Source: https://lenderscompliance.blogspot.com/2019/01/hmda-highlights-new-rules-for-2018-and.html
Timestamp: 2019-04-25 08:53:09+00:00

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For instance, in calendar year 2019, if a financial institution reports 60,000 covered loans, excluding purchased covered loans, it must comply with the quarterly reporting requirement during 2020. Similarly, for calendar year 2019, if a financial institution reported 20,000 applications and 40,000 covered loans, combined, excluding purchased loans, it must comply with quarterly reporting in 2020. But, for calendar year 2020, if a financial institution reports fewer than 60,000 covered loans and applications, combined, excluding purchased loans, it would not be required to file quarterly reports in 2021.
My firm has an entire group devoted to HMDA data collection reviews, scrubbing for accuracy, and fair lending risk assessments. We come across the data gathering complexities all the time. The big problem is this: garbage in, garbage out! Whatever the software, and whatever the expertise you retain, such as Lenders Compliance Group, it is critical to make sure the data in the loan origination system is accurate. Otherwise, you will be left with all sorts of mismatches and edits, and may also need to conduct a HMDA scrub.
Beginning January 1, 2019 for data collected in 2018, a financial institution must submit its data electronically in the format prescribed by the CFPB at www.consumerfinance.gov/hmda.
If you do not know about the Legal Entity Identifier, you might want to check out my White Paper, Legal Entity Identifiers and HMDA 2018: Questions and Answers, available in the ARTICLES section of the Lenders Compliance Group’s website (www.lenderscompliancegroup.com).[xv] You might also be interested in my Magazine Article, Home Mortgage Disclosure Act – Big Changes on the Way!,[xvi] published by National Mortgage Professional Magazine, also available at my firm’s website.
Beginning with data collected in 2017, LARs must be submitted in a “pipe” (also referred to as a “vertical bar”) delimited text file format. This means: (1) each data field within each row must be separated with a pipe character (“|”); (2) zeros need not be added for the sole purpose of making a data field a specific number of characters; and (3) the LAR must be a text file with a .txt file format extension.
Text entries in alphanumeric fields do not need to use all uppercase letters, with the exception of “NA” when a reporting requirement is not applicable, and the two letter state codes.
As in the past, the first row of the LAR must begin with the numeral “1” to indicate that the data fields in row one contain information relating to the particular institution (that is, the transmittal sheet), all subsequent rows of the LAR will begin with the numeral “2” to indicate that the data fields beginning in row two contain data fields for the LAR with information relating to the reported loan or application, and each row must end with a carriage return.
Let’s now zoom out a little more to some high points regarding the submitting of the HMDA LAR.
There are new rules for mergers or acquisitions. If the merger or acquisition takes place in the calendar year, effective January 1, 2019 the surviving or newly formed financial institution must file quarterly reports, effective the date of the merger or acquisition, if a combined total of at least 60,000 covered loans and applications, combined, excluding purchased loans, is reported for the preceding calendar year by or for the surviving or newly formed financial institution and each financial institution or branch office merged or acquired. For instance, let’s say, in 2020, financial institution A and financial institution B merge to form financial institution C. Financial institution A reports 40,000 covered loans and applications, combined, excluding purchased loans, for 2019. Financial institution B reports 21,000 loans and applications, combined, excluding purchased loans, for 2019. Financial institution C is not required to file quarterly reports, effective the date of the merger. Similarly, for example, in 2020, financial institution A acquires a branch office of financial institution B. Financial institution A reports 58,000 loans and applications, combined excluding purchased loans, for 2019. Financial institution B reports 3,000 loans and applications, combined, excluding purchased loans, for 2019 for the branch office acquired by Financial institution A. Financial institution A is required to file quarterly reports in 2020 effective the date of the branch acquisition.
The year following a merger or acquisition also has filing rules to follow. Effective January 1, 2019, in the calendar year following a merger or acquisition, the surviving or newly formed financial institution must file quarterly reports if a combined total of at least 60,000 loans and applications, combined, excluding purchased loans, was reported for the preceding calendar year by or for the surviving or newly formed financial institution and each financial institution or branch officer merged or acquired. For instance, in 2019, financial institution A and financial institution B merge to form financial institution C. Financial institution C reports 21,000 loans and applications, combined, excluding purchased loans, each for financial institution A, B, and C for 2019, for a combined total of 63,000 loans and applications. Financial institution C is required to file quarterly in 2020. Similarly, financial Institution A may report 58,000 loans and applications, combined, excluding purchased loans, for 2019. Financial institution A or B reports 3,000 loans and applications, combined, excluding purchased loans, for 2019 for the branch office acquired by Financial institution A. Financial institution A is required to file quarterly in 2020.
By the way, if there is a change in the regulator as a result of a merger or acquisition, there are important rules. If the appropriate Federal agency for a financial institution changes (for instance, as a consequence of a merger or a change in the institution’s charter),[xviii] the institution must identify the new appropriate Federal agency in its LAR for the year of the change. Here would be a typical scenario: if an institution’s Federal agency changes in February 2018, it must identify the new agency beginning with the annual submission of its 2018 data by March 1, 2019. An institution subject to quarterly reporting must identify its new agency beginning with its submission for the quarter of the change, unless the change occurs during the fourth quarter. Thus, if the agency changes during February 2020, the institution must identify its new agency beginning with its quarterly submission for the first quarter of 2020. On the other hand, if the agency changes during December 2020, the institution must identify the new agency beginning with the annual submission of its 2020 data by March 1, 2021.
With regard to the Legal Entity Identifier associated with a merger or acquisition, effective January 1, 2019, Regulation C requires a financial institution to provide its Federal Taxpayer Identification Number with its data submission. If a financial institution obtains a new number, it should provide the new number in its subsequent data submission. For example, if two financial institutions that previously reported HMDA data merge and the surviving institution retained its Legal Entity Identifier, the LEI, but obtained a new Federal Taxpayer Identification Number, the surviving institution should report the new Federal Taxpayer Identification Number with its HMDA data submission.
One other point, with respect to defining 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 greater than 50 percent.
The financial institution should be prepared to retain its HMDA LAR for not less than three years in an electronic or paper form. Said otherwise, effective January 1, 2019, a financial institution may satisfy the requirement to retain a copy of its annual LAR for 3 years by retaining a copy of the LAR in either electronic or paper form.
Adds partial exemptions from HMDA’s requirements for certain transactions made by certain insured depository institutions and insured credit unions.
Provides that an insured depository institution or insured credit union does not need to collect or report certain data with respect to closed-end mortgage loans if it originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years.
Provides that an insured depository institution or insured credit union does not need to collect or report certain data with respect to open-end lines of credit if it originated fewer than 500 open-end lines of credit in each of the two preceding calendar years.
In any event, the Bureau seems to recognize there are going to be transition issues. The 2018 Rule applies to data collected or reported under HMDA on or after May 24, 2018. An insured depository institution or insured credit union that is eligible for a partial exemption for a transaction does not need to collect exempt data points on or after May 24, 2018. Additionally, such institutions are not required to report certain data that may have been collected on or before May 24, 2018. For instance, if an insured depository institution is eligible for a partial exemption for its closed-end mortgage loans and the institution collected data for its closed-end mortgage loans prior to May 24, 2018, the institution is not required to report in 2019 any data covered by the partial exemption for its closed-end mortgage loans. [xxvii] As mentioned above, an insured depository institution or insured credit union may opt to voluntarily report data that is covered by a partial exemption.
If you want to review the HMDA Data Points that are or are not covered by partial exemptions, I would refer you to the Filing Instructions Guide.[xxviii] However, the reporting requirements under the Regulation, as amended by the 2015 HMDA Final Rule and 2017 HMDA Final Rule, remain unchanged for these data points.
The wheels of HMDA continued to turn right up to December 21, 2018, when the Bureau issued final policy guidance describing modifications that the Bureau is going to apply to the loan-level data that financial institutions report prior to its disclosure to the public. This final policy guidance, which I will dub “2018 Final HMDA Rule,” applies to HMDA data compiled by financial institutions in or after 2018. [xxix] The main purpose of the issuance is to notify whether and how HMDA data should be modified in order to protect applicant and borrower privacy while also fulfilling HMDA’s public disclosure purposes.
Additional exclusions are the free-form text fields used to report the following data: (1) applicant or borrower race; (2) applicant or borrower ethnicity; (3) the name and version of the credit scoring model used; (4) the principal reason or reasons the financial institution denied the application, if applicable; and (5) the automated underwriting system name.
Obviously, in matters involving individual privacy versus the public’s need to know, there is often going to be a trade-off. The Bureau’s issuance, for instance, contemplates the risk that a potential adversary, such as an applicant’s or borrower’s neighbor or acquaintance, may be able to re-identify the HMDA data by relying on personal knowledge about the applicant or borrower. We should not lose sight of the purpose of HMDA: it is a disclosure statute – public disclosure of HMDA data is central to the achievement of HMDA’s goals.[xxxviii] The reality is, these modifications to the loan-level HMDA data disclosed to the public do not completely eliminate privacy risks. So, the trade-off is to offer the public a broad notion of the loan-level data as a heuristic to reducing privacy risks to individual applicants and borrowers.
The rationalization is based on the view, relied upon by the Bureau, that public loan-level HMDA data have always displayed a high level of record uniqueness and included fields that are also found in identified public records.[xxxix] Given this premise, the Bureau appears to believe that some degree of re-identification risk in connection with the public disclosure of the data is acceptable, because HMDA requires the Bureau to consider not only the risk posed by disclosure but also the benefits of disclosure to HMDA’s purposes. Consequently, the initiative seems to endeavor a balance between privacy risk, such as re-identification, and the disclosure benefits to the public.
[v] Regulation C, 12 C.F.R. § 1003.4(a). Other State or Federal regulations may require a financial institution to record its data on a LAR more frequently. See Regulation C Commentary 4(f)-2.
[ix] Regulation C Commentary, 12 C.F.R. § 1003.4(a)–1(v) and 4(a)(1)-5.
[x] In April 2017, the CFPB proposed numerous technical revisions to Regulation C to reflect the fact that this quarterly reporting requirement was not scheduled to take effect until 2020. See Federal Register 19142, 19162 (April 25, 2017).
[xii] See CRA/HMDA Software Downloads at https://www.ffiec.gov/software/software.htm. Each software version is year-specific.
[xiii] See Resources for HMDA Filers at https://www.consumerfinance.gov/data-research/hmda/for-filers.
[xv] Legal Entity Identifiers and HMDA 2018, Questions and Answers, Foxx, Jonathan, April 7, 2017, available in Articles section of www.lenderscompliancegroup.com.
[xvi] Home Mortgage Disclosure Act: Big Changes on the Way, Foxx, Jonathan, published in the December 2015 edition of National Mortgage Professional Magazine, available in Articles section of www.lenderscompliancegroup.com.
[xviii] The enforcement agencies are: the OCC, for any national bank, federal savings association, or Federal branch or Federal agency of a foreign bank; the FRB, for any State member bank, any branch or agency of a foreign bank (other than a Federal branch, Federal agency, or insured State branch of a foreign bank), any commercial lending company owned or controlled by a foreign bank, and any organization operating under section 25 or 25A of the Federal Reserve Act; the FDIC, for any State nonmember insured bank, insured State savings association, mutual savings bank, insured State branch of a foreign bank, or any other depository institution not already mentioned; NCUA, for any insured credit union; and the CFPB, for any company subject to the Consumer Financial Protection Act of 2010 (Dodd-Frank Act Title 10). See 12 U.S.C. §§ 2804 and 1813(q).
[xix] The CFPB statement is available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-public-statement-home-mortgage-disclosure-act-compliance/.
[xxii] Community Reinvestment Act (CRA) requirements are not treated in this article.
[xxiii] Executive Summary of the 2018 HMDA Interpretive and Procedural Rule, August 31, 2018, Bureau of Consumer Financial Protection, formerly known as Consumer Financial Protection Bureau, and, as of this writing, once again called the Consumer Financial Protection Bureau.
[xxiv] The 2018 Rule specifies that a “closed-end mortgage loan” is any closed-end mortgage loan as defined in 12 CFR § 1003.2(d) that is not excluded under § 1003.3(c)(1)-(10) or (13), and that “open-end line of credit” is any open-end line of credit as defined in § 1003.2(o) that is not excluded under § 1003.3(c)(1)-(10).
[xxxiv] Binning, sometimes known as “recoding” or “interval recoding,” allows data to be shown clustered into ranges rather than as precise values. Top-coding and bottom-coding mask any value that is above or below a certain threshold. For instance, 25 to 34; 35 to 44; 45 to 54; 55 to 64; and 65 to 74; with bottom-code reported values under 25 and top-code reported values over 74; and indicia for whether the reported value is 62 or higher.

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