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HMDA Data Reporting: Now and to Come

By Blair Rugh 10 Feb 2016

The amendment to Regulation C (HMDA) has been finalized, and the data that financial institutions will have to report for covered loans beginning January 2018 has been greatly expanded.  Institution staff who have a responsibility for HMDA reporting need to understand what new data will be required so that they can plan on how it will be collected as well as how their institution can use the new information. The new data elements are:

 

  • Loan identifier. Currently, each loan must have a unique identifying number. Under the new reporting, the unique identifier must begin with the institution’s 20-digit Legal Entity Identifier (LEI) followed by up to a 23-character loan identifier followed by a two character check digit. An institution’s LEI is issued by a utility endorsed by the Global LEI Foundation or LEI Regulatory Oversight Committee, generally at the holding company level, to identify all entities owned by a holding company. The calculation of the two-character check digit is described in Appendix C of the regulation and is far too complicated to explain here.  
  • The date of the application.  
  • Whether the loan is (or, in the case of an application, would have been) insured by the FHA or guaranteed by the VA, Rural Housing Service or Farm Service Agency.  
  • Whether the application is for a home purchase, home improvement, refinancing, cash-out refinancing or another purpose.  
  • Whether the application is for a pre-approval.  
  • Whether the dwelling is site built or manufactured housing.  
  • Owner-occupancy of the property.  
  • The amount of the loan or amount applied for.  
  • Action taken and date.  
  • Property location, including address of property.  
  • Ethnicity, age, race and sex of borrower and gross annual income relied upon.
  • Type of entity purchasing a covered loan.  
  • For Regulation Z covered loans, the difference between the APR and the APOR.  
  • Whether the loan is HOEPA covered.  
  • Lien status.  
  • The credit score or scores relied on and the name and version of the scoring model.  
  • The principal reasons the loan was denied.  (Previously, this was optional for some institutions.)
  • For Regulation Z covered loans, the total amount of loan costs disclosed. If not Regulation Z covered, the points and fees charged.  
  • For Regulation Z covered loans, the disclosed amount designated as borrower-paid at or before closing.  
  • For Regulation Z covered loans, points paid to the lender to reduce the interest rate.  
  • For Regulation Z covered loans, the amount of lender credits.  
  • The interest rate on the loan.  
  • For Regulation Z covered loans, the term in months of any prepayment penalty.  
  • The ratio of the applicant’s total monthly debt to total monthly income.  
  • The ratio of the total amount of debt secured by the property to the property’s value.  
  • The term of the loan in months.  
  • For variable rate loans, the number of months before the first potential interest rate change.  
  • Whether the loan has a balloon payment, interest-only payments, the potential of negative amortization or any other term that would allow payments other than fully amortizing payments over the loan term.  
  • The value of the property.  
  • If the collateral is a manufactured home, whether the loan is or would be secured by the home only or by the home and land.  
  • If a manufactured home, whether the owner owns or leases the land.  
  • The number of units in the property.  
  • If multi-family, the number of units that are income restricted by Federal, state or local housing programs.  
  • Whether the application was made directly to the financial institution by the applicant and whether the initial loan was made payable to the financial institution.  
  • The NMLS number of the loan originator.  
  • The name of the automated underwriting loan system, if any, used by the financial institution to evaluate the application and the result generated.  
  • Whether the covered loan is a reverse mortgage.  
  • Whether the covered loan is a line of credit.  
  • Whether the covered loan is primarily for a business purpose.  

 

Of the data elements that will have to be reported, most are either new or expanded from what they previously were. If your plan is to have someone gather the information from the loan application and the systems in which the information resides and then enter that information into your HMDA reporting system, you have failed before you started. You have to have an automated way of transferring the information from where ever it is to where it has to be. This is going to require some pretty sophisticated interfaces between your loan origination system, your core system and your HMDA reporting system. For example, if a loan requires a balloon payment in your other systems, it may be defined as a number of years or as only a single date in the future, but, in HMDA, it has to be reported as a number of months.

 

Because of the complexity of the new HMDA reporting, if your institution uses a separate HMDA reporting system, it is mandatory that the provider of the system gets it to you far enough in advance of the due date for the new information collecting so that it can be accurately interfaced to the sources of information that it will need – and you have plenty of time to test it. 

 

How the government will use the information it is requesting is anyone’s guess.  However, some of it may be useful to your institution. For example, you have never known your customer’s age.  Beginning 2018, you will. Make sure your management understands the new information you are gathering so it can determine how it can be used to your institution’s advantage. Be sure to strengthen your fair lending policies to avoid any inadvertent violation.

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