enter Code 2 if the points and fees for 

the transaction exceed the high-cost mortgage 

thresholds. 

c. Enter Code 3 if both the annual 

percentage rate and the points and fees for 

the transaction exceed the high-cost mortgage 

thresholds. 

d. Enter Code 4 in all other cases. For 

example, enter Code 4 for a covered loan that 

you originated or purchased that is not a 

high-cost mortgage for any reason, including 

because the transaction is not subject to 

coverage under HOEPA (e.g., reverse 

mortgage transactions). Also enter Code 4 in 

the case of an application that does not result 

in a loan origination. 

Paragraph 4(a)(14)—Lien Status 

1. Enter the applicable Code for covered 

loans that you originate or purchase and for 

applications that do not result in an 

origination. 

Code 1—Secured by a first lien 

Code 2—Secured by a second lien 

Code 3—Secured by a third lien 

Code 4—Secured by a fourth lien 

Code 5—Other 

a. Use Codes 1 through 5 for covered loans 

that you originate or purchase, as well as for 

applications that do not result in an 

origination (applications that are approved 

but not accepted, denied, withdrawn, or 

closed for incompleteness). 

b. Use Code 5 when the priority of the lien 

against the property is other than one 

identified in Codes 1 through 4 (for example, 

secured by a fifth lien or sixth lien). 

Paragraph 4(a)(15)—Credit Score 

1. Score. Enter the credit score(s) relied on 

in making the credit decision, using column 

‘‘A’’ for the applicant or borrower and, where 

required by Regulation C, column ‘‘CA’’ for 

the first co-applicant or co-borrower. Where 

Regulation C requires you to report a single 

score for the transaction that corresponds to 

multiple applicants or borrowers, use column 

‘‘A.’’ 

2. Name and Version of Model. For each 

credit score reported, use the following 

Codes to indicate the name and version of the 

model used to generate the credit score relied 

on in making the credit decision, using 

column ‘‘A’’ and column ‘‘CA’’ as applicable. 

Code 1—Equifax Beacon 5.0 

Code 2—Experian Fair Isaac 

Code 3—FICO Risk Score Classic 04 

Code 4—FICO Risk Score Classic 98 

Code 5—VantageScore 2.0 

Code 6—VantageScore 3.0 

Code 7—More than one credit scoring model 

Code 8—Other credit scoring model 

Code 9—Not applicable 

Code 10—Purchased loan 

a. Use Code 7 if more than one credit 

scoring model was used in developing the 

credit score. 

b. Use Code 8 for any credit scoring model 

that is not listed above, and provide the name 

and version of the scoring model used. 

c. Use Code 9 if the file was closed for 

incompleteness or the application was 

withdrawn before a credit decision was made 

or if you did not rely on a credit score in 

making the credit decision. 

d. Use Code 10 if the loan is a purchased 

loan. 

Paragraph 4(a)(16)—Reason(s) for Denial 

1. Use the following Codes to indicate the 

principal reason(s) for denial, indicating up 

to three reasons. 

Code 1—Debt-to-income ratio 

Code 2—Employment history 

Code 3—Credit history 

Code 4—Collateral 

Code 5—Insufficient cash (downpayment, 

closing costs) 

Code 6—Unverifiable information 

Code 7—Credit application incomplete 

Code 8—Mortgage insurance denied 

Code 9—Other 

Code 10—Not applicable 

2. Use Code 9 for ‘‘other’’ when a principal 

reason your institution denied the 

application is not listed in Codes 1 through 

8. For a transaction in which your institution 

enters Code 9, enter the principal reason(s) 

the application was denied. 

3. Use Code 10 for ‘‘not applicable’’ if the 

action taken on the application, pursuant to 

§ 1003.4(a)(8), is not a denial. For example, 

use Code 10 if the application was 

withdrawn before a credit decision was made 

or the file was closed for incompleteness. 

4. If your institution uses the model form 

for adverse action contained in appendix C 

to Regulation B (Form C–1, Sample Notice of 

Action Taken and Statement of Reasons), use 

the foregoing Codes as follows: 

a. Code 1 for: Income insufficient for 

amount of credit requested, and Excessive 

obligations in relation to income. 

b. Code 2 for: Temporary or irregular 

employment, and Length of employment. 

c. Code 3 for: Insufficient number of credit 

references provided; Unacceptable type of 

credit references provided; No credit file; 

Limited credit experience; Poor credit 

performance with us; Delinquent past or 

present credit obligations with others; 

Number of recent inquiries on credit bureau 

report; Garnishment, attachment, foreclosure, 

repossession, collection action, or judgment; 

and Bankruptcy. 

d. Code 4 for: Value or type of collateral 

not sufficient. 

e. Code 6 for: Unable to verify credit 

references; Unable to verify employment; 

Unable to verify income; and Unable to verify 

residence. 

f. Code 7 for: Credit application 

incomplete. 

g. Code 9 for: Length of residence; 

Temporary residence; and Other reasons 


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specified on the adverse action notice. For a 

transaction in which your institution enters 

Code 9 for Other reasons, enter the principal 

reason(s) the application was denied. 

Paragraph 4(a)(17)—Total Points and Fees 

1. Enter in dollars the amount of the total 

points and fees payable in connection with 

the covered loan or application, rounded to 

the nearest whole dollar. For example, enter 

5472. 

2. Enter ‘‘NA’’ for covered loans or 

applications subject to this reporting 

requirement for which the total points and 

fees were not known at or before closing in 

connection with the covered loan, or for 

covered loans not subject to this reporting 

requirement, such as purchased covered 

loans. 

Paragraph 4(a)(18)—Total Origination 

Charges 

1. Enter in dollars the total of all itemized 

amounts that are designated borrower-paid at 

or before closing, rounded to the nearest 

whole dollar. For example, enter 1078. 

2. Enter ‘‘NA’’ for covered loans subject to 

this reporting requirement for which no 

amounts paid by the borrower were known 

at or before closing in connection with the 

covered loan, or for covered loans not subject 

to this reporting requirement, such as openend lines of credit or reverse mortgages. 

Paragraph 4(a)(19)—Total Discount Points 

1. Enter in dollars the total amount of the 

points designated as paid to the creditor to 

reduce the interest rate, rounded to the 

nearest whole dollar. For example, enter 405. 

2. Enter ‘‘NA’’ for covered loans subject to 

this reporting requirement for which no 

points to reduce the interest rate were known 

at or before closing in connection with the 

covered loan, or for covered loans not subject 

to this reporting requirement, such as openend lines of credit or reverse mortgages. 

Paragraph 4(a)(20)—Risk-Adjusted, PreDiscounted Interest Rate 

1. Enter the interest rate to three decimal 

places and use a leading zero if the interest 

rate is under 10 percent. For example, enter 

04.125. If the interest rate applicable to the 

covered loan or application is a figure with 

more than three decimal places, round the 

figure to three decimal places. 

2. Enter ‘‘NA’’ for covered loans not subject 

to this reporting requirement, such as 

purchased covered loans, open-end lines of 

credit, or reverse mortgages. 

Paragraph 4(a)(21)—Interest Rate 

1. Enter the interest rate that will be 

applicable, or in the case of an application, 

that would be applicable, to the covered loan 

at closing or account opening to three 

decimal places and use a leading zero if the 

interest rate is under 10 percent. For 

example, enter 04.125. If the interest rate 

applicable to the covered loan is a figure with 

more than three decimal places, round the 

figure to three decimal places. 

2. Enter ‘‘NA’’ for covered loans for which 

no interest rate is applicable, or for 

applications for which the interest rate is 

unknown, such as applications closed for 

incompleteness. 

Paragraph 4(a)(22)—Prepayment Penalty 

Term 

1. Enter the term in months of any 

prepayment penalty applicable to the 

covered loan or application. For example, if 

a prepayment penalty may be imposed 

within the first 24 months after closing, enter 

24. 

2. Enter ‘‘NA’’ for covered loans for which 

a prepayment penalty may not be imposed 

under the terms of the covered loan, for 

covered loans not subject to this reporting 

requirement, such as purchased covered 

loans, or for applications for which the 

prepayment penalty term is unknown, such 

as applications closed for incompleteness. 

Paragraph 4(a)(23)—DTI Ratio 

1. Enter the applicant’s or borrower’s debtto-income ratio to two decimal places. For 

example, enter 25.25. If the applicant’s or 

borrower’s debt-to-income ratio is a figure 

with more than two decimal places, round up 

to the next hundredth. For example, for a 

debt-to-income ratio of 25.251, enter 25.26. 

2. If no debt-to-income ratio was relied on 

in making the credit decision, if a file was 

closed for incompleteness, or if an 

application was withdrawn before a credit 

decision was made, enter ‘‘NA.’’ Also enter 

‘‘NA’’ for reverse mortgages. 

Paragraph 4(a)(24)—CLTV Ratio 

1. Enter the combined loan-to-value ratio 

applicable to the property to two decimal 

places. For example, enter 82.95. If the 

combined loan-to-value ratio is a figure with 

more than two decimal places, truncate the 

digits beyond two decimal places. 

2. If no combined loan-to-value ratio was 

calculated in connection with the covered 

loan or application, enter ‘‘NA.’’ 

Paragraph 4(a)(25)—Loan Term 

1. Loan Term. Enter the scheduled number 

of months after which the legal obligation 

will mature or would have matured. 

a. For a covered loan that you purchased, 

enter the number of months after which the 

legal obligation matures as measured from 

the covered loan’s origination. 

b. For an open-end line of credit with a 

definite term, enter the number of months 

from origination until the account 

termination date, including both the draw 

and repayment period. 

c. For a covered loan or application 

without a definite term, such as some homeequity lines of credit or reverse mortgages, 

enter ‘‘NA.’’ 

Paragraph 4(a)(26)—Introductory Rate Period 

1. Enter the number of months from loan 

origination until the first date the interest 

rate may change. 

a. For a fixed rate covered loan or an 

application for a fixed rate covered loan, 

enter ‘‘NA.’’ 

b. For a covered loan you purchased, enter 

the number of months until the first date the 

interest rate may change as measured from 

loan origination, or enter ‘‘NA’’ for a 

purchased fixed rate covered loan. 

Paragraph 4(a)(27)(i)—Balloon Payment 

1. Indicate if the covered loan or 

application requires a payment that is more 

than two times a regular periodic payment. 

Code 1—True 

Code 2—False 

Paragraph 4(a)(27)(ii)—Interest-Only 

Payments 

1. Indicate if the covered loan or 

application would permit one or more 

periodic payments to be applied solely to 

accrued interest and not to principal. 

Code 1—True 

Code 2—False 

Paragraph 4(a)(27)(iii)—Negative 

Amortization 

1. Indicate if the covered loan or 

application would permit a minimum 

periodic payment that covers only a portion 

of the accrued interest, resulting in an 

increase in the principal balance under the 

terms of the legal obligation. 

Code 1—True 

Code 2—False 

Paragraph 4(a)(27)(iv)—Other Nonamortizing Features 

1. Indicate if the covered loan or 

application includes contractual terms other 

than contractual terms described in 

§§ 1003.4(a)(27)(i), (ii), and (iii) that would 

allow for payments other than fully 

amortizing payments during the loan term. 

Code 1—True 

Code 2—False 

Paragraph 4(a)(28)—Property Value 

1. Enter the value of the property securing 

the covered loan or, in the case of an 

application, proposed to secure the covered 

loan relied on in making the credit decision 

in dollars. 

a. If the value of the property was not 

relied on in making the credit decision, enter 

‘‘NA.’’ 

Paragraph 4(a)(29)—Manufactured Home 

Legal Classification 

1. Indicate whether the manufactured 

home related to the covered loan or 

application is legally classified as real 

property or as personal property using the 

following codes: 

Code 1—Real Property 

Code 2—Personal Property 

Code 3—Not Applicable 

a. Use Code 1 if the manufactured home is 

legally classified as real property under 

applicable State law. 

b. Use Code 2 if the manufactured home is 

legally classified as personal property under 

applicable State law. 

c. Use Code 3 if the covered loan or 

application does not relate to a manufactured 

home. 

Paragraph 4(a)(30)—Manufactured Home 

Land Property Interest 

1. Indicate whether the applicant or 

borrower owns the land on which a 

manufactured home is or will be located 

through a direct or indirect ownership 

interest or leases the land through a paid or 


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unpaid leasehold according to the following 

codes: 

Code 1—Direct Ownership 

Code 2—Indirect Ownership 

Code 3—Paid Leasehold 

Code 4—Unpaid Leasehold 

Code 5—Not Applicable 

a. Use Code 1 for a covered loan or 

application for which the applicant or 

borrower has a direct ownership interest in 

the land on which the dwelling is or is to be 

located, such as fee simple ownership. 

b. Use Code 2 for a covered loan or 

application for which the applicant or 

borrower holds or will hold an indirect 

ownership interest in the land on which the 

dwelling is or is to be located, such as 

through a resident-owned community 

structured as a housing cooperative that 

owns the underlying land. 

c. Use Code 3 for a covered loan or 

application for which the applicant or 

borrower leases the land on which the 

dwelling is or is to be located and pays or 

will make payments pursuant to the lease, 

such as a lease for a lot in a manufactured 

home park. 

d. Use Code 4 for a covered loan or 

application for which the applicant or 

borrower is or will be a tenant on the land 

on which the dwelling is or is to be located 

and does not or will not make payments 

pursuant to the tenancy, such as tenancy on 

land owned by a family member who has 

given permission for the location of the 

manufactured home. 

e. Use Code 5 if the covered loan or 

application does not relate to a manufactured 

home or if a location for a manufactured 

home related to a covered loan or application 

is not determined. 

Paragraph 4(a)(31)—Total Units 

1. Enter the number of individual dwelling 

units related to the property securing the 

covered loan or, in the case of an application, 

proposed to secure the covered loan. 

Paragraph 4(a)(32)—Multifamily Affordable 

Units 

1. Enter the number of individual dwelling 

units related to the property securing the 

covered loan or, in the case of an application, 

proposed to secure the covered loan that are 

income-restricted pursuant to Federal, State, 

or local affordable housing programs. 

a. For a covered loan or application not 

related to a multifamily dwelling, enter 

‘‘NA.’’ 

b. For a covered loan or application related 

to a multifamily dwelling that does not 

contain any such income-restricted 

individual dwelling units, enter ‘‘0.’’ 

Paragraph 4(a)(33)—Application Channel 

1. Direct Application. Indicate whether the 

applicant or borrower submitted the 

application directly to your institution. 

Code 1—True 

Code 2—False 

Code 3—Not applicable 

a. Use Code 1 if the applicant or borrower 

submitted the application directly to your 

institution. 

b. Use Code 2 if the applicant or borrower 

did not submit the application directly to 

your institution. 

c. Use Code 3 only if the loan is a 

purchased loan. 

2. Initially Payable. Indicate whether the 

covered loan was or, in the case of an 

application, would have been initially 

payable to your institution. 

Code 1—True 

Code 2—False 

Code 3—Not applicable 

a. Use Code 1 if the covered loan was or, 

in the case of an application, would have 

been initially payable to your institution. 

b. Use Code 2 if the covered loan was not 

or, in the case of an application, would not 

have been initially payable to your 

institution. 

c. Use Code 3 only if the loan is a 

purchased loan. 

Paragraph 4(a)(34)—Mortgage Loan 

Originator Identifier 

1. NMLSR ID: Enter the Nationwide 

Mortgage Licensing System and Registry 

mortgage loan originator unique identifier 

(NMLSR ID) as set forth in the Secure and 

Fair Enforcement for Mortgage Licensing Act 

of 2008, title V of the Housing and Economic 

Recovery Act of 2008 (S.A.F.E. Act), 12 

U.S.C. 5101 et seq., as implemented by 

Regulation G (S.A.F.E. Mortgage Licensing 

Act—Federal Registration of Residential 

Mortgage Loan Originators), 12 CFR part 

1007, and Regulation H (S.A.F.E. Mortgage 

Licensing Act—State Compliance and Bureau 

Registration System), 12 CFR part 1008. 

2. No NMLSR ID: If the mortgage loan 

originator is not required to obtain and has 

not been assigned an NMLSR ID, enter ‘‘NA’’ 

for not applicable. 

Paragraph 4(a)(35)—Automated 

Underwriting System (AUS) and 

Recommendation 

1. Automated Underwriting System: 

Indicate the name of the automated 

underwriting system (AUS) used by your 

institution to evaluate the application by 

entering the applicable Code from the 

following: 

Code 1—Desktop Underwriter 

Code 2—Loan Prospector 

Code 3—Technology Open to Approved 

Lenders (TOTAL) Scorecard 

Code 4—Guaranteed Underwriting System 

(GUS) 

Code 5—Other 

Code 6—Not applicable 

Code 7—Purchased loan 

a. Use Code 1 for the AUS developed by 

the Federal National Mortgage Association 

(Fannie Mae) or any successor. 

b. Use Code 2 for the AUS developed by 

the Federal Home Loan Mortgage Corporation 

(Freddie Mac) or any successor. 

c. Use Code 3 for the AUS developed by 

the U.S. Department of Housing and Urban 

Development for Federal Housing 

Administration (FHA) loans. 

d. Use Code 4 for the AUS developed by 

the U.S. Department of Agriculture for Single 

Family Housing Guaranteed Loan Program 

loans. 

e. Use Code 5 for an AUS developed by a 

securitzer, Federal government insurer, or 

guarantor not listed in Codes 1 through 4. For 

a transaction in which your institution enters 

Code 5, enter the name of the AUS used to 

evaluate the application. 

f. Use Code 6 for ‘‘not applicable’’ if your 

institution did not use an AUS developed by 

a securitzer, Federal government insurer, or 

guarantor to evaluate the application. 

g. Use Code 7 if the loan is a purchased 

loan. 

2. Automated Underwriting System 

Recommendation: Indicate the 

recommendation generated by the automated 

underwriting system (AUS) used by your 

institution to evaluate the application by 

entering the applicable Code from the 

following: 

Code 1—Approve/Eligible 

Code 2—Approve/Ineligible 

Code 3—Refer with Caution 

Code 4—Out of Scope 

Code 5—Error 

Code 6—Accept 

Code 7—Caution 

Code 8—Refer 

Code 9—Other 

Code 10—Not applicable 

Code 11—Purchased loan 

a. Use Code 1, 2, 3, 4, or 5 for the AUS 

recommendation returned by the Federal 

National Mortgage Association (Fannie Mae) 

or any successor. 

b. Use Code 6 or 7 for the AUS 

recommendation returned by the Federal 

Home Loan Mortgage Corporation (Freddie 

Mac) or any successor. 

c. Use Code 6 or 8 for the AUS 

recommendation returned by FHA TOTAL 

Scorecard. 

d. Use Code 3, 6, or 8 for the AUS 

recommendation returned by GUS. 

e. Use Code 9 for any AUS 

recommendation not listed in Codes 1 

through 8. For a transaction in which your 

institution enters Code 9, enter the 

recommendation generated by the AUS 

developed by a securitzer, Federal 

government insurer, or guarantor that was 

used to evaluate the application. 

f. Use Code 10 for ‘‘not applicable’’ if your 

institution did not consider a 

recommendation generated by an AUS 

developed by a securitzer, Federal 

government insurer, or guarantor in its 

underwriting process. For example, use Code 

10 if your institution only manually 

underwrote the application. Also, use Code 

10 if the file was closed for incompleteness 

or the application was withdrawn before a 

credit decision was made. 

g. Use Code 11 if the loan is a purchased 

loan. 

Paragraph 4(a)(36)—Reverse Mortgage Flag 

1. Indicate whether the covered loan is, or 

the application is for, a reverse mortgage and, 

for transactions that are reverse mortgages, 

whether or not it is an open- or closed-end 

transaction by entering the applicable Code 

from the following: 

Code 1—Closed-end reverse mortgage 

Code 2—Open-end reverse mortgage 

Code 3—Not applicable 


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a. If the transaction is a closed-end reverse 

mortgage transaction, enter Code 1. 

b. If the transaction is an open-end reverse 

mortgage transaction, enter Code 2. 

c. If the transaction is not a reverse 

mortgage transaction, enter Code 3. 

Paragraph 4(a)(37)—HELOC Flag. 

1. Indicate whether the covered loan is, or 

the application is for, an open-end line of 

credit, and whether the covered loan is, or 

the application is for, a home-equity line of 

credit, by entering the applicable Code from 

the following: 

Code 1—Home-equity line of credit 

Code 2—Open-end line of credit that is not 

a home-equity line of credit 

Code 3—Not applicable 

a. If the transaction is a home-equity line 

of credit, enter Code 1. 

b. If the transaction an open-end line of 

credit, but is not a home-equity line of credit, 

enter Code 2. 

c. If the transaction is not an open-end line 

of credit, enter Code 3. Also enter Code 3 for 

an open-end reverse mortgage transaction. 

Paragraph 4(a)(38)—Qualified Mortgage 

Identifier 

1. Indicate whether the covered loan is a 

qualified mortgage, as described under 

Regulation Z, by entering the applicable Code 

from the following: 

Code 1—Standard qualified mortgage 

Code 2—Temporary qualified mortgage 

Code 3—Small creditor qualified mortgage 

Code 4—Balloon-payment qualified mortgage 

Code 5—Not a qualified mortgage 

Code 6—Not applicable 

2. For covered loans subject to the abilityto-repay provisions of Regulation Z: 

a. If the covered loan is a standard 

qualified mortgage pursuant to Regulation Z 

§ 1026.43(e)(2), enter Code 1. 

b. If the covered loan is a temporary 

qualified mortgage pursuant to Regulation Z 

§ 1026.43(e)(4), enter Code 2. 

c. If the covered loan is a small creditor 

qualified mortgage pursuant to Regulation Z 

§ 1026.43(e)(5), enter Code 3. 

d. If the covered loan is a balloon-payment 

qualified mortgage pursuant to Regulation Z 

§ 1026.43(f), enter Code 4. 

e. If the covered loan is not a qualified 

mortgage pursuant to Regulation Z 

§ 1026.43(e) or (f), enter Code 5. 

3. For applications for covered loans and 

for covered loans not subject to the abilityto-repay provisions of Regulation Z, enter 

‘‘not applicable.’’ 

Paragraph 4(a)(39)—HELOC and Open-End 

Reverse Mortgage First Draw 

1. Enter in dollars the amount of any draw 

on a home-equity line of credit or on an 

open-end reverse mortgage made at the time 

of account opening. 

II. Instructions for Reporting to the Bureau 

or Appropriate Federal Agencies 

Paragraph 5(a)—Reporting 

1. Financial institutions are required to 

submit all required data to the Bureau or 

appropriate Federal agency via the Bureau’s 

Web site or via secure electronic submission 

as specified by the Bureau or appropriate 

Federal agency in prescribed procedures and 

technical specifications. 

2. With its submission, each financial 

institution is required: 

a. To provide the name, telephone number, 

facsimile number, and email address of a 

person who may contacted with questions 

about the institution’s submission; 

b. To identify its appropriate Federal 

agency; and 

c. To identify the total entries contained in 

the submission. 

3. Data required to be submitted that are 

not recorded on the loan application register 

shall be submitted with the loan application 

register on the transmittal sheet or in such 

other format specified by the Bureau or 

appropriate Federal agency. 

[Revised forms to publish in final rule] 

■ 8. In Supplement I to Part 1003: 

■ a. The heading Section 1003.1— 

Authority, Purpose, and Scope, the 

subheading 1(c) Scope under that 

heading, and paragraphs 1, 2, 3, 4, 5, 6, 

7, 8, and 9 under that subheading are 

removed. 

■ b. Under Section 1003.2—Definitions: 

■ i. The subheading Application and 

paragraphs 1, 2, and 3 under that 

subheading are revised. 

■ ii. The subheading Branch office is 

revised and paragraphs 2 and 3 under 

that subheading are revised. 

■ iii. The subheading Dwelling is 

revised, paragraphs 1 and 2 under that 

subheading are revised, and paragraph 3 

under that subheading is added. 

■ iv. The subheading Financial 

institution is revised and paragraphs 1, 

3, 4, 5, and 6 under that subheading are 

revised. 

■ v. The subheading Home 

improvement loan is revised, 

paragraphs 1 and 4 under that 

subheading are revised, and paragraph 5 

under that subheading is removed and 

reserved. 

■ vi. The subheading Home purchase 

loan and paragraphs 1, 2, 3, and 7 under 

that subheading are revised. 

■ vii. The subheading Manufactured 

home is revised, paragraph 1 under that 

subheading is revised, and new 

paragraph 2 under that subheading is 

added. 

■ viii. The subheading 2(o) Open-end 

line of credit and paragraph 1 under that 

subheading are added. 

■ ix. The subheading 2(p) Refinancing 

and paragraphs 1, 2, and 3 under that 

subheading are added. 

■ c. The subheading Section 1003.3— 

Exempt institutions and excluded 

transactions is added. Under that 

subheading: 

■ i. The subheading 3(c) Excluded 

transactions is added. 

■ ii. The subheading Paragraph 3(c)(1) 

and paragraph 1 under that subheading 

are added. 

■ iii. The subheading Paragraph 3(c)(2) 

and paragraph 1 under that subheading 

are added. 

■ iv. The subheading Paragraph 3(c)(3) 

and paragraphs 1 and 2 under that 

subheading are added. 

■ v. New subheading Paragraph 3(c)(4) 

and paragraph 1 under that subheading 

are added. 

■ vi. New subheading Paragraph 3(c)(6) 

and paragraph 1 under that subheading 

are added. 

■ vii. New subheading Paragraph 3(c)(8) 

and paragraph 1 under that subheading 

are added. 

■ viii. New subheading Paragraph 

3(c)(9) and paragraph 1 under that 

subheading are added. 

■ d. The heading Section 1003.4— 

Compilation of Reportable Data is 

revised, and under that heading: 

■ i. Under the subheading 4(a) Data 

format and itemization, paragraph 1 is 

revised and paragraphs 4, 5, and 6 are 

added. 

■ ii. The subheading Paragraph 4(a)(1) 

and paragraphs 1, 2, 3, 4, and 5 under 

that subheading are removed. 

■ iii. The subheading Paragraph 

4(a)(1)(i) and paragraphs 1 and 2 under 

that subheading are added. 

■ iv. The subheading Paragraph 

4(a)(1)(ii) and paragraphs 1, 2, 3, and 4 

under that subheading are added. 

■ v. Under subheading Paragraph 

4(a)(3), paragraph 2 is revised and 

paragraph 3 is added. 

■ vi. The subheading Paragraph 4(a)(5) 

and paragraphs 1 and 2 under that 

subheading are added. 

■ vii. Under subheading Paragraph 

4(a)(6), paragraphs 2, 3, and 4 are 

added. 

■ viii. Under the subheading Paragraph 

4(a)(7), paragraphs 1, 2, 3, and 4 are 

revised and paragraphs 5 and 6 are 

added. 

■ ix. Under subheading Paragraph 

4(a)(8), paragraphs 1, 2, 3, 4, 5, 6 and 

7 are revised and paragraphs 8 and 9 are 

added. 

■ x. Under the subheading Paragraph 

4(a)(9), paragraphs 1, 2, 3, and 4 are 

revised and paragraph 5 is added. 

■ xi. The subheading Paragraph 4(a)(10) 

and paragraphs 1, 2, 3, 4, 5, 6, 7, and 

8 under that subheading are removed. 

■ xii. The subheading Paragraph 

4(a)(10)(i) and paragraphs 1, 2, 3, 4, and 

5 under that subheading are added. 

■ xiii. The subheading Paragraph 

4(a)(10)(ii) and paragraphs 1, 2, 3, 4, 5, 

and 6 under that subheading are added. 

■ xiv. Under the subheading Paragraph 

4(a)(11), paragraphs 1 and 2 are revised 

and paragraphs 3, 4, 5, 6, 7, and 8 are 

added. 

■ xv. The subheading Paragraph 

4(a)(12)(ii) is revised, paragraphs 2 and 


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3 under that subheading are revised, 

and paragraphs 4, 5, and 6 are added. 

■ xvi. Under the subheading Paragraph 

4(a)(14), paragraph 1 is revised and 

paragraph 2 is added. 

■ xvii. The subheading Paragraph 

4(a)(15) and paragraphs 1, 2, 3, and 4 

under that subheading are added. 

■ xviii. The subheading Paragraph 

4(a)(16) and paragraphs 1 and 2 under 

that subheading are added. 

■ xix. The subheading Paragraph 

4(a)(21) and paragraph 1 under that 

subheading are added. 

■ xx. The subheading Paragraph 

4(a)(23) and paragraphs 1, 2, 3, and 4 

under that subheading are added. 

■ xxi. The subheading Paragraph 

4(a)(24) and paragraphs 1, 2, and 3 

under that subheading are added. 

■ xxii. The subheading Paragraph 

4(a)(25) and paragraphs 1 and 2 under 

that subheading are added. 

■ xxiii. The subheading Paragraph 

4(a)(26) and paragraphs 1 and 2 under 

that subheading are added. 

■ xxiv. The subheading Paragraph 

4(a)(27) and paragraph 1 under that 

subheading is added. 

■ xxv. The subheading Paragraph 

4(a)(28) and paragraphs 1 and 2 under 

that subheading are added. 

■ xxvi. The subheading Paragraph 

4(a)(29) and paragraph 1 under that 

subheading is added. 

■ xxvii. The subheading Paragraph 

4(a)(30) and paragraphs 1, 2, and 3 

under that subheading are added. 

■ xxviii. The subheading Paragraph 

4(a)(31) and paragraph 1 under that 

subheading are added. 

■ xxix. The subheading Paragraph 

4(a)(32) and paragraphs 1, 2, 3, and 4 

under that subheading are added. 

■ xxx. New subheading Paragraph 

4(a)(33) is added, and paragraphs 1, 2, 

and 3 under that subheading are added. 

■ xxxi. The subheading Paragraph 

4(a)(34) and paragraphs 1, 2, and 3 

under that subheading are added. 

■ xxxii. The subheading Paragraph 

4(a)(35) and paragraphs 1, 2, and 3 

under that subheading are added. 

■ xxxiii. The subheading Paragraph 

4(a)(38) and paragraph 1 under that 

subheading are added. 

■ xxxiv. Under subheading Paragraph 

4(c)(3), paragraph 1 is removed and 

reserved. 

■ xxxv. The subheading 4(d) Excluded 

data is removed and paragraph 1 under 

that subheading is removed. 

■ E. Under Section 1003.5—Disclosure 

and Reporting: 

■ i. Under subheading 5(a) Reporting to 

Agency, paragraphs 1, 2, 3, 4, and 5 are 

revised, and paragraphs 6, 7, and 8 are 

removed. 

■ ii. The subheading 5(b) Public 

disclosure of statement is revised, 

paragraph 2 under that subheading is 

revised, and paragraph 3 under that 

subheading is added. 

■ iii. The subheading 5(c) Public 

Disclosure of modified loan/application 

register is revised and paragraphs 2 and 

3 under that subheading are added. 

■ iv. Under subheading 5(e) Notice of 

availability, paragraph 1 is revised and 

paragraph 2 is removed. 

The revisions and additions read as 

follows: 

Supplement I to Part 1003—Staff 

Commentary 

* * * * * 

Section 1003.2—Definitions 

2(b) Application. 

1. Consistency with Regulation B. Bureau 

interpretations that appear in the official staff 

commentary to Regulation B (Equal Credit 

Opportunity Act, 12 CFR part 1002, 

Supplement I) are generally applicable to the 

definition of application under Regulation C. 

However, under Regulation C the definition 

of an application does not include 

prequalification requests. 

2. Prequalification. A prequalification 

request is a request by a prospective loan 

applicant (other than a request for 

preapproval) for a preliminary determination 

on whether the prospective loan applicant 

would likely qualify for credit under an 

institution’s standards, or for a determination 

on the amount of credit for which the 

prospective applicant would likely qualify. 

Some institutions evaluate prequalification 

requests through a procedure that is separate 

from the institution’s normal loan 

application process; others use the same 

process. In either case, Regulation C does not 

require an institution to report 

prequalification requests on the loan 

application register, even though these 

requests may constitute applications under 

Regulation B for purposes of adverse action 

notices. 

3. Requests for preapproval. To be a 

preapproval program as defined in 

§ 1003.2(b)(2), the written commitment 

issued under the program must result from a 

comprehensive review of the 

creditworthiness of the applicant, including 

such verification of income, resources, and 

other matters as is typically done by the 

institution as part of its normal credit 

evaluation program. In addition to conditions 

involving the identification of a suitable 

property and verification that no material 

change has occurred in the applicant’s 

financial condition or creditworthiness, the 

written commitment may be subject only to 

other conditions (unrelated to the financial 

condition or creditworthiness of the 

applicant) that the lender ordinarily attaches 

to a traditional home mortgage application 

approval. These conditions are limited to 

conditions such as requiring an acceptable 

title insurance binder or a certificate 

indicating clear termite inspection, and, in 

the case where the applicant plans to use the 

proceeds from the sale of the applicant’s 

present home to purchase a new home, a 

settlement statement showing adequate 

proceeds from the sale of the present home. 

Regardless of its name, a program that 

satisfies the definition of a preapproval 

program in § 1003.2(b)(2) is a preapproval 

program for purposes of Regulation C. 

Conversely, a program that a financial 

institution describes as a ‘‘preapproval 

program’’ that does not satisfy the 

requirements of § 1003.2(b)(2) is not a 

preapproval program for purposes of 

Regulation C. If a financial institution does 

not regularly use the procedures specified in 

§ 1003.2(b)(2), but instead considers requests 

for preapprovals on an ad hoc basis, the 

financial institution need not treat ad hoc 

requests as part of a preapproval program for 

purposes of Regulation C. A financial 

institution should, however, be generally 

consistent in following uniform procedures 

for considering such ad hoc requests. 

2(c) Branch office. 

* * * * * 

2. Depository financial institution. A 

branch office of a depository financial 

institution does not include a loanproduction office if the loan production 

office is not considered a branch by the 

Federal or State supervisory authority 

applicable to that institution. A branch office 

also does not include the office of an affiliate 

or of a third party, such as a third-party 

broker. 

3. Nondepository financial institution. A 

branch office of a nondepository financial 

institution does not include the office of an 

affiliate or of a third party, such as a third 

party broker. 

2(f) Dwelling. 

1. General. The definition of a dwelling is 

not limited to the principal or other 

residence of the applicant or borrower, and 

thus includes vacation or second homes and 

investment properties. A dwelling also 

includes a multifamily residential structure 

such as an apartment, condominium, or 

cooperative building or complex. 

2. Exclusions. Recreational vehicles, 

including boats, campers, travel trailers, and 

park model recreational vehicles, are not 

considered dwellings for purposes of 

§ 1003.2(f), regardless of whether they are 

used as residences. Houseboats, floating 

homes, and mobile homes constructed before 

June 15, 1976, are also excluded, regardless 

of whether they are used as residences. Also 

excluded are transitory residences such as 

hotels, hospitals, and college dormitories, 

and structures originally designed as 

dwellings but used exclusively for 

commercial purposes such as homes 

converted to daycare facilities or professional 

offices. 

3. Mixed-use properties. A property used 

for both residential and commercial 

purposes, such as a building containing 

apartment units and retail space, is a 

dwelling if the property’s primary use is 

residential. An institution may use any 

reasonable standard to determine the primary 

use of the property, such as by square footage 

or by the income generated. An institution 

may select the standard to apply on a caseby-case basis. However, an institution shall 

consider a property that includes five or 

more individual dwelling units to have a 

primary residential use. 


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2(g) Financial institution. 

1. Preceding calendar year and preceding 

December 31. The definition of financial 

institution refers both to the preceding 

calendar year and the preceding December 

31. These terms refer to the calendar year and 

the December 31 preceding the current 

calendar year. For example, in year two, year 

one is the preceding calendar year and 

December 31 of year one is the preceding 

December 31. Accordingly, in year two, 

Financial Institution A satisfies the asset 

threshold described in § 1003.2(g)(1)(i) if its 

assets exceeded the threshold specified in 

comment 2(g)–2 on December 31 of year one. 

Likewise, in year two, Financial Institution A 

does not meet the loan volume test described 

in § 1003.2(g)(1)(v) if it originated fewer than 

25 covered loans during year one. 

* * * * * 

3. Coverage after a merger or acquisition. 

Several scenarios of data-collection 

responsibilities for the calendar year of a 

merger or acquisition are described below. 

For the purposes of these illustrations, a 

‘‘covered institution’’ means a financial 

institution, as defined in § 1003.2(g), that is 

not exempt from reporting under § 1003.3(a), 

and ‘‘an institution that is not covered’’ 

means an institution that is not a financial 

institution, as defined in § 1003.2(g) or that 

is exempt from reporting under § 1003.3(a). 

Under all the scenarios, if the merger or 

acquisition results in a covered institution, 

that institution must begin data collection on 

January 1 of the calendar year following the 

merger. 

i. Two institutions that are not covered 

merge. The merged entity meets all of the 

requirements necessary to be a covered 

institution. No data collection is required for 

the calendar year of the merger (even though 

the merger creates an institution that meets 

all of the requirements necessary to be a 

covered institution). When a branch office of 

an institution that is not covered is acquired 

by another institution that is not covered, 

and the acquisition results in a covered 

institution, no data collection is required for 

the calendar year of the acquisition. 

ii. A covered institution and an institution 

that is not covered merge. The covered 

institution is the surviving institution, or a 

new covered institution is formed. For the 

calendar year of the merger, data collection 

is required for the covered institution’s 

covered loans and applications and is 

optional for covered loans and applications 

handled in offices of the institution that was 

previously not covered. When a covered 

institution acquires a branch office of an 

institution that is not covered, data collection 

is optional for covered loans and applications 

handled by the acquired branch office for the 

calendar year of the acquisition. 

iii. A covered institution and an institution 

that is not covered merge. The institution 

that is not covered is the surviving 

institution, or a new institution that is not 

covered is formed. For the calendar year of 

the merger, data collection is required for 

covered loans and applications of the 

covered institution that take place prior to 

the merger. Data collection by the previously 

covered institution is optional for that 

calendar year for transactions taking place 

after the merger date. When an institution 

remains not covered after acquiring a branch 

office of a covered institution, data collection 

is required for transactions of the covered 

branch office that take place prior to the 

acquisition. Data collection by the previously 

covered branch office is optional for 

transactions taking place after the 

acquisition. 

iv. Two covered institutions merge. Data 

collection is required for the entire year. The 

surviving or new institution files either a 

consolidated submission or separate 

submissions for that calendar year. When a 

covered institution acquires a branch office 

of a covered institution, data collection is 

required for the entire year. Data for the 

acquired branch office may be submitted by 

either institution. 

4. Originations. Whether an institution 

meets the definition of a financial institution 

depends in part on whether an institution 

has originated a certain number and type of 

covered loans. To determine whether 

activities with respect to a particular covered 

loan constitute an origination, institutions 

should consult comments 4(a)–4 and 4(a)–5. 

5. Branches of foreign banks—treated as 

banks. A Federal branch or a State-licensed 

or insured branch of a foreign bank that 

meets the definition of a ‘‘bank’’ under 

section 3(a)(1) of the Federal Deposit 

Insurance Act (12 U.S.C. 1813(a)) is a bank 

for the purposes of § 1003.2(g). 

6. Branches and offices of foreign banks 

and other entities—treated as nondepository 

financial institutions. A Federal agency, 

State-licensed agency, State-licensed 

uninsured branch of a foreign bank, 

commercial lending company owned or 

controlled by a foreign bank, or entity 

operating under section 25 or 25A of the 

Federal Reserve Act, 12 U.S.C. 601 and 611 

(Edge Act and agreement corporations) may 

not meet the definition of ‘‘bank’’ under the 

Federal Deposit Insurance Act and may 

thereby fail to satisfy the definition of a 

depository financial institution under 

§ 1003.2(g)(1). An entity is nonetheless a 

financial institution if it meets the definition 

of nondepository financial institution under 

§ 1003.2(g)(2). 

2(i) Home improvement loan. 

1. General. Section 1003.2(i) defines a 

home improvement loan by reference to the 

purpose of the obligation. For example, a 

closed-end mortgage loan obtained for the 

purpose of repairing a dwelling by replacing 

a roof is a home improvement loan for 

purposes of § 1003.2(i). An obligation is a 

home improvement loan even if only a part 

of the purpose is for repairing, rehabilitating, 

remodeling, or improving a dwelling. For 

example, a home-equity line of credit 

obtained in part for the purpose of 

remodeling a kitchen and in part for 

purposes other than repairing, rehabilitating, 

remodeling, or improving a dwelling is a 

home improvement loan for purposes of 

§ 1003.2(i). 

* * * * * 

4. Mixed-use property. A covered loan to 

improve property used for residential and 

commercial purposes (for example, a 

building containing apartment units and 

retail space) is a home improvement loan if 

the loan proceeds are used primarily to 

improve the residential portion of the 

property. If the loan proceeds are used to 

improve the entire property (for example, to 

replace the heating system), the covered loan 

is a home improvement loan if the property 

itself is primarily residential. A financial 

institution may use any reasonable standard 

to determine the primary use of the property, 

such as by square footage or by the income 

generated. A financial institution may select 

the standard to apply on a case-by-case basis. 

* * * * * 

2(j) Home purchase loan. 

1. General. Section 1003.2(j) defines a 

home purchase loan as a covered loan that 

is for the purpose of purchasing a dwelling. 

For example, if a person obtains a closed-end 

mortgage loan for the purpose of purchasing 

a dwelling, the closed-end mortgage loan is 

a home purchase loan for purposes of 

§ 1003.2(j). However, if a person purchases a 

dwelling by entering into an installment 

contract that is not secured by a lien on a 

dwelling, that contract is not a home 

purchase loan for purposes of § 1003.2(j). 

2. Multiple properties. A home purchase 

loan includes a covered loan secured by one 

dwelling and used to purchase another 

dwelling. For example, if a person obtains a 

reverse mortgage secured by one dwelling for 

the purpose of purchasing another dwelling, 

the reverse mortgage is a home purchase loan 

for purposes of § 1003.2(j). 

3. Mixed-use property. A covered loan to 

purchase property used primarily for 

residential purposes (for example, an 

apartment building containing a convenience 

store) is a home purchase loan. A financial 

institution may use any reasonable standard 

to determine the primary use of the property, 

such as by square footage or by the income 

generated. A financial institution may select 

the standard to apply on a case-by-case basis. 

* * * * * 

7. Assumptions. For purposes of 

§ 1003.2(j), an assumption is a home 

purchase loan when a financial institution 

enters into a written agreement accepting a 

new borrower as the obligor on an existing 

obligation for a covered loan. If an 

assumption does not involve a written 

agreement between a new borrower and the 

financial institution, it is not a home 

purchase loan for purposes of § 1003.2(j). 

2(l) Manufactured home. 

1. Definition of a manufactured home. The 

definition in § 1003.2(l) refers to the Federal 

building code for manufactured housing 

established by the U.S. Department of 

Housing and Urban Development (HUD) (24 

CFR 3280.2). Modular or other factory-built 

homes that do not meet the HUD code 

standards are not manufactured homes for 

purposes of § 1003.2(l). Recreational vehicles 

are excluded from the HUD code standards 

pursuant to 24 CFR 3282.8(g) and are also 

excluded from the definition of dwelling for 

purposes of § 1003.2(f). See comment 2(f)-2. 

2. Identification. A manufactured home 

will generally bear a data plate affixed in a 

permanent manner near the main electrical 

panel or other readily accessible and visible 

location noting its compliance with the 

Federal Manufactured Home Construction 

and Safety Standards in force at the time of 


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manufacture and providing other information 

about its manufacture pursuant to 24 CFR 

3280.5. A manufactured home will generally 

also bear a HUD Certification Label pursuant 

to 24 CFR 3280.11. 

* * * * * 

2(o) Open-end line of credit. 

1. General. Section 1003.2(o) defines an 

open-end line of credit for purposes of 

Regulation C. Among other things, 

§ 1003.2(o) defines an open-end line of credit 

by reference to Regulation Z, 12 CFR 

1026.2(a)(20), but without regard to whether 

the credit is for personal, family, or 

household purposes, without regard to 

whether the person to whom credit is 

extended is a consumer, and without regard 

to whether the person extending credit is a 

creditor, as those terms are defined under 

Regulation Z. For example, assume a 

business-purpose transaction that is exempt 

from Regulation Z pursuant to § 1026.3(a)(1), 

but that otherwise would be considered 

open-end credit under § 1026.2(a)(20). In this 

example, the business-purpose transaction is 

an open-end line of credit, provided the other 

requirements of § 1003.2(o) are met. 

Similarly, assume a transaction in which the 

person extending open-end credit is a 

financial institution under § 1003.2(g), but is 

not a creditor under § 1026.2(a)(17). In this 

example, the transaction is an open-end line 

of credit, assuming the other requirements of 

§ 1003.2(o) are met. Aside from these 

distinctions, financial institutions may rely 

on § 1026.2(a)(20) and the related 

commentary in determining whether a 

transaction is open-end credit under 

§ 1003.2(o)(1). 

2(p) Refinancing. 

1. General. Section 1003.2(p) defines a 

refinancing as a covered loan in which a new 

debt obligation satisfies and replaces an 

existing debt obligation by the same 

borrower, in which both the existing debt 

obligation and the new debt obligation are 

secured by liens on dwellings. For example, 

if a borrower obtains a new closed-end 

mortgage loan that satisfies and replaces one 

or more existing closed-end mortgage loans, 

the new closed-end mortgage loan is a 

refinancing for purposes of § 1003.2(p). 

Similarly, if a borrower obtains a homeequity line of credit that satisfies and 

replaces an existing closed-end mortgage 

loan, the new home-equity line of credit is 

a refinancing for purposes of § 1003.2(p). 

However, if a borrower enters into a new debt 

obligation that modifies that terms of the 

existing debt obligation, but does not satisfy 

and replace the existing debt obligation, the 

new debt obligation is not a refinancing for 

purposes of § 1003.2(p). See also § 1003.2(g) 

and the related commentary regarding the 

refinancings that are considered for purposes 

of determining whether a person is a 

financial institution. 

2. Debt obligation. For purposes of 

determining whether the transaction is a 

refinancing under § 1003.2(p), both the 

existing debt obligation and the new debt 

obligation must be secured by liens on 

dwellings. For example, assume that a 

borrower has an existing $30,000 covered 

loan secured by a dwelling. If the borrower 

obtains a new $50,000 covered loan secured 

by a dwelling that satisfies and replaces the 

existing $30,000 covered loan, the new 

$50,000 covered loan is a refinancing for 

purposes of § 1003.2(p). However, if the 

borrower obtains a new $50,000 loan secured 

by a guarantee that satisfies and replaces the 

existing $30,000 loan, the new $50,000 loan 

is not a refinancing for purposes of 

§ 1003.2(p). 

3. Same borrower. Section 1003.2(p) 

provides that the existing and new obligation 

must both be by the same borrower. For 

purposes of § 1003.2(p), only one borrower 

must be the same on both the existing and 

new obligation. For example, if two 

borrowers are obligated on an existing 

obligation, and only one of those two 

borrowers are obligated on a new obligation 

that satisfies and replaces the existing 

obligation, the new obligation is a 

refinancing for purposes of § 1003.2(p), 

assuming the other requirements of that 

section are met. However, assume a scenario 

where two spouses are divorcing. If only one 

spouse is obligated on an existing obligation, 

and the other spouse is obligated on a new 

obligation that satisfies and replaces the 

existing obligation, the new obligation is not 

a refinancing for purposes of § 1003.2(p). 

Section 1003.3—Exempt Institutions and 

Excluded Transactions 

3(c) Excluded transactions. 

Paragraph 3(c)(1). 

1. Financial institution acting in a 

fiduciary capacity. A financial institution is 

acting in a fiduciary capacity if, for example, 

the financial institution is acting as a trustee. 

Paragraph 3(c)(2). 

1. Loan secured by a lien on unimproved 

land. Section 1003.3(c)(2) provides that a 

loan secured by a lien on unimproved land 

is an excluded transaction. A loan that is 

secured by vacant land under Regulation X, 

12 CFR 1024.5(b)(4), is a loan secured by a 

lien on unimproved land. However, a loan 

does not qualify for this exclusion if the 

financial institution knows or reasonably 

believes that within two years after the loan 

closes, a dwelling will be constructed or 

placed on the land using the loan proceeds. 

Paragraph 3(c)(3). 

1. Temporary financing—general. 

Temporary financing refers to loans that are 

designed to be replaced by permanent 

financing at a later time. For example, a 

bridge loan or swing loan is considered 

temporary financing, as is a loan that meets 

the definition of temporary financing in 

Regulation X, 12 CFR 1024.5(b)(3). A 

construction loan with a term of two years or 

more to construct a new dwelling, other than 

a loan to a bona fide builder (a person who 

regularly constructs dwellings for sale or 

lease), is not considered temporary financing. 

2. Temporary financing—loans that 

convert to permanent financing. A loan that 

is designed to be converted to permanent 

financing by the same financial institution is 

not temporary financing. For example, a loan 

made to finance construction of a dwelling is 

not considered temporary financing if the 

loan is designed to be converted to 

permanent financing by the same institution 

or if the loan is used to finance transfer of 

title to the first user. Likewise, if an 

institution issues a commitment for 

permanent financing, with or without 

conditions, the loan is not considered 

temporary financing. 

Paragraph 3(c)(4). 

1. Purchase of an interest in a pool of 

loans. The purchase of an interest in a pool 

of loans includes, for example, mortgageparticipation certificates, mortgage-backed 

securities, or real estate mortgage investment 

conduits. 

Paragraph 3(c)(6). 

1. Mergers, purchases in bulk, and branch 

office acquisitions. If a financial institution 

acquires covered loans in bulk from another 

institution (for example, from the receiver for 

a failed institution), but no merger or 

acquisition of an institution, or acquisition of 

a branch office, is involved, the acquiring 

financial institution reports the covered loans 

as purchased loans. 

Paragraph 3(c)(8). 

1. Partial interest. If a financial institution 

acquires only a partial interest in a covered 

loan, the institution does not report the 

transaction even if the institution 

participated in the underwriting and 

origination of the loan. If a financial 

institution acquires a 100 percent interest in 

a covered loan, the transaction is not 

excluded under § 1003.3(c)(8). 

Paragraph 3(c)(9). 

1. Farm loan. A financial institution does 

not report a loan to purchase property used 

primarily for agricultural purposes, even if 

the property includes a dwelling. A financial 

institution may use any reasonable standard 

to determine the primary use of the property, 

such as by reference to the exemption from 

Regulation X, 12 CFR 1024.5(b)(1), for a loan 

on property of 25 acres or more. An 

institution may select the standard to apply 

on a case-by-case basis. 

Section 1003.4—Compilation of Reportable 

Data 

4(a) Data Format and Itemization 

1. General. Section 1003.4(a) describes a 

financial institution’s obligation to collect 

data on applications which it received, 

covered loans on which it made a credit 

decision, and on covered loans that it 

purchased during the calendar year described 

in the loan application register. 

i. A financial institution reports these data 

even if the covered loans were subsequently 

sold by the institution. 

ii. A financial institution reports data for 

applications that did not result in an 

origination but on which action was taken— 

for example, an application that the 

institution denied, that it approved but was 

not accepted, that it closed for 

incompleteness, or that the applicant 

withdrew during the calendar year covered 

by the register. A financial institution is 

required to report data regarding requests 

under a preapproval program (as defined in 

§ 1003.2(b)(2)) only if the preapproval request 

is denied, results in the origination of a home 

purchase loan, or was approved but not 

accepted. 

iii. A financial institution reports the data 

for an application on the loan application 

register for the calendar year during which 

the application was acted upon even if the 


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institution received the application in a 

previous calendar year. 

iv. A financial institution may report data 

on a single loan application register, separate 

loan application registers at different 

branches, or on separate loan application 

registers for different loan types (such as for 

home purchase or home improvement loans, 

or for loans on multifamily dwellings). 

* * * * * 

4. Originations and applications involving 

more than one institution. Each origination 

and application is only reported by one 

financial institution as an origination or 

application, although a second institution 

may report the loan as a purchase depending 

on the circumstances. If more than one 

institution was involved in an origination of 

a covered loan, the financial institution that 

made the credit decision before the loan 

closed reports the origination or application. 

In the case of an application for a covered 

loan that did not result in an origination, the 

financial institution that made the credit 

decision or that was reviewing the 

application when the application was 

withdrawn or closed for incompleteness 

reports the application. It is not relevant 

whether the loan closed or, in the case of an 

application, would have closed in the 

institution’s name. The following scenarios 

illustrate which institution reports a 

particular origination or application. 

Comment 4(a)–5 discusses how to report 

actions taken by agents. 

i. Financial Institution A received an 

application for a covered loan from an 

applicant and forwarded that application to 

Financial Institution B. Financial Institution 

B reviewed the application and approved the 

loan prior to closing. The loan closed in 

Financial Institution A’s name. Financial 

Institution B purchased the loan from 

Financial Institution A after closing. 

Financial Institution B was not acting as 

Financial Institution A’s agent. Since 

Financial Institution B made the credit 

decision prior to closing, Financial 

Institution B reports the transaction as an 

origination, not as a purchase. Financial 

Institution A does not report the transaction. 

ii. Financial Institution A received an 

application for a covered loan from an 

applicant and forwarded that application to 

Financial Institution B. Financial Institution 

B reviewed the application before the loan 

would have closed, but the application did 

not result in an origination because, for 

example, the application was denied or the 

application was withdrawn by the applicant. 

Financial Institution B was not acting as 

Financial Institution A’s agent. If the loan 

had been originated, the loan would have 

closed in Financial Institution A’s name and 

Financial Institution B would have 

purchased the loan after closing. Since 

Financial Institution B made the credit 

decision before the loan would have closed 

or, in the case of a withdrawal, was in the 

process of reviewing the application to make 

a credit decision when the application was 

withdrawn, Financial Institution B reports 

the application. Financial Institution A does 

not report the application. 

iii. Financial Institution B purchased a 

covered loan from Financial Institution A. 

Financial Institution B did not review the 

application before closing. Financial 

Institution A approved the application before 

closing. Financial Institution A was not 

acting as Financial Institution B’s agent. 

Since Financial Institution A made the credit 

decision before closing, Financial Institution 

A reports the loan as an origination. 

Financial Institution B reports the loan as a 

purchase. 

iv. Financial Institution A received an 

application directly from an applicant. If 

approved, the loan would have closed in 

Financial Institution B’s name. Financial 

Institution A denied the application without 

sending it to Financial Institution B for 

approval. Financial Institution A was not 

acting as Financial Institution B’s agent. 

Since Financial Institution A made the credit 

decision before the loan would have closed, 

Financial Institution A reports the 

application. Financial Institution B does not 

report the application. 

v. Financial Institution A reviewed and 

made a credit decision on an application 

using Financial Institution B’s underwriting 

criteria. Financial Institution B did not 

review the application. Financial Institution 

A was not acting as Financial Institution B’s 

agent. Financial Institution A reports the 

application or origination. Financial 

Institution B does not report the transaction. 

vi. Financial Institution A reviewed and 

made a credit decision on an application 

based on the criteria of a third-party insurer 

or guarantor (including a government or 

private insurer or guarantor). Financial 

Institution A reports the application or 

origination. 

5. Agents. If a financial institution made a 

credit decision on a covered loan or 

application through the actions of an agent, 

the institution reports the application or 

origination. State law determines whether 

one party is the agent of another. For 

example, acting as Financial Institution A’s 

agent, Financial Institution B approved an 

application prior to closing and a covered 

loan was originated. Financial Institution A 

reports the loan as an origination. 

6. Repurchased loans. When a covered 

loan that a financial institution initially 

originated and sold to a secondary market 

entity is repurchased by the originating 

financial institution within the same 

calendar year as it was originated, the 

originating financial institution should report 

it as not sold under § 1003.4(a)(11), and the 

purchasing entity, if a financial institution, 

should not report it as purchased. However, 

if the repurchase happens in a subsequent 

calendar year, the purchase and repurchase, 

reported as a purchase, should be reported in 

their respective calendar years. If a financial 

institution is required to report on a quarterly 

basis under § 1003.5(a)(1)(ii) and it originates 

and repurchases a covered loan in different 

quarters of the same calendar year, in its 

submission for the quarter during which it 

repurchased the covered loan it should 

update its previous submission to remove the 

reported sale of the covered loan to the 

financial institution from which it 

repurchased the covered loan. If a financial 

institution is required to report on a quarterly 

basis under § 1003.5(a)(1)(ii) and it purchases 

a covered loan from the originating 

institution and sells the covered loan back to 

the originating financial institution in 

different quarters of the same calendar year, 

in its submission for the quarter during 

which it sold the covered loan back to the 

originating financial institution it should 

update its previous submission to delete the 

reported purchase. The following scenarios 

illustrate if and when a purchase or 

repurchase is reported: 

i. Financial Institution A originates 

covered loan 001 in year one and sells it to 

Financial Institution B in year one. Later in 

year one, Financial Institution B requires 

Financial Institution A to repurchase covered 

loan 001. Financial Institution A reports the 

origination of covered loan 001 in year one 

and does not report the sale of covered loan 

001 or the repurchase of covered loan 001. 

Financial Institution B does not report the 

purchase of covered loan 001 in year one. 

ii. Financial Institution A originates 

covered loan 001 in year 1 and sells it to 

Financial Institution B in year one. In year 

two, Financial Institution B requires 

Financial Institution A to repurchase covered 

loan 001. Financial Institution A reports the 

origination and sale of covered loan 001 in 

year one and the repurchase, reported as a 

purchase, of covered loan 001 in year two. 

Financial Institution B reports the purchase 

of covered loan 001 in year one. 

iii. Financial Institution A originates 

covered loan 001 in year one and sells it to 

Financial Institution B in year two. In year 

two, Financial Institution B requires 

Financial Institution A to repurchase covered 

loan 001. Financial Institution A reports the 

origination of covered loan 001 in year one 

and the repurchase, reported as a purchase, 

of covered loan 001 in year two but does not 

report the sale of covered loan 001 in year 

two. Financial Institution B reports the 

purchase and the sale of covered loan 001 in 

year two. 

Paragraph 4(a)(1)(i). 

1. ULI—uniqueness. Section 

1003.4(a)(1)(i)(B)(2) requires a financial 

institution that assigns a ULI to ensure that 

the character sequence it assigns is unique 

within the institution. Only one ULI should 

be assigned to any particular application or 

covered loan, and each ULI should 

correspond to a single application and 

ensuing loan in the case that the application 

is approved and a loan is originated. A 

financial institution shall use a ULI that was 

reported previously to refer only to the same 

loan or application for which the ULI was 

used previously or a loan that ensues from 

an application for which the ULI was used 

previously. For example, if a loan origination 

was previously reported under this part with 

a ULI, a financial institution would report the 

later purchase of the loan using the same 

ULI. A financial institution may not, 

however, report an application for a covered 

loan in 2030 using a ULI that was reported 

for a covered loan that was originated in 

2020. Similarly, refinancings or applications 

for refinancing should be assigned a different 

ULI than the loan that is being refinanced. A 

financial institution with multiple branches 

must ensure that its branches do not use a 

single ULI to refer to multiple covered loans 

or applications. 


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2. ULI—privacy. Section 

1003.4(a)(1)(i)(B)(3) prohibits a financial 

institution from including information that 

could be used to directly identify the 

applicant or borrower in the identifier that it 

assigns for the application or covered loan of 

the applicant or borrower. Information that 

could be used to directly identify the 

applicant or borrower includes but is not 

limited to the applicant’s or borrower’s name, 

date of birth, Social Security number, official 

government-issued driver’s license or 

identification number, alien registration 

number, government passport number, or 

employer or taxpayer identification number. 

Paragraph 4(a)(1)(ii). 

1. Application date—consistency. Section 

1003.4(a)(1)(ii) requires that in reporting the 

date of application, a financial institution 

report the date it received the application or 

the date shown on the application form. 

Although a financial institution need not 

choose the same approach for its entire 

HMDA submission, it should be generally 

consistent (such as by routinely using one 

approach within a particular division of the 

institution or for a category of loans). 

2. Application date—indirect application. 

For an application that was not submitted 

directly to the financial institution, the 

institution may report the date the 

application was received by the party who 

initially received the application, the date the 

application was received by the institution, 

or the date shown on the application. 

Although an institution need not choose the 

same approach for its entire HMDA 

submission, it should be generally consistent 

(such as by routinely using one approach 

within a particular division of the institution 

or for a category of loans). 

3. Application date—reinstated 

application. If, within the same calendar 

year, an applicant asks a financial institution 

to reinstate a counteroffer that the applicant 

previously did not accept (or asks the 

institution to reconsider an application that 

was denied, withdrawn, or closed for 

incompleteness), the institution may treat 

that request as the continuation of the earlier 

transaction or as a new transaction. If the 

institution treats the request for 

reinstatement or reconsideration as a new 

transaction, it reports the date of the request 

as the application date. 

4. Application—year action taken. A 

financial institution must report an 

application as occurring in the calendar year 

in which the institution takes final action on 

the application. 

Paragraph 4(a)(3). 

* * * * * 

2. Purpose—multiple-purpose loan. 

Section 1003.4(a)(3) requires a financial 

institution to report the purpose of a covered 

loan or application and also specifies the 

order of importance if a covered loan or 

application is for more than one purpose. If 

a covered loan is a home purchase loan as 

well as a home improvement loan or a 

refinancing, § 1003.4(a)(3) requires the 

institution to report the loan as a home 

purchase loan. If a covered loan is a home 

improvement loan as well as a refinancing, 

but the covered loan is not a home purchase 

loan, § 1003.4(a)(3) requires the institution to 

report the covered loan as a home 

improvement loan. If a covered loan is a 

refinancing as well as for another purpose, 

such as for the purpose of paying educational 

expenses, but the covered loan is not a home 

purchase loan or a home improvement loan, 

§ 1003.4(a)(3) requires the institution to 

report the covered loan as a refinancing. 

3. Purpose—other. If a covered loan is not, 

or an application is not for, a home purchase 

loan, a home improvement loan, or a 

refinancing, § 1003.4(a)(3) requires a 

financial institution to report the covered 

loan or application as for a purpose other 

than home purchase, home improvement, or 

refinancing. For example, if a covered loan is 

for the purpose of paying educational 

expenses, the financial institution complies 

with § 1003.4(a)(3) by reporting the covered 

loan as for a purpose other than home 

purchase, home improvement, or refinancing. 

Paragraph 4(a)(5). 

1. Modular homes. Covered loans or 

applications related to modular homes 

should be reported with a construction 

method of site built, regardless of whether 

they are on-frame or off-frame modular 

homes. Modular homes comply with local or 

other recognized buildings codes rather than 

standards established by the National 

Manufactured Housing Construction and 

Safety Standards Act, 42 U.S.C. 5401 et seq. 

Modular homes are not required to have HUD 

Certification Labels under 24 CFR 3280.11 or 

data plates under 24 CFR 3280.5. Modular 

homes may have a certification from a State 

licensing agency that documents compliance 

with State or other applicable building codes. 

On-frame modular homes are constructed on 

permanent metal chassis similar to those 

used in manufactured homes. The chassis are 

not removed on site and are secured to the 

foundation. Off-frame modular homes 

typically have floor construction similar to 

the construction of other site built homes, 

and the construction typically includes 

wooden floor joists and does not include 

permanent metal chassis. 

2. Multiple properties. See comment 

4(a)(9)–2 regarding transactions involving 

multiple properties with more than one 

property taken as security. 

Paragraph 4(a)(6). 

* * * * * 

2. Principal residence. Section 1003.4(a)(6) 

requires a financial institution to identify 

whether the property to which the covered 

loan or application relates is or will be used 

as a residence that the applicant or borrower 

physically occupies and uses, or will occupy 

and use, as his or her principal residence. For 

purposes of § 1003.4(a)(6) an applicant or 

borrower can have only one principal 

residence at a time. Thus, a vacation or other 

second home would not be a principal 

residence. However, if an applicant or 

borrower buys or builds a new dwelling that 

will become the applicant’s or borrower’s 

principal residence within a year or upon the 

completion of construction, the new dwelling 

is considered the principal residence for 

purposes of applying this definition to a 

particular transaction. 

3. Second residences. Section 1003.4(a)(6) 

requires a financial institution to identify 

whether the property to which the loan or 

application relates is or will be used as a 

second residence. For purposes of 

§ 1003.4(a)(6), a property is an applicant’s or 

borrower’s second residence if the property 

is or will be occupied by the applicant or 

borrower for a portion of the year and is not 

the applicant’s or borrower’s principal 

residence. For example, if a person purchases 

a property, occupies the property for a 

portion of the year, and rents the property for 

the remainder of the year, the property is a 

second residence for purposes of 

§ 1003.4(a)(6). Similarly, if a couple occupies 

a property near their place of employment on 

weekdays, but the couple returns to their 

principal residence on weekends, the 

property near the couple’s place of 

employment is a second residence for 

purposes of § 1003.4(a)(6). 

4. Investment properties. Section 

1003.4(a)(6) requires a financial institution to 

identify whether the property to which the 

covered loan or application relates is or will 

be used as an investment property. For 

purposes of § 1003.4(a)(6), a property is an 

investment property if the owner does not 

occupy the property. For example, if a person 

purchases a property, does not occupy the 

property, and generates income by renting 

the property, the property is an investment 

property for purposes of § 1003.4(a)(6). 

Similarly, if a person purchases a property, 

does not occupy the property, and does not 

generate income by renting the property, but 

intends to generate income by selling the 

property at some point in time, the property 

is an investment property for purposes of 

§ 1003.4(a)(6). Section 1003.4(a)(6) requires a 

financial institution to identify a property as 

an investment property if the owner does not 

occupy the property, even if the owner does 

not consider the property as owned for 

investment purposes. For example, if a 

corporation purchases a property that is a 

dwelling under § 1003.2(f), that it does not 

occupy, and that is for the use of its 

employees, the property is an investment 

property for purposes of § 1003.4(a)(6), even 

if the corporation considers the property as 

owned for business purposes rather than 

investment purposes, does not generate 

income by renting the property, and does not 

intend to generate income by selling the 

property at some point in time. 

5. Multiple properties. See comment 

4(a)(9)-2 regarding transactions involving 

multiple properties with more than one 

property taken as security. 

Paragraph 4(a)(7). 

1. Covered loan amount—counteroffer. If 

an applicant accepts a counteroffer for an 

amount different from the amount for which 

the applicant applied, the financial 

institution reports the covered loan amount 

granted. If an applicant does not accept a 

counteroffer or fails to respond, the 

institution reports the amount initially 

requested. 

2. Covered loan amount—application 

denied or withdrawn. For an application that 

was denied or withdrawn, a financial 

institution reports the amount for which the 

applicant applied. 

3. Covered loan amount—multiple-purpose 

loan. A financial institution reports the entire 

amount of the covered loan, even if only a 


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Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 51873 

part of the proceeds is intended for home 

purchase or home improvement. 

4. Covered loan amount—open-end line of 

credit. A financial institution reports the 

entire amount of credit available to the 

borrower under the terms of the plan. 

5. Covered loan amount—refinancing. For 

a refinancing, a financial institution reports 

the amount of credit extended under the 

terms of the new legal obligation. 

6. Covered loan amount—home 

improvement loan. A financial institution 

reports the entire amount of a home 

improvement loan, even if only a part of the 

proceeds is intended for home improvement. 

Paragraph 4(a)(8). 

1. Action taken—counteroffers. If a 

financial institution makes a counteroffer to 

lend on terms different from the applicant’s 

initial request (for example, for a shorter loan 

maturity or in a different amount) and the 

applicant does not accept the counteroffer or 

fails to respond, the institution reports the 

action taken as a denial on the original terms 

requested by the applicant. 

2. Action taken—rescinded transactions. If 

a borrower rescinds a transaction after 

closing and before a financial institution is 

required to submit its loan application 

register containing the information for the 

transaction under § 1003.5(a), the institution 

reports the transaction as an application that 

was approved but not accepted. 

3. Action taken—purchased loans. An 

institution reports the covered loans that it 

purchased during the calendar year, and does 

not report the covered loans that it declined 

to purchase, unless, as discussed in comment 

4(a)–4.i, the institution reviewed the 

application prior to closing and reports it as 

an origination. 

4. Action taken—repurchased covered 

loans. See comment 4(a)–6 regarding 

reporting requirements when a covered loan 

is repurchased by the originating financial 

institution. 

5. Action taken—conditional approvals. If 

an institution issues an approval other than 

a commitment pursuant to a preapproval 

program as defined under § 1003.2(b)(2), and 

that approval is subject to the applicant 

meeting certain conditions, the institution 

reports the action taken as provided below 

dependent on whether the conditions are 

solely customary commitment or closing 

conditions or if the conditions include any 

underwriting or creditworthiness conditions. 

i. Action taken examples. If the approval 

is conditioned on satisfying underwriting or 

creditworthiness conditions and they are not 

met, the institution reports the action taken 

as a denial. If, however, the conditions 

involve submitting additional information 

about creditworthiness that the institution 

needs to make the credit decision, and the 

institution has sent a written notice of 

incompleteness under Regulation B, 12 CFR 

1002.9(c)(2) and the applicant did not 

respond within the period of time specified 

in the notice, the institution reports the 

action taken as file closed for 

incompleteness. If the conditions are solely 

customary commitment or closing conditions 

and the conditions are not met, the 

institution reports the action taken as 

approved but not accepted. If all the 

conditions (underwriting, creditworthiness, 

or customary commitment or closing 

conditions) are satisfied and the institution 

agrees to extend credit but the covered loan 

is not originated, the institution reports the 

action taken as application approved but not 

accepted. If the applicant expressly 

withdraws before satisfying all underwriting 

or creditworthiness conditions and before the 

institution denies the application or closes 

the file for incompleteness, the institution 

reports the action taken as application 

withdrawn. If all underwriting and 

creditworthiness conditions have been met, 

and the conditions are solely customary 

commitment or closing conditions and the 

applicant expressly withdraws before the 

covered loan is originated, the institution 

reports the action taken as application 

approved but not accepted. 

ii. Customary commitment or closing 

conditions. Customary commitment or 

closing conditions include, for example: A 

clear-title requirement, an acceptable 

property survey, acceptable title insurance 

binder, clear termite inspection, a 

subordination agreement from another 

lienholder, and, where the applicant plans to 

use the proceeds from the sale of one home 

to purchase another, a settlement statement 

showing adequate proceeds from the sale. 

iii. Underwriting or creditworthiness 

conditions. Underwriting or creditworthiness 

conditions include, for example: Conditions 

that constitute a counter-offer, such as a 

demand for a higher down-payment; 

satisfactory debt-to-income or loan-to-value 

ratios, determination of need for private 

mortgage insurance, or a satisfactory 

appraisal requirement; or verification or 

confirmation, in whatever form the 

institution requires, that the applicant meets 

underwriting conditions concerning 

applicant creditworthiness, including 

documentation or verification of income or 

assets. 

6. Action taken—transactions involving 

more than one institution. A financial 

institution reports the action taken on a 

covered loan or application involving more 

than one institution in accordance with the 

instructions in comment 4(a)–4. 

7. Action taken date—approved but not 

accepted. For a covered loan approved by an 

institution but not accepted by the applicant, 

the institution reports any reasonable date, 

such as the approval date, the deadline for 

accepting the offer, or the date the file was 

closed. Although an institution need not 

choose the same approach for its entire 

HMDA submission, it should be generally 

consistent (such as by routinely using one 

approach within a particular division of the 

institution or for a category of covered loans). 

8. Action taken date—originations. For 

covered loan originations, an institution 

generally reports the settlement or closing 

date. For covered loan originations that an 

institution acquires from a party that initially 

received the application, the institution 

reports either the settlement or closing date, 

or the date the institution acquired the 

covered loan from the party that initially 

received the application. If the disbursement 

of funds takes place on a date later than the 

settlement or closing date, the institution 

may use the date of disbursement. For a 

construction/permanent covered loan, the 

institution reports either the settlement or 

closing date, or the date the covered loan 

converts to the permanent financing. 

Although an institution need not choose the 

same approach for its entire HMDA 

submission, it should be generally consistent 

(such as by routinely using one approach 

within a particular division of the institution 

or for a category of covered loans). 

Notwithstanding this flexibility regarding the 

use of the closing date in connection with 

reporting the date action was taken, the 

institution must report the origination as 

occurring in the year in which the origination 

goes to closing. 

9. Action taken—pending applications. An 

institution does not report any covered loan 

application still pending at the end of the 

calendar year; it reports that application on 

its loan application register for the year in 

which final action is taken. 

Paragraph 4(a)(9). 

1. Multiple properties with one property 

taken as security. If a covered loan is related 

to more than one property, but only one 

property is taken as or, in the case of an 

application, proposed to be taken as security, 

a financial institution reports the information 

required by § 1003.4(a)(9) for the property 

taken as or, in the case of an application, 

proposed to be taken as security. A financial 

institution does not report the information 

required by § 1003.4(a)(9) for the property or 

properties related to the loan that are not 

taken as, or in the case of an application, 

proposed to be taken as security. For 

example, if a covered loan is secured by 

property A, and the proceeds are used to 

purchase or rehabilitate property B, the 

institution reports the information required 

by § 1003.4(a)(9) for property A and does not 

report the information required by 

§ 1003.4(a)(9) for property B. 

2. Multiple properties with more than one 

property taken as security. If more than one 

property is taken or, in the case of an 

application, proposed to be taken as security 

for a single covered loan, a financial 

institution may report one of the properties 

in a single entry on its loan application 

register or report all of the properties using 

multiple entries on its loan application 

register. If a financial institution opts to 

report all of the properties, the multiple 

entries should be identical except for the 

required information that relates to the 

property identified in § 1003.4(a)(9). If an 

institution is required to report specific 

information about the property identified in 

§ 1003.4(a)(9), the institution should report 

the information that relates to the property 

identified in § 1003.4(a)(9) in that entry. For 

example, Financial Institution A originated a 

covered loan that is secured by both property 

A and property B. Financial Institution A 

may report the loan as one entry on its loan 

application register, reporting the 

information required by § 1003.4(a)(9) for 

either property A or property B. Financial 

Institution A may also report the loan as two 

entries on its loan application register. If 

Financial Institution A elects to report the 

loan as two entries, in the first entry, 

Financial Institution A reports the 


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51874 Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Proposed Rules 

information required by § 1003.4(a)(9) for 

property A and the information required by 

§ 1003.4(a)(5), (6), (14), (29), and (30) related 

to property A. In the second entry, Financial 

Institution A reports the information required 

by § 1003.4(a)(9) for property B and the 

information required by § 1003.4(a)(5), (6), 

(14), (29), and (30) related to property B. For 

aspects of the entries that are not specific to 

the property identified in § 1003.4(a)(9) (i.e., 

§ 1003.4(a)(1) through (4), (7), (8), (10) 

through (13), (15) through (28), (31) through 

(39)), Financial Institution A reports the same 

information in both entries. 

3. Multifamily dwellings. A single 

multifamily dwelling may have more than 

one postal address. For example, three 

apartment buildings, each with a different 

street address, comprise a single multifamily 

dwelling that secures a covered loan. For the 

purposes of § 1003.4(a)(9), a financial 

institution reports the information required 

by § 1003.4(a)(9) in the same manner 

described in comment 4(a)(9)–2. As 

discussed below in comments 4(a)(31)–1 and 

4(a)(32)–4, regardless of whether the 

financial institution elects to report the 

covered loan using one or more than one 

entry, the information required by 

§ 1003.4(a)(31) and (32) should refer to the 

total number of applicable units in the 

property or properties securing or, in the case 

of an application, proposed to secure the 

covered loan. 

4. Loans purchased from another 

institution. The requirement to report the 

property location information required by 

§ 1003.4(a)(9) applies not only to applications 

and originations but also to covered loans 

purchased from another institution. 

5. Manufactured home. If the site of a 

manufactured home has not been identified, 

a financial institution reports the transaction 

on its loan application register using ‘‘not 

applicable’’ in each of the fields required by 

§ 1003.4(a)(9). 

Paragraph 4(a)(10)(i). 

1. Applicant data—completion by 

applicant. A financial institution reports the 

government monitoring information as 

provided by the applicant. For example, if an 

applicant checks the ‘‘Asian’’ box the 

institution reports using the ‘‘Asian’’ Code. 

With respect to age, § 1003.4(a)(10)(i) 

requires that a financial institution report the 

age of the applicant or borrower, as of the 

application date under § 1003.4(a)(1)(ii), in 

number of years as derived from the date of 

birth as shown on the application form. For 

example, if an applicant indicates a date of 

birth of 01/15/1970 on the application form 

that the financial institution receives on 01/ 

15/2014, the institution reports 44 as the age 

of the applicant. 

2. Applicant data—completion by financial 

institution. If an applicant fails to provide the 

requested information for an application 

taken in person, the financial institution 

reports the data on the basis of visual 

observation or surname, other than the age of 

the applicant which the financial institution 

reports in number of years as derived from 

the date of birth as shown on the application 

form and the application date under 

§ 1003.4(a)(1)(ii). 

3. Applicant data—application completed 

in person. When an applicant meets in 

person with a financial institution to 

complete an application that was begun by 

mail, internet, or telephone, the financial 

institution must request the government 

monitoring information. If the meeting occurs 

after the application process is complete, for 

example, at closing or account opening, the 

financial institution is not required to obtain 

government monitoring information. 

4. Applicant data—joint applicant. A joint 

applicant may provide the government 

monitoring information on behalf of an 

absent joint applicant. If the information is 

not provided, the financial institution reports 

using the Code for ‘‘information not provided 

by applicant in mail, internet, or telephone 

application.’’ 

5. Applicant data—video and other 

electronic-application processes. A financial 

institution that accepts applications through 

electronic media with a video component 

treats the applications as taken in person and 

collects the information about the ethnicity, 

race, and sex of applicants. A financial 

institution that accepts applications through 

electronic media without a video component 

(for example, the internet or facsimile) treats 

the applications as accepted by mail. 

Paragraph 4(a)(10)(ii). 

1. Income data—income relied on. When 

an institution evaluates income as part of a 

credit decision, it reports the gross annual 

income relied on in making the credit 

decision. For example, if an institution relies 

on an applicant’s salary to compute a debtto-income ratio but also relies on the 

applicant’s annual bonus to evaluate 

creditworthiness, the institution reports the 

salary and the bonus to the extent relied 

upon. However, if an institution relies on an 

applicant’s income, but does not rely on 

certain income from an applicant in its 

determination, it does not report that portion 

of income not relied on. For example, the 

income relied on would not include 

commission income if the institution, 

pursuant to lender and investor guidelines, 

does not rely on an applicant’s commission 

income because it has been earned for less 

than 12 months. Similarly, if an institution 

relies on the income of a cosigner to evaluate 

creditworthiness, the institution includes 

this income to the extent relied upon. But an 

institution does not include the income of a 

guarantor who is only secondarily liable. 

2. Income data—co-applicant. If two 

persons jointly apply for a covered loan and 

both list income on the application, but the 

institution relies only on the income of one 

applicant in computing ratios and in 

evaluating creditworthiness, the institution 

reports only the income relied on. 

3. Income data—loan to employee. An 

institution may report ‘‘NA’’ in the income 

field for covered loans to or applications 

from its employees to protect their privacy, 

even though the institution relied on their 

income in making its credit decisions. 

4. Income data—assets. An institution does 

not include as income amounts considered in 

making a credit decision based on factors that 

an institution relies on in addition to income, 

such as amounts derived from annuitization 

or depletion of an applicant’s remaining 

assets. 

5. Income data—collected income. An 

institution reports income information 

collected as part of the application process if 

the application is denied or withdrawn or the 

file is closed for incompleteness before a 

credit decision requiring consideration of 

income is made. For example, if an 

institution receives an application that 

includes an applicant’s self-reported income, 

but the application is withdrawn before a 

credit decision requiring consideration of 

income is made, the institution reports the 

income provided on the application. 

6. Income data—credit decision not 

requiring consideration of income. An 

institution does not report income if the 

application did not or would not have 

required a credit decision requiring 

consideration of income under the policies 

and practices of the financial institution. For 

example, if the institution does not consider 

income for a streamlined refinance program 

but obtained income information submitted 

by the borrower, the institution reports 

neither gross annual income relied on nor 

gross annual income collected. 

Paragraph 4(a)(11). 

1. Type of purchaser—loan-participation 

interests sold to more than one entity. A 

financial institution that originates a covered 

loan, and then sells it to more than one 

entity, reports the ‘‘type of purchaser’’ based 

on the entity purchasing the greatest interest, 

if any. For purposes of § 1003.4(a)(11), if a 

financial institution sells a covered loan but 

retains a majority interest in that loan, it does 

not report the sale. 

2. Type of purchaser—swapped covered 

loans. Covered loans ‘‘swapped’’ for 

mortgage-backed securities are to be treated 

as sales; the purchaser is the type of entity 

receiving the covered loans that are swapped. 

3. Type of purchaser—affiliate institution. 

For purposes of § 1003.4(a)(11), the term 

‘‘affiliate’’ means any company that controls, 

is controlled by, or is under common control 

with, another company, as set forth in the 

Bank Holding Company Act of 1956 (12 

U.S.C. 1841 et seq.). 

4. Type of purchaser—private 

securitizations. A financial institution that 

knows or reasonably believes that the 

covered loan it is selling will be securitized 

by the institution purchasing the covered 

loan, other than by one of the governmentsponsored enterprises, reports the purchasing 

entity type as a private securitization 

regardless of the type or affiliation of the 

purchasing entity. Knowledge or reasonable 

belief could, for example, be based on the 

purchase agreement or other related 

documents, the financial institution’s 

previous transactions with the purchaser, or 

the purchaser’s role as a securitizer (such as 

an investment bank). If a financial institution 

selling a covered loan does not know or 

reasonably believe that the purchaser will 

securitize the loan, and the seller knows that 

the purchaser frequently holds or disposes of 

loans by means other than securitization, 

then the financial institution should report 

the covered loan as purchased by, as 

appropriate, a commercial bank, savings 

bank, savings association, life insurance 

company, credit union, mortgage bank, 

finance company, affiliate institution, or 

other type of purchaser. 

5. Type of purchaser—mortgage bank. For 

purposes of § 1003.4(a)(11), a mortgage bank, 


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often referred to as a mortgage company, 

means an institution that purchases covered 

loans and typically originates such loans. A 

mortgage bank might be an affiliate or a 

subsidiary of a bank holding company or 

thrift holding company, or it might be an 

independent mortgage company. In either 

case, a financial institution reports the 

purchasing entity type as a mortgage bank, 

unless the mortgage bank is an affiliate of the 

seller institution, in which case the seller 

institution should report the loan as 

purchased by an affiliate institution. 

6. Purchases by subsidiaries. A financial 

institution that sells a covered loan to its 

subsidiary that is a commercial bank, savings 

bank, or savings association, should report 

the covered loan as purchased by a 

commercial bank, savings bank, or savings 

association. A financial institution that sells 

a covered loan to its subsidiary that is a life 

insurance company, credit union, mortgage 

bank, or finance company, should report the 

covered loan as purchased by a life insurance 

company, credit union, mortgage bank, or 

finance company. If the subsidiary that 

purchases the covered loan is not a 

commercial bank, savings bank, savings 

association, life insurance company, credit 

union, mortgage bank, or finance company, 

the seller institution should report the loan 

as purchased by other type of purchaser. The 

financial institution should report the 

covered loan as purchased by an affiliate 

institution when the subsidiary is an affiliate 

of the seller institution. 

7. Type of purchaser—bank holding 

company or thrift holding company. When a 

financial institution sells a covered loan to a 

bank holding company or thrift holding 

company (rather than to one of its 

subsidiaries), it should report the loan as 

purchased by other type of purchaser, unless 

the bank holding company or thrift holding 

company is an affiliate of the seller 

institution, in which case the seller 

institution should report the loan as 

purchased by an affiliate institution. 

8. Repurchased covered loans. See 

comment 4(a)–6 regarding reporting 

requirements when a covered loan is 

repurchased by the originating financial 

institution. 

Paragraph 4(a)(12). 

* * * * * 

2. Bureau tables. The Bureau publishes on 

the FFIEC’s Web site (http://www.ffiec.gov/

hmda), in tables entitled ‘‘Average Prime 

Offer Rates-Fixed’’ and ‘‘Average Prime Offer 

Rates-Adjustable,’’ current and historic 

average prime offer rates for a wide variety 

of closed-end transaction types. The Bureau 

calculates an annual percentage rate, 

consistent with Regulation Z (see 12 CFR 

1026.22 and part 1026, appendix J), for each 

transaction type for which pricing terms are 

available from the survey described in 

comment 4(a)(12)–1. The Bureau uses loan 

pricing terms available in the survey and 

other information to estimate annual 

percentage rates for other types of 

transactions for which direct survey data are 

not available. The Bureau publishes on the 

FFIEC’s Web site the methodology it uses to 

arrive at these estimates. A financial 

institution may either use the average prime 

offer rates published by the Bureau or may 

determine average prime offer rates itself by 

employing the methodology published on the 

FFIEC Web site. A financial institution that 

determines average prime offer rates itself, 

however, is responsible for correctly 

determining the rates in accordance with the 

published methodology. 

3. Rate spread calculation—annual 

percentage rate. The requirements of 

§ 1003.4(a)(12)(i) refer to the covered loan’s 

annual percentage rate. A financial 

institution complies with § 1003.4(a)(12)(i) 

by relying on the annual percentage rate for 

the covered loan, as calculated and disclosed 

pursuant to Regulation Z, 12 CFR 1026.18 

(closed-end credit transactions) or 1026.40 

(open-end credit plans), as applicable. 

4. Rate spread calculation—comparable 

transaction. The rate spread calculation in 

§ 1003.4(a)(12)(i) is defined by reference to a 

comparable transaction, which is determined 

according to the covered loan’s amortization 

type (i.e., fixed- or variable-rate) and loan 

term. For open-end covered loans, 

§ 1003.4(a)(12)(i) requires a financial 

institution to identify the most closely 

comparable closed-end transaction. The 

tables of average prime offer rates published 

by the Bureau (see comment 4(a)(12)–2) 

provide additional detail about how to 

identify the comparable transaction. 

i. Fixed-rate transactions. For fixed-rate 

covered loans, the term for identifying the 

comparable transaction is the transaction’s 

maturity (i.e., the period until the last 

payment will be due under the loan contract 

or open-end credit agreement). If an openend credit plan has a fixed rate but no 

definite plan length, a financial institution 

complies with § 1003.4(a)(12)(i) by using a 

30-year fixed-rate loan as the most closely 

comparable closed-end transaction. Financial 

institutions may refer to the table on the 

FFIEC Web site entitled ‘‘Average Prime 

Offer Rates-Fixed’’ when identifying a 

comparable fixed-rate transaction. 

ii. Variable-rate transactions. For variablerate covered loans, the term for identifying 

the comparable transaction is the initial, 

fixed-rate period (i.e., the period until the 

first scheduled rate adjustment). For 

example, five years is the relevant term for 

a variable-rate transaction with a five-year, 

fixed-rate introductory period that is 

amortized over thirty years. Financial 

institutions may refer to the table on the 

FFIEC Web site entitled ‘‘Average Prime 

Offer Rates-Variable’’ when identifying a 

comparable variable-rate transaction. If an 

open-end credit plan has a variable rate and 

an optional, fixed-rate feature, a financial 

institution uses the rate table for variable-rate 

transactions. 

iii. Term not in whole years. When a 

covered loan’s term to maturity (or, for a 

variable-rate transaction, the initial fixed-rate 

period) is not in whole years, the financial 

institution uses the number of whole years 

closest to the actual loan term or, if the actual 

loan term is exactly halfway between two 

whole years, by using the shorter loan term. 

For example, for a loan term of ten years and 

three months, the relevant term is ten years; 

for a loan term of ten years and nine months, 

the relevant term is 11 years; for a loan term 

of ten years and six months, the relevant term 

is ten years. If a loan term includes an odd 

number of days, in addition to an odd 

number of months, the financial institution 

rounds to the nearest whole month, or 

rounds down if the number of odd days is 

exactly halfway between two months. The 

financial institution rounds to one year any 

covered loan with a term shorter than six 

months, including variable-rate covered 

loans with no initial, fixed-rate periods. For 

example, if an open-end covered loan has a 

rate that varies according to an index plus a 

margin, with no introductory, fixed-rate 

period, the transaction term is one year. 

iv. Amortization period longer than loan 

term. If the amortization period of a covered 

loan is longer than the term of the transaction 

to maturity, § 1003.4(a)(12)(i) requires a 

financial institution to use the loan term to 

determine the applicable average prime offer 

rate. For example, assume a financial 

institution originates a closed-end, fixed-rate 

loan that has a term to maturity of five years 

and a thirty-year amortization period that 

results in a balloon payment. The financial 

institution complies with § 1003.4(a)(12)(i) 

by using the five-year loan term. 

5. Rate-set date. The relevant date to use 

to determine the average prime offer rate for 

a comparable transaction is the date on 

which the covered loan’s interest rate was set 

by the financial institution for the final time 

before closing or account opening. 

i. Rate-lock agreement. If an interest rate is 

set pursuant to a ‘‘lock-in’’ agreement 

between the financial institution and the 

borrower, then the date on which the 

agreement fixes the interest rate is the date 

the rate was set. Except as provided in 

comment 4(a)(12)–5.ii, if a rate is reset after 

a lock-in agreement is executed (for example, 

because the borrower exercises a float-down 

option or the agreement expires), then the 

relevant date is the date the financial 

institution exercises discretion in setting the 

rate for the final time before closing or 

account opening. The same rule applies 

when a rate-lock agreement is extended and 

the rate is reset at the same rate, regardless 

of whether market rates have increased, 

decreased, or remained the same since the 

initial rate was set. If no lock-in agreement 

is executed, then the relevant date is the date 

on which the institution sets the rate for the 

final time before closing or account opening. 

ii. Change in loan program. If a financial 

institution issues a rate-lock commitment 

under one loan program, the borrower 

subsequently changes to another program 

that is subject to different pricing terms, and 

the financial institution changes the rate 

promised to the borrower under the rate-lock 

commitment accordingly, the rate-set date is 

the date of the program change. However, if 

the financial institution changes the 

promised rate to the rate that would have 

been available to the borrower under the new 

program on the date of the original rate-lock 

commitment, then that is the date the rate is 

set, provided the financial institution 

consistently follows that practice in all such 

cases or the original rate-lock agreement so 

provided. For example, assume that a 

borrower locks a rate of 2.5 percent on June 

1 for a 30-year, variable-rate loan with a 5- 


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year, fixed-rate introductory period. On June 

15, the borrower decides to switch to a 30- 

year, fixed-rate loan, and the rate available to 

the borrower for that product on June 15 is 

4.0 percent. On June 1, the 30-year, fixed-rate 

loan would have been available to the 

borrower at a rate of 3.5 percent. If the 

financial institution offers the borrower the 

3.5 percent rate (i.e., the rate that would have 

been available to the borrower for the fixedrate product on June 1, the date of the 

original rate-lock) because the original 

agreement so provided or because the 

financial institution consistently follows that 

practice for borrowers who change loan 

programs, then the financial institution 

should use June 1 as the rate-set date. In all 

other cases, the financial institution should 

use June 15 as the rate-set date. 

iii. Brokered loans. When a financial 

institution has reporting responsibility for a 

covered loan that it received from a broker, 

as discussed in comment 4(a)–4 (e.g., because 

the financial institution makes a credit 

decision prior to closing or account opening), 

the rate-set date is the last date the financial 

institution set the rate with the broker, not 

the date the broker set the borrower’s rate. 

6. Compare the annual percentage rate to 

the average prime offer rate. Section 

1003.4(a)(12)(i) requires a financial 

institution to compare the covered loan’s 

annual percentage rate to the most recently 

available average prime offer rate that was in 

effect for the comparable transaction as of the 

rate-set date. For purposes of 

§ 1003.4(a)(12)(i), the most recently available 

rate means the average prime offer rate set 

forth in the applicable table with the most 

recent effective date as of the date the interest 

rate was set. However, § 1003.4(a)(12)(i) does 

not permit a financial institution to use an 

average prime offer rate before its effective 

date. 

Paragraph 4(a)(14). 

1. Determining lien status for applications 

and covered loans originated and purchased. 

i. Financial institutions are required to report 

lien status for covered loans they originate 

and purchase and applications that do not 

result in originations. For covered loans 

purchased by a financial institution, lien 

status is determined by reference to the best 

information readily available to the financial 

institution at the time of purchase. For 

covered loans that a financial institution 

originates and applications that do not result 

in originations, lien status is determined by 

reference to the best information readily 

available to the financial institution at the 

time final action is taken and to the financial 

institution’s own procedures. Thus, financial 

institutions may rely on the title search they 

routinely perform as part of their 

underwriting procedures—for example, for 

home purchase loans. Regulation C does not 

require financial institutions to perform title 

searches solely to comply with HMDA 

reporting requirements. Financial institutions 

may rely on other information that is readily 

available to them at the time final action is 

taken and that they reasonably believe is 

accurate, such as the applicant’s statement on 

the application or the applicant’s credit 

report. If an application does not result in an 

origination and the best information readily 

available to the financial institution at the 

time final action is taken indicates that there 

is a mortgage on the property that would not 

have been paid off as part of the transaction, 

but the financial institution is not able to 

determine, based on the best information 

readily available to it, the exact lien priority 

of the loan applied for, the financial 

institution complies with § 1003.4(a)(14) by 

reporting that the property would have been 

secured by a second lien. 

ii. Financial institutions may also consider 

their established procedures when 

determining lien status for applications that 

do not result in originations. For example, an 

applicant applies to a financial institution to 

refinance a $100,000 first mortgage; the 

applicant also has a home-equity line of 

credit for $20,000. If the financial 

institution’s practice in such a case is to 

ensure that it will have first-lien position— 

through a subordination agreement with the 

holder of the mortgage on the home-equity 

line of credit—then the financial institution 

should report the application as an 

application for a first-lien covered loan. 

2. Multiple properties. See comment 

4(a)(9)–2 regarding transactions involving 

multiple properties with more than one 

property taken as security. 

Paragraph 4(a)(15). 

1. Credit score—relied on. Except for 

purchased covered loans, § 1003.4(a)(15) 

requires a financial institution to report the 

credit score or scores relied on in making the 

credit decision and information about the 

scoring model used to generate each score. A 

financial institution relies on a credit score 

in making the credit decision if the credit 

score was a factor in the credit decision even 

if it was not a dispositive factor. For example, 

if a credit score is one of multiple factors in 

a financial institution’s credit decision, the 

financial institution has relied on the credit 

score even if the financial institution denies 

the application because one or more 

underwriting requirements other than the 

credit score are not satisfied. 

2. Credit score—multiple credit scores. 

When a financial institution obtains or 

creates two or more credit scores for a single 

applicant or borrower but relies on only one 

score in making the credit decision (for 

example, by relying on the lowest, highest, 

most recent, or average of all of the scores), 

the financial institution complies with 

§ 1003.4(a)(15) by reporting that credit score 

and information about the scoring model 

used. When a financial institution obtains or 

creates two or more credit scores for an 

applicant or borrower and relies on multiple 

scores for the applicant or borrower in 

making the credit decision (for example, by 

relying on a scoring grid that considers each 

of the scores obtained or created for the 

applicant or borrower without combining the 

scores into a composite score), § 1003.4(a)(15) 

requires the financial institution to report 

one of the credit scores for the borrower or 

applicant that was relied on in making the 

credit decision. In choosing which credit 

score to report in this circumstance, a 

financial institution need not use the same 

approach for its entire HMDA submission, 

but it should be generally consistent (such as 

by routinely using one approach within a 

particular division of the institution or for a 

category of covered loans). In instances such 

as these, the financial institution should 

report the name and version of the credit 

scoring model for the score reported. 

3. Credit score—multiple applicants or 

borrowers. In a transaction involving two or 

more applicants or borrowers for which the 

financial institution relies on a single credit 

score in making the credit decision for the 

transaction, the institution complies with 

§ 1003.4(a)(15) by reporting that credit score. 

Otherwise, a financial institution complies 

with § 1003.4(a)(15) by reporting a credit 

score for the applicant or borrower that it 

relied on in making the credit decision, if 

any, and a credit score for the first coapplicant or co-borrower that it relied on in 

making the credit decision, if any. To 

illustrate, assume a transaction involves one 

applicant and one co-applicant and that the 

financial institution obtains or creates two 

credit scores for the applicant and two credit 

scores for the co-applicant. Assume further 

that the financial institution relies on the 

lowest, highest, most recent, or average of all 

of the credit scores obtained or created to 

make the credit decision for the transaction. 

The financial institution complies with 

§ 1003.4(a)(15) by reporting that credit score 

and information about the scoring model 

used. Alternatively, assume a transaction 

involves one applicant and one co-applicant 

and that the financial institution obtains or 

creates three credit scores for the applicant 

and three credit scores for the co-applicant. 

Assume further that the financial institution 

relies on the middle credit score for the 

applicant and the middle credit score for the 

co-applicant to make the credit decision for 

the transaction. The financial institution 

complies with § 1003.4(a)(15) by reporting 

both the middle score for the applicant and 

the middle score for the co-applicant. 

4. No credit decision or credit decision 

made without reliance on a credit score. If a 

file was closed for incompleteness or the 

application was withdrawn before a credit 

decision was made, the financial institution 

complies with § 1003.4(a)(15) by reporting 

not applicable. If a financial institution 

makes a credit decision without relying on a 

credit score for the applicant or borrower, the 

financial institution complies with 

§ 1003.4(a)(15) by reporting not applicable. 

Paragraph 4(a)(16). 

1. Reason(s) for denial—general. A 

financial institution complies with 

§ 1003.4(a)(16) by reporting the principal 

reason(s) it denied the application, indicating 

up to three reasons. The reasons reported 

must be specific and accurately describe the 

principal reasons the financial institution 

denied the application. 

2. Reason(s) for denial—other reason(s). 

When a principal reason a financial 

institution denied the application is not 

provided on the list of denial reasons in 

appendix A, a financial institution complies 

with § 1003.4(a)(16) by entering ‘‘Other’’ and 

reporting the principal reason(s) it denied the 

application. If a financial institution chooses 

to provide the applicant the reason(s) it 

denied the application using the model form 

contained in appendix C to Regulation B 

(Form C–1, Sample Notice of Action Taken 


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and Statement of Reasons) or a similar form, 

the financial institution complies with 

§ 1003.4(a)(16) by entering the ‘‘Other’’ 

reason(s) that were specified on the form by 

the financial institution. If a financial 

institution chooses to provide a disclosure of 

the applicant’s right to a statement of specific 

reasons using the model form contained in 

appendix C to Regulation B (Form C–5, 

Sample Disclosure of Right to Request 

Specific Reasons for Credit Denial) or a 

similar form, or chooses to provide the denial 

reason(s) orally under Regulation B, 12 CFR 

1002.9(a)(2)(ii), the financial institution 

complies with § 1003.4(a)(16) by entering the 

principal reason(s) it denied the application. 

Paragraph 4(a)(21). 

1. General. Section 1003.4(a)(21) requires a 

financial institution to identify the interest 

rate applicable to the covered loan at closing 

or account opening, as applicable. For 

covered loans subject to the disclosure 

requirements of Regulation Z, 12 CFR 

1026.38, a financial institution complies with 

§ 1003.4(a)(21) by identifying the interest rate 

as the rate disclosed pursuant to Regulation 

Z, 12 CFR 1026.37(b)(2). For an adjustablerate covered loan subject to the disclosure 

requirements of Regulation Z, 12 CFR 

1026.38, if the interest rate at closing is not 

known, a financial institution complies with 

§ 1003.4(a)(21) by identifying the fullyindexed rate, which, for purposes of 

§ 1003.4(a)(21), means the interest rate 

calculated using the index value and margin 

at the time of closing, pursuant to Regulation 

Z, 12 CFR 1026.37(b)(2). 

Paragraph 4(a)(23). 

1. General. For covered loans that are not 

reverse mortgages, § 1003.4(a)(23) requires a 

financial institution to report the ratio of the 

applicant’s or borrower’s total monthly debt 

to total monthly income (DTI ratio) relied on 

in making the credit decision. For example, 

if a financial institution calculated the 

applicant’s or borrower’s DTI ratio twice— 

once according to the financial institution’s 

own requirements and once according to the 

requirements of a secondary market 

investor—and the financial institution relied 

on the DTI ratio calculated according to the 

secondary market investor’s requirements in 

making the credit decision, § 1003.4(a)(23) 

requires the financial institution to report the 

debt-to-income ratio calculated according to 

the requirements of the secondary market 

investor. 

2. Transactions for which a debt-to-income 

ratio is one of multiple factors. If a financial 

institution relies on a set of underwriting 

requirements in making a credit decision, 

and the requirements include the ratio of the 

applicant’s or borrower’s total monthly debt 

to total monthly income (DTI ratio) as one of 

multiple factors, § 1003.4(a)(23) requires the 

financial institution to report the DTI ratio 

considered as part of the set of underwriting 

requirements relied on by the financial 

institution. For example, if a financial 

institution relies on a set of underwriting 

requirements in making a credit decision, the 

requirements include the applicant’s or 

borrower’s DTI ratio as one of multiple 

factors, and the financial institution approves 

the application, the financial institution 

complies with § 1003.4(a)(23) by reporting 

the DTI ratio considered as part of the set of 

underwriting requirements. Similarly, if a 

financial institution relies on a set of 

underwriting requirements in making a credit 

decision, the requirements include the 

applicant’s or borrower’s DTI ratio as one of 

multiple factors, and the financial institution 

denies the application because an 

underwriting requirement other than the DTI 

ratio requirement is not satisfied, the 

financial institution complies with 

§ 1003.4(a)(23) by reporting the DTI ratio 

considered as part of the set of underwriting 

requirements. 

3. Transactions for which no credit 

decision was made. If a file was closed for 

incompleteness, or if an application was 

withdrawn before a credit decision was 

made, a financial institution complies with 

§ 1003.4(a)(23) by reporting that no credit 

decision was made, even if the financial 

institution had calculated the ratio of the 

applicant’s total monthly debt to total 

monthly income (DTI ratio). For example, if 

a file is incomplete and is so reported in 

accordance with § 1003.4(a)(8), the financial 

institution complies with § 1003.4(a)(23) by 

reporting that no credit decision was made, 

even if the financial institution had 

calculated the applicant’s DTI ratio. 

Similarly, if an application was withdrawn 

by the applicant before a credit decision was 

made, the financial institution complies with 

§ 1003.4(a)(23) by reporting that no credit 

decision was made, even if the financial 

institution had calculated the applicant’s DTI 

ratio. 

4. Transactions for which no debt-toincome ratio is relied on. Section 

1003.4(a)(23) does not require a financial 

institution to calculate the ratio of an 

applicant’s or borrower’s total monthly debt 

to total monthly income (DTI ratio), nor does 

it require a financial institution to rely on an 

applicant’s or borrower’s DTI ratio in making 

a credit decision. If a financial institution 

makes a credit decision without relying on 

the applicant’s or borrower’s DTI ratio, the 

financial institution complies with 

§ 1003.4(a)(23) by reporting that no DTI ratio 

was relied on in connection with the credit 

decision. 

Paragraph 4(a)(24). 

1. General. Section 1003.4(a)(24) requires a 

financial institution to report the ratio of the 

total amount of debt secured by the property 

to the property value identified under 

§ 1003.4(a)(28). If a financial institution 

makes a credit decision without calculating 

the ratio of the total amount of debt secured 

by the property to the value of the property, 

the financial institution complies with 

§ 1003.4(a)(24) by reporting that this ratio 

was not calculated in connection with the 

credit decision. 

2. Calculation for transactions that are 

home-equity lines of credit. For home-equity 

lines of credit, as defined under § 1003.2(h), 

§ 1003.4(a)(24)(i) requires a financial 

institution to calculate the ratio of the total 

amount of debt secured by the property to the 

value of the property by including the full 

amount of any home-equity line of credit, 

whether drawn or undrawn. For example, 

assume that an applicant applies for a homeequity line of credit to be secured by a 

subordinate lien on the property, where the 

initial draw amount will be $10,000 and the 

full amount of credit available under the line 

of credit will be $20,000. Assume further that 

a home-equity line of credit with an amount 

outstanding of $23,000, and in which the full 

amount of credit available under the line of 

credit is $25,000, is secured by a first lien on 

the property; that a loan with a $10,000 

unpaid principal balance that is not a homeequity line of credit is secured by a 

subordinate-lien on the property; and that no 

other debts are secured by the property. The 

financial institution complies with 

§ 1003.4(a)(24)(i) by dividing $55,000, 

representing the $45,000 amount of credit 

that will be available to the applicant under 

the home-equity lines of credit plus the 

$10,000 unpaid principal balance of the 

subordinate-lien loan, by the value of the 

property identified under § 1003.4(a)(28). 

3. Calculation for transactions that are not 

home-equity lines of credit. For transactions 

that are not home-equity lines of credit, as 

defined under § 1003.2(h), § 1003.4(a)(24)(ii) 

requires a financial institution to calculate 

the ratio of the total amount of debt secured 

by the property to the value of the property 

by including the amounts outstanding under 

home-equity lines of credit secured by the 

property. For example, assume that an 

applicant applies for a $10,000 loan that is 

not a home-equity line of credit to be secured 

by a subordinate lien on the property. 

Assume further that a home-equity line of 

credit with an amount outstanding of 

$10,000, and in which the full amount of 

credit available under the line of credit is 

$20,000, is secured by a subordinate lien on 

the property; that a home-equity line of credit 

with an amount outstanding of $23,000, and 

in which the full amount of credit available 

under the line of credit is $25,000, is secured 

by a first lien on the property; and that no 

other debts are secured by the property. The 

financial institution complies with 

§ 1003.4(a)(24)(ii) by dividing $43,000, 

representing the $33,000 amount of credit 

outstanding under the home-equity lines of 

credit plus the $10,000 subordinate-lien loan 

for which the applicant is applying, by the 

value of the property identified under 

§ 1003.4(a)(28). 

Paragraph 4(a)(25). 

1. Amortization and maturity. For a fully 

amortizing covered loan, the number of 

months after which the legal obligation 

matures is the number of months in the 

amortization schedule, ending with the final 

payment. Some covered loans do not fully 

amortize during the maturity term, such as 

covered loans with a balloon payment; such 

loans should still be reported using the 

maturity term rather than the amortization 

term, even in the case of covered loans that 

mature before fully amortizing but have reset 

options. For example, a 30-year fully 

amortizing covered loan would be reported 

with a term of ‘‘360,’’ while a five year 

balloon covered loan would be reported with 

a loan term of ‘‘60.’’ 

2. Non-monthly repayment periods. If a 

covered loan or application includes a 

schedule with repayment periods measured 

in a unit of time other than months, the 

financial institution should report the 


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covered loan or application term using an 

equivalent number of whole months without 

regard for any remainder. 

Paragraph 4(a)(26). 

1. Types of introductory rates. Section 

1003.4(a)(26) requires a financial institution 

to report the number of months from loan 

origination until the first date the interest 

rate may change. For example, assume a 

home-equity line of credit contains an 

introductory or ‘‘teaser’’ interest rate for two 

months after the date of account opening, 

after which the interest rate may adjust. In 

this example, the financial institution 

complies with § 1003.4(a)(26) by reporting 

the number of months as ‘‘2.’’ Section 

1003.4(a)(26) requires a financial institution 

to report the number of months based on 

when the first interest rate adjustment may 

occur, even if an interest rate adjustment is 

not required to occur, or if the rates that will 

apply or the periods for which they will 

apply, are not known at loan origination. For 

example, if a closed-end mortgage loan with 

a 30-year term is an adjustable rate product 

with an introductory interest rate for the first 

60 months, after which the interest rate is 

permitted to vary, but not required to vary, 

according to the terms of an index rate, the 

financial institution complies with 

§ 1003.4(a)(26) by reporting the number of 

months as ‘‘60.’’ Similarly, if a closed-end 

mortgage loan with a 30-year term is a step 

rate product with an introductory interest 

rate for the first 24 months, after which the 

interest rate will increase to a different 

known interest rate for the next 36 months, 

the financial institution complies with 

§ 1003.4(a)(26) by reporting the number of 

months as ‘‘24.’’ 

2. Preferred rates. Section 1003.4(a)(26) 

does not requiring reporting of introductory 

interest rate periods based on preferred rates 

unless the terms of the legal obligation 

provide that the preferred rate will expire at 

a defined future date. Preferred rates include 

terms of the legal obligation which provide 

that the initial underlying rate is fixed but 

will increase upon the occurrence of some 

future event, such as an employee leaving the 

employ of the financial institution, the 

borrower closing an existing deposit account 

with the financial institution, or the borrower 

revoking an election to make automated 

payments. 

Paragraph 4(a)(27). 

1. General. Section 1003.4(a)(27) requires 

reporting of contractual features that would 

allow payments other than fully amortizing 

payments. Section 1003.4(a)(27) defines the 

contractual features by reference to 

Regulation Z, 12 CFR part 1026, but without 

regard to whether the covered loan is credit 

for personal, family, or household purposes, 

without regard to whether the person to 

whom credit is extended is a consumer, 

without regard to whether the property is a 

dwelling, and without regard to whether the 

person extending credit is a creditor, as those 

terms are used in Regulation Z. For example, 

assume that a financial institution originates 

a business-purpose transaction pursuant to 

Regulation Z, 12 CFR 1026.3(a)(1), to finance 

a multifamily dwelling that is not a dwelling 

under Regulation Z, 12 CFR 1026.2(a)(19), 

but that qualifies as a covered loan pursuant 

to § 1003.2(e). The transaction is secured by 

a lien on a dwelling pursuant to § 1003.2(f) 

and has a balloon payment as defined by 

Regulation Z, 12 CFR 1026.18(s)(5)(i), such as 

a home purchase loan for a multifamily 

dwelling that has a balloon payment at the 

end of the loan term. In this example, the 

financial institution should report the 

business-purpose transaction as having a 

balloon payment under § 1003.4(a)(27)(i), 

assuming the other requirements of this part 

are met. Aside from these distinctions, 

financial institutions may rely on the 

definitions and related commentary provided 

in the appropriate sections of Regulation Z 

referenced in § 1003.4(a)(27) of this part and 

in determining whether the contractual 

feature should be reported. 

Paragraph 4(a)(28). 

1. Property value relied on. A financial 

institution reports the property value relied 

on in making the credit decision. For 

example, if the institution relies on an 

appraisal or other valuation for the property 

in calculating the loan-to-value ratio, it 

reports that value; if the institution relies on 

the purchase price of the property in 

calculating the loan-to-value ratio, it reports 

that value. 

2. Multiple property values. When a 

financial institution obtains two or more 

valuations of the property securing or 

proposed to secure the covered loan, the 

financial institution complies with 

§ 1003.4(a)(28) by reporting the value relied 

on in making the credit decision. For 

example, when a financial institution obtains 

two appraisals or other valuations with 

different values for the property, it reports 

the value relied on in making the credit 

decision. 

Paragraph 4(a)(29). 

1. Multiple properties. See comment 

4(a)(9)–2 regarding transactions involving 

multiple properties with more than one 

property taken as security. 

Paragraph 4(a)(30). 

1. Indirect land ownership. Indirect land 

ownership can occur when the applicant is 

or will be a member of a resident-owned 

community structured as a housing 

cooperative in which the occupants own an 

entity that holds the underlying land of the 

manufactured home community. In such 

communities, the applicant may still pay rent 

for the lot on which his or her manufactured 

home is or will be located and have a lease, 

but the property interest type for such an 

arrangement should be reported as indirect 

ownership if the applicant is or will be a 

member of the cooperative that owns the 

underlying land of the manufactured home. 

If an applicant resides or will reside in such 

a community but is not a member, the 

property interest type should be reported as 

a paid leasehold. 

2. Leasehold interest. A leasehold interest 

could be formalized in a lease with a defined 

term and specified rent payments, or could 

arise as a tenancy at will through permission 

of a land owner without any written, formal 

arrangement. For example, assume a 

borrower will locate the manufactured home 

in a manufactured home park, has a written 

lease for a lot in that park, and the lease 

specifies rent payments. In this example, a 

financial institution complies with 

§ 1003.4(a)(30) by reporting a paid leasehold. 

However, if instead the borrower will locate 

the manufactured home on land owned by a 

family member without a written lease and 

with no agreement as to rent payments, a 

financial institution complies with 

§ 1003.4(a)(30) by reporting an unpaid 

leasehold. 

3. Multiple properties. See comment 

4(a)(9)–2 regarding transactions involving 

multiple properties with more than one 

property taken as security. 

Paragraph 4(a)(31). 

1. Multiple properties and multifamily 

dwelling. Comments 4(a)(9)–2 and –3 explain 

that a financial institution may elect to report 

a single covered loan or application in a 

single or multiple entries if the covered loan 

or application is secured by or, in the case 

of an application, proposed to be secured by 

multiple properties or a multifamily dwelling 

with more than one postal address. 

Regardless of whether the institution reports 

the loan in a single or multiple entries, an 

institution reports the information required 

by § 1003.4(a)(31) for all of the property or 

properties securing or, in the case of an 

application, proposed to secure the covered 

loan. See comments 2(f)–1 and 4(a)(9)–2. For 

example, assume a financial institution 

originated a covered loan secured by a 

multifamily dwelling, comprised of two 10- 

unit apartment buildings, each with a 

different postal address. If the financial 

institution elects to report the loan in two 

entries, reporting the information required 

for § 1003.4(a)(9) for each of the two 

apartment buildings, the financial institution 

reports, as required by § 1003.4(a)(31), 20 

individual dwelling units in each of the two 

entries. The financial institution also reports, 

as required by § 1003.4(a)(31), 20 individual 

dwelling units, if the financial institution 

elects to report the loan in a single entry by 

reporting the information required for 

§ 1003.4(a)(9) for only one of the two 

buildings. 

Paragraph 4(a)(32). 

1. Affordable housing income restrictions. 

For purposes of § 1003.4(a)(32), affordable 

housing income-restricted units are 

individual dwelling units that have 

restrictions based on the income level of 

occupants. Such income levels are frequently 

expressed as a percentage of area median 

income by household size as established by 

the U.S. Department of Housing and Urban 

Development or another agency responsible 

for implementing the applicable affordable 

housing program. Such restrictions are 

frequently part of compliance with programs 

that provide public funds, special tax 

treatment, or density bonuses to encourage 

development or preservation of affordable 

housing. Rent control or rent stabilization 

laws, and the acceptance by the owner or 

manager of a multifamily dwelling of 

Housing Choice Vouchers (24 CFR part 982) 

or other similar forms of portable housing 

assistance that are tied to an occupant and 

not an individual dwelling unit are not 

affordable housing income-restricted 

dwelling units for purposes of 

§ 1003.4(a)(32). 

2. Federal affordable housing sources. 

Examples of Federal programs and funding 


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sources that may result in individual 

dwelling units that are reportable under 

§ 1003.4(a)(32) include, but are not limited 

to: 

i. Affordable housing programs pursuant to 

Section 8 of the United States Housing Act 

of 1937 (42 U.S.C. 1437f); 

ii. Public housing (42 U.S.C. 1437a(b)(6)); 

iii. The HOME Investment Partnerships 

program (24 CFR part 92); 

iv. The Community Development Block 

Grant program (24 CFR part 570); 

v. Multifamily tax subsidy project funding 

through tax-exempt bonds or tax credits (26 

U.S.C. 42; 26 U.S.C. 142(d)); 

vi. Project-based vouchers (24 CFR part 

983); 

vii. Federal Home Loan Bank affordable 

housing program funding (12 CFR part 1291); 

and 

viii. Rural Housing Service multifamily 

housing loans and grants (7 CFR part 3560). 

3. State and local government affordable 

housing sources. Examples of State and local 

sources that may result in individual 

dwelling units that are reportable under 

§ 1003.4(a)(32) include, but are not limited 

to: State or local administration of Federal 

funds or programs; State or local funding 

programs for affordable housing or rental 

assistance, including programs operated by 

independent public authorities; inclusionary 

zoning laws; and tax abatement or tax 

increment financing contingent on affordable 

housing requirements. 

4. Multiple properties and multifamily 

dwelling. Comments 4(a)(9)–2 and –3 explain 

that a financial institution may elect to report 

a single covered loan or application in a 

single or multiple entries if the covered loan 

or application is secured by or, in the case 

of an application, proposed to be secured by 

multiple properties or a multifamily dwelling 

with more than one postal address. 

Regardless of whether the institution reports 

the loan in a single or multiple entries, an 

institution reports the information required 

by § 1003.4(a)(32) for all of the property or 

properties securing or, in the case of an 

application, proposed to secure the covered 

loan. See comments 2(f)–1 and 4(a)(9)–2. For 

example, a financial institution originated a 

covered loan secured by a multifamily 

dwelling, comprised of two 50-unit 

apartment buildings that each contain 10 

income-restricted individual dwelling units, 

each with a different postal address. If the 

financial institution elects to report the loan 

in two entries, reporting the information 

required for § 1003.4(a)(9) for each of the two 

apartment buildings, the financial institution 

reports, as required by § 1003.4(a)(32), 20 

income-restricted individual dwelling units 

in each of the two entries. The financial 

institution also reports, as required by 

§ 1003.4(a)(32), 20 income-restricted 

individual dwelling units, if the financial 

institution elects to report the loan in a single 

entry by reporting the information required 

for § 1003.4(a)(9) for only one of the two 

buildings. 

Paragraph 4(a)(33). 

1. Direct submission. An application is 

submitted directly to the financial institution 

if the institution receives the application 

directly from the applicant or borrower. For 

example, if an applicant submits an 

application through the financial institution’s 

Web site, the application is submitted 

directly to the institution. An application is 

not submitted directly to an institution if the 

institution does not receive the application 

directly from the applicant or borrower. For 

example, if an applicant completes an 

application over the telephone with a broker 

or correspondent and the broker or 

correspondent forwards the application to 

the institution for approval, the institution 

does not receive the application directly from 

the applicant or borrower. For example, 

assume that an applicant submits an 

application for a covered loan to a 

correspondent lender that approves the 

application, originates the covered loan in its 

name, and sells the covered loan to another 

financial institution. The correspondent 

reports the covered loan as an origination 

and indicates that it received the application 

directly from the applicant. The purchasing 

financial institution reports the loan as a 

purchase, and uses the code for ‘‘not 

applicable’’ for the information required by 

§ 1003.4(a)(33). 

2. Initially payable. Section 1003.4(a)(33) 

requires financial institutions to report 

whether the obligation arising from a covered 

loan was or, in the case of an application, 

would have been initially payable to the 

institution. An obligation is initially payable 

to the institution if, for example, the loan 

closed in the institution’s name or if the 

institution meets the definition of creditor in 

Regulation Z, 12 CFR 1026.2(a)(17), with 

respect to the transaction at issue. 

Conversely, if, for example, a covered loan 

closed in the name of another financial 

institution, such as a correspondent lender, 

the covered loan was not initially payable to 

the institution. 

3. Agents. If a financial institution is 

reporting the credit decision made by its 

third party agent consistent with comment 

4(a)–5, the agent is not considered the 

financial institution for the purposes of 

§ 1003.4(a)(33). For example, assume that an 

applicant submitted an application to 

Financial Institution A, and Financial 

Institution A made the credit decision acting 

as Financial Institution B’s agent under State 

law. A covered loan was originated and 

closed in Financial Institution A’s name. 

Financial Institution B purchased the loan. 

Financial Institution B reports the origination 

and not the purchase, and indicates that the 

application was not submitted directly to the 

financial institution and that the transaction 

was not initially payable to the financial 

institution. 

Paragraph 4(a)(34). 

1. NMLSR ID. Section 1003.4(a)(34) 

requires a financial institution to report the 

Nationwide Mortgage Licensing System and 

Registry unique identifier (NMLSR ID) for the 

mortgage loan originator, as defined in 

Regulation G, 12 CFR 1007.102, or Regulation 

H, 12 CFR 1008.23, as applicable. The 

NMLSR ID is a unique number or other 

identifier generally assigned to individuals 

registered or licensed through NMLSR to 

provide loan originating services. For more 

information, see the Secure and Fair 

Enforcement for Mortgage Licensing Act of 

2008, title V of the Housing and Economic 

Recovery Act of 2008 (S.A.F.E. Act), 12 

U.S.C. 5101 et seq., and its implementing 

regulations (12 CFR part 1007 and 12 CFR 

part 1008). 

2. Mortgage loan originator without 

NMLSR ID. An NMLSR ID for the mortgage 

loan originator is not required by 

§ 1003.4(a)(34) to be reported by a financial 

institution if the mortgage loan originator is 

not required to obtain and has not been 

assigned an NMLSR ID. For example, certain 

individual mortgage loan originators may not 

be required to obtain an NMLSR ID for the 

particular transaction being reported by the 

financial institution, such as a commercial 

loan. However, some mortgage loan 

originators may have obtained an NMLSR ID 

even if they are not required to obtain one 

for that particular transaction. If a mortgage 

loan originator has been assigned an NMLSR 

ID, a financial institution complies with 

§ 1003.4(a)(34) by reporting the mortgage 

loan originator’s NMLSR ID regardless of 

whether the mortgage loan originator is 

required to obtain an NMLSR ID for the 

particular transaction being reported by the 

financial institution. In the event that the 

mortgage loan originator is not required to 

obtain and has not been assigned an NMLSR 

ID, a financial institution complies with 

§ 1003.4(a)(34) by reporting ‘‘NA’’ for not 

applicable. 

3. Multiple mortgage loan originators. If 

more than one individual meets the 

definition of a mortgage loan originator, as 

defined in Regulation G, 12 CFR 1007.102, or 

Regulation H, 12 CFR 1008.23, for a covered 

loan or application, a financial institution 

complies with § 1003.4(a)(34) by reporting 

the NMLSR ID of the individual mortgage 

loan originator with primary responsibility 

for the transaction. A financial institution 

that establishes and follows a reasonable, 

written policy for determining which 

individual mortgage loan originator has 

primary responsibility for the reported 

transaction complies with § 1003.4(a)(34). 

Paragraph 4(a)(35). 

1. AUS recommendation—considered in 

underwriting. Except for purchased covered 

loans, § 1003.4(a)(35) requires a financial 

institution to report the recommendation 

generated by the automated underwriting 

system (AUS) used to evaluate the 

application. A financial institution complies 

with § 1003.4(a)(35) by reporting an AUS 

recommendation if the recommendation was 

considered by the financial institution in its 

underwriting process. For example, when a 

financial institution takes into account a 

combination of an AUS recommendation and 

manual underwriting in making the credit 

decision, the financial institution has 

considered the AUS recommendation in its 

underwriting process and reports the AUS 

recommendation. 

2. Reporting AUS data. i. Multiple systems. 

When a financial institution uses more than 

one AUS to evaluate an application, the 

financial institution complies with 

§ 1003.4(a)(35) by reporting the name of the 

AUS developed by a securitizer, Federal 

government insurer, or guarantor that the 

financial institution used closest in time to 

the credit decision. For example, when a 


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financial institution processes an application 

through the AUS of two different 

government-sponsored enterprises, such as 

the Federal National Mortgage Association 

(Fannie Mae) or the Federal Home Loan 

Mortgage Corporation (Freddie Mac), the 

financial institution complies with 

§ 1003.4(a)(35) by reporting the name of the 

AUS that was used closest in time to the 

credit decision. If a financial institution 

processes an application through multiple 

AUSs at the same time, the financial 

institution complies with § 1003.4(a)(35) by 

reporting the name of the AUS that generated 

the recommendation that was a factor in the 

credit decision. 

ii. Multiple recommendations. When a 

financial institution obtains two or more 

recommendations for an applicant or 

borrower that are generated by a single or 

multiple AUSs developed by a securitizer, 

Federal government insurer, or guarantor, the 

financial institution complies with 

§ 1003.4(a)(35) by reporting the AUS 

recommendation generated closest in time to 

the credit decision. For example, when a 

financial institution receives a 

recommendation from an AUS that requires 

the financial institution to manually 

underwrite the loan, but in addition the 

financial institution subsequently processes 

the application through a different AUS that 

also generates a recommendation, the 

financial institution complies with 

§ 1003.4(a)(35) by reporting the AUS 

recommendation generated closest in time to 

the credit decision. If a financial institution 

obtains multiple AUS recommendations at 

the same time, the financial institution 

complies with § 1003.4(a)(35) by reporting 

the AUS recommendation that was a factor 

in the credit decision. 

3. No credit decision or AUS not 

considered in underwriting. If a financial 

institution does not use an AUS developed 

by a securitizer, Federal government insurer, 

or guarantor to evaluate the application, the 

financial institution complies with 

§ 1003.4(a)(35) by reporting ‘‘not applicable.’’ 

For example, if a financial institution only 

manually underwrites an application and 

does not consider an AUS recommendation 

in its underwriting process, the financial 

institution complies with § 1003.4(a)(35) by 

reporting ‘‘not applicable.’’ Also, if the file 

was closed for incompleteness or the 

application was withdrawn before a credit 

decision was made, the financial institution 

complies with § 1003.4(a)(35) by reporting 

‘‘not applicable.’’ 

Paragraph 4(a)(38). 

1. General. Section 1003.4(a)(38) requires a 

financial institution to identify whether the 

covered loan is subject to the ability-to-repay 

provisions of Regulation Z, 12 CFR 1026.43, 

and whether the covered loan is a qualified 

mortgage, as described under Regulation Z, 

12 CFR 1026.43(e) or (f). Financial 

institutions may rely on 12 CFR 1026.43, the 

related commentary in supplement I to part 

1026, and appendix Q to part 1026 in 

determining whether a covered loan is a 

qualified mortgage. If a covered loan, as 

defined in § 1003.2(e), is subject to 12 CFR 

1026.43, but is not a qualified mortgage 

pursuant to 12 CFR 1026.43(e) or (f), 

§ 1003.4(a)(38) requires a financial institution 

to identify the covered loan as a loan that is 

not a qualified mortgage. For example, if a 

covered loan, as defined in § 1003.2(e), is 

subject to the requirements of 12 CFR 

1026.43, but does not meet the criteria for the 

definition of qualified mortgage under 

Regulation Z 12 CFR 1026.43(e)(2), (e)(4), 

(e)(5), or (f), the financial institution 

complies with § 1003.4(a)(38) by identifying 

the covered loan as a loan that is not a 

qualified mortgage. If a covered loan, as 

defined in § 1003.2(e), is not subject to 

paragraphs (c) through (f) of 12 CFR 1026.43, 

§ 1003.4(a)(38) requires the financial 

institution to identify the covered loan as a 

loan that is not subject to the reporting 

requirements of 12 CFR 1026.43. For 

example, if a covered loan, such as a reverse 

mortgage, is not subject to paragraphs (c) 

through (f) of 12 CFR 1026.43, the financial 

institution complies with § 1003.4(a)(38) by 

identifying the loan as not subject to the 

ability-to-repay provisions. 

* * * * * 

Section 1003.5—Disclosure and Reporting 

5(a) Reporting to agency. 

1. Quarterly reporting—coverage. Section 

1003.5(a)(1)(ii) requires that a financial 

institution that reported at least 75,000 

covered loans, applications, and purchased 

covered loans, combined, for the preceding 

calendar year must submit on a quarterly 

basis the HMDA data required to be recorded 

on a loan application register pursuant to 

§ 1004.4(f). For example, if for calendar year 

one Financial Institution A reports 75,001 

purchased covered loans, it must submit its 

data on a quarterly basis in calendar year 

two. Similarly, if for calendar year one 

Financial Institution A reports 25,001 

covered loans and 50,000 purchased covered 

loans, it must submit its data on a quarterly 

basis in calendar year two. If for calendar 

year two Financial Institution A reports a 

total of fewer than 75,000 covered loans, 

applications, and purchased covered loans, 

combined, it will return to submitting its data 

on a calendar year basis for calendar year 

three. 

2. Change in appropriate Federal agency. 

If the appropriate Federal agency for a 

financial institution changes (as a 

consequence of a merger or a change in the 

institution’s charter, for example), the 

institution must submit its data to the Bureau 

or the new appropriate Federal agency 

beginning in the calendar year following the 

change or, for institutions reporting on a 

quarterly basis, in the quarter following the 

change. 

3. Subsidiaries. A financial institution is a 

subsidiary of a bank or savings association 

(for purposes of reporting HMDA data to the 

same agency as the parent) if the bank or 

savings association holds or controls an 

ownership interest in the institution that is 

greater than 50 percent. For purposes of 

§ 1003.5(a)(4), an entity that holds or controls 

an ownership interest in the financial 

institution that is greater than 50 percent 

should be listed as a parent company. 

4. Retention. A financial institution shall 

retain a copy of its complete loan application 

register for its records in either electronic or 

paper form. 

5. Quarterly reporting—retention. Section 

1003.5(a)(1)(ii) requires that a financial 

institution that reports on a quarterly basis 

shall retain a copy of its complete loan 

application register for its records for at least 

three years. A complete loan application 

register reflects all data reported for a 

calendar year. A financial institution that 

reports data on a quarterly basis satisfies the 

retention requirement in § 1003.5(a)(1)(ii) by 

retaining the data for the calendar year 

combined on one loan application register or 

on four quarterly loan application registers. 

5(b) Disclosure statement. 

* * * * * 

2. Format of notice. An institution may 

make the notice required under § 1003.5(b)(2) 

available in paper or electronic form. 

3. Notice—suggested text. A financial 

institution may use any text that meets the 

requirements of § 1003.5(b)(2). The following 

language is suggested but is not required: 

Home Mortgage Disclosure Act Notice 

The HMDA data about our residential 

mortgage lending are available online for 

review. The data show geographic 

distribution of loans and applications; 

ethnicity, race, sex, age, and income of 

applicants and borrowers; and information 

about loan approvals and denials. This data 

is available online at the Web sites of the 

Federal Financial Institutions Examination 

Council (www.ffiec.gov/hmda) and the 

Consumer Financial Protection Bureau 

(www.consumerfinance.gov). 

5(c) Public disclosure of modified loan 

application register. 

* * * * * 

2. Loan amount. Before it makes available 

to the public its modified loan application 

register, a financial institution must round 

the loan amount for each covered loan, 

application, and purchased covered loan to 

the nearest thousand (round $500 up to the 

next $1,000). For example, a loan for 

$167,300 should be shown as 167,000 and 

one for $15,500 shown as 16,000. 

3. Modified loan application register data. 

The modified loan application register is the 

loan application register reflecting all data 

reported for a calendar year, modified as 

described in § 1003.5(c)(1), whether the data 

were submitted on a quarterly or annual 

basis. A financial institution that submits its 

HMDA data on a quarterly basis must show 

on the modified loan application register all 

data reported for the calendar year, not just 

data reported for a particular quarter. 

5(e) Notice of availability. 

1. Posted notice—suggested text. A 

financial institution may use any text that 

meets the requirements of § 1003.5(e). The 

Bureau or an appropriate Federal agency may 

provide HMDA posters that an institution 

can use to inform the public of the 

availability of its HMDA data, or an 

institution may create its own notice. The 

following language is suggested but is not 

required: 

Home Mortgage Disclosure Act Notice 

The HMDA data about our residential 

mortgage lending are available for review. 

The data show geographic distribution of 

loans and applications; ethnicity, race, sex, 


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age, and income of applicants and borrowers; 

and information about loan approvals and 

denials. Inquire at this office about how to 

obtain our HMDA data. HMDA data for this 

and many other financial institutions are 

also available online. For more information, 

visit the Web site of the Federal Financial 

Institutions Examination Council 

(www.ffiec.gov/hmda) or the Consumer 

Financial Protection Bureau 

(www.consumerfinance.gov). 

Dated: July 23, 2014. 

Richard Cordray, 

Director, Bureau of Consumer Financial 

Protection. 

[FR Doc. 2014–18353 Filed 8–25–14; 11:15 am] 

BILLING CODE 4810–AM–P 


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