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On September 21, the CFPB finalized its proposal to amend Regulation B requirements related to the collection of consumer ethnicity and race information, in order to resolve the differences between Regulation B and revised Regulation C (the “Final Rule”).  This Final Rule is effective on January 1, 2018, the same effective date for most of the 2015 Home Mortgage Disclosure Act (HMDA) Final Rule.  The amendment removing the existing “Uniform Residential Loan Application” form is effective January 1, 2022.

Generally, the amendments set forth in the Final Rule are being adopted as proposed.  The Final Rule institutes four primary changes to Regulation B:

  1. Applicant Information Collection for Regulation B Creditors. The Final Rule gives persons who collect and retain race and ethnicity information in compliance with Regulation B the option of permitting applicants to self-identify using the disaggregated race and ethnicity categories required by the 2015 HMDA Final Rule.  Aligning these rules allows HMDA-reporting entities to comply with Regulation B without further action, while entities that do not report under HMDA but record and retain race and ethnicity data under Regulation B may either use existing aggregated categories or the new disaggregated race and ethnicity categories.  The flexibility may be helpful for institutions that move in and out of being a HMDA reporting entity.
  2. Applicant Information Collection for HMDA Reporters. The Final Rule allows creditors to collect ethnicity, race and sex information from mortgage applicants in certain cases where the creditor is not required to report under HMDA and Regulation C, including creditors that submit HMDA data even though not required to do so, and creditors that submitted HMDA data in any of the preceding five calendar years.  This change also may benefit institutions move in and out of being a HMDA reporting entity, and institutions that may be uncertain about their reporting status.
  3. Regulation B Model Forms. The Final Rule removes the outdated 2004 Uniform Residential Loan Application (URLA) as a model form, and provides a new, one-page data collection model form that can be used to collect the revised HMDA demographic data until the 2016 URLA prepared by Freddie Mac and Fannie Mae is implemented.  As we reported previously, last year the CFPB added the 2016 URLA as a model form to Regulation B.
  4. Voluntary Collection Authorizations. The Final Rule authorizes a financial institution that is subject to only (1) the requirement to report closed-end loans, to voluntarily report home equity lines of credit (HELOCs), and (2) to the requirement to report HELOCs, to voluntarily report closed-end loans.  Moreover, the CFPB is adopting two recommendations from industry commenters that were not contained in the proposed rule.  First, a financial institution may collect applicant demographic information for dwelling-secured business loans that are not reportable because the loans are not for the purposes of home purchase, refinancing, or home improvement.  Second, the Final Rule permits, but does not require, creditors to collect applicant demographic information from a second or additional co-applicant.  The HMDA rule requires the collection of the information for the applicant and first co-applicant.

In addition to the guidance regarding Hurricane Harvey disaster relief, the housing agencies and government-sponsored enterprises (GSEs) recently addressed the mortgage-related relief available to victims of both Hurricane Harvey and Hurricane Irma in Presidentially-declared disaster areas.  Click here for a summary of these announcements.

The CFPB has published a final rule regarding various annual adjustments it is required to make under provisions of Regulation Z (TILA) that implement the CARD Act, HOEPA, and the ability to repay/qualified mortgage provisions of Dodd-Frank.  The adjustments reflect changes in the Consumer Price Index in effect on June 1, 2017 and will take effect January 1, 2018.

CARD Act.  The CARD Act requires the CFPB to calculate annual adjustments of (1) the minimum interest charge threshold that triggers disclosure of the minimum interest charge in credit card applications, solicitations and account opening disclosures, and (2) the fee thresholds for the penalty fees safe harbor.  The calculation did not result in a change for 2018 to the current minimum interest charge threshold (which requires disclosure of any minimum interest charge above $1.00).  The calculation also did not result in a change for 2018 to the first and subsequent violation safe harbor penalty fees.  Such fees remain at $27 and $38, respectively.

HOEPA.  HOEPA requires the CFPB to annually adjust the total loan amount and fee thresholds that determine whether a transaction is a high cost mortgage.  In the final rule, for 2018, the CFPB increased the current total loan amount threshold from $20,579 to $21,032, and the current points and fees threshold from $1,029 to $1,052.  As a result, in 2018, a transaction will be a high-cost mortgage (1) if the total loan amount is $21,032 or more and the points and fees exceed 5 percent of the total loan amount, or (2) if the total loan amount is less than $21,032 and the points and fees exceed the lesser of $1,052 or 8 percent of the total loan amount.

Ability to repay/QM rule.  Pursuant to its ability to repay/QM rule, the CFPB must annually adjust the points and fees limits that a loan cannot exceed to satisfy the requirements for a QM.  The CFPB must also annually adjust the related loan amount limits.  In the final rule, the CFPB increased these limits for 2018 to the following:

  • For a loan amount greater than or equal to $105,158 (currently $102,894), points and fees may not exceed 3 percent of the total loan amount
  • For a loan amount greater than or equal to $63,095 (currently $61,737) but less than $105,158, points and fees may not exceed $3,155
  • For a loan amount greater than or equal to $21,032 (currently $20,579) but less than $63,095, points and fees may not exceed 5 percent of the total loan amount
  • For a loan amount greater than or equal to $13,145 (currently $12,862) but less than $21,032, points and fees may not exceed $1,052
  • For a loan amount less than $13,145 (currently $12,862), points and fees may not exceed 8 percent of the total loan amount

 

In July, the CFPB finalized amendments to the TILA/RESPA Integrated Disclosure (TRID) rule.   Published in the Federal Register earlier this month, the amendments will become effective on October 10, 2017, with a mandatory compliance date of October 1, 2018.

The CFPB has just released a 24-page summary of the amendments, with citations to the sections of the rule that were amended.

 

As we previously reported, in October 2015, the CFPB adopted significant revisions to Regulation C, the Home Mortgage Disclosure Act (HMDA) rule, most of which become effective January 1, 2018.  As a result of the revisions, the reporting of home equity lines of credit (HELOCs) under HMDA, which is currently  voluntary, will become mandatory for both depository institutions and non-depository institutions that originated at least 100 HELOCs in each of the two preceding calendar years.

On July 14, 2017, the CFPB proposed to temporarily increase the reporting threshold to the origination of 500 HELOCs in each of the two preceding calendar years.  On August 24, 2017, the CFPB finalized a rule to increase the threshold for collecting and reporting data about HELOCs (the “Rule”).  Under the Rule, financial institutions originating 100 or more HELOCs but fewer than 500  in 2018 or 2019 would not be required to begin collecting and reporting HELOC data until January 1, 2020.  This temporary increase was adopted amid concerns from community banks and credit unions about the challenges and costs of reporting open-end lending.  The CFPB will assess whether another rulemaking is required to address the appropriate permanent threshold for smaller-volume lenders.  Accordingly, the reporting threshold commencing in 2020 may still be revised.

The Rule also finalizes certain substantive changes and technical corrections to the 2015 HMDA Final Rule that were proposed in April 2017.  First, the Rule establishes transition rules that permit financial institutions, under certain conditions, to report “not applicable” for two data points – loan purpose and the unique identifier for the loan originator (the NMLSR ID).  Second, the Rule amends the 2015 HMDA Final Rule to clarify certain key terms, such as multifamily dwelling, temporary financing, and automated underwriting system, and to create a new reporting exception for certain transactions associated with New York State consolidation, extension, and modification agreements.  These changes, which we discussed in detail when they were initially proposed in April,  were largely adopted as proposed because according to the CFPB, the “comments [received] did not raise points relevant to the Bureau’s decisions raised in its proposals.”  Third, the Rule provides that a census tract reporting error will be considered a bona fide error and not a violation of HMDA or Regulation C if a financial institution obtains an incorrect census tract number from the CFPB’s soon-to-be-online geocoding tool, as long as the financial institution entered an accurate property address into the tool and the tool returned a census tract for the address entered.

Concurrent with the issuance of the Rule, the CFPB released an executive summary of the final rule, updates to technical filing instructions, and other implementation materials.  Note that the changes include revisions to the Filing Instructions Guide for data collected in 2017 that must be reported in 2018.

With few exceptions, most of the amendments included in the 2015 HMDA Final Rule will take effect on January 1, 2018.  Interested parties should assess if programming and operational changes made necessary by the Rule can be appropriately completed by January 1, 2018.

As expected, the Federal Financial Institution Examination Council (FFIEC) member agencies issued new data resubmission guidelines under the Home Mortgage Disclosure Act (HMDA) effective for the 2018 data collection year.  The change coincides with the substantial expansion of the HMDA data reporting fields that is effective January 1, 2018.

When examining an institution’s HMDA Loan Application Register (LAR), regulators will assess if the correction and resubmission of any data is required based on a review of a sample of reported loans.  Currently for institutions that have a total of less than 100,000 loans or applications on their annual LAR, which is the vast majority of HMDA reporting institutions, (1) an institution must correct and resubmit its entire LAR if 10% or more or of the entries in the sample contain errors, and (2) an institution must correct and resubmit an individual data field in the LAR if there are errors in that field with 5% or more of the entries in the sample.  An institution can be required to correct and resubmit data even if the 10% or 5% thresholds are not reached, if the errors would make analysis of the institution’s data unreliable.  Regulators will first assess a smaller set of entries in a LAR, and if one or no errors are found they typically cease the verification process at that point.

Under the new guidelines, there are revised thresholds for requiring resubmission, and for assessing if a full review of the sample will be performed based on errors in the initial smaller set of loans.  Assessment of the data will be conducted on an individual data field basis.  The new testing sample sizes and thresholds are as follows:

For institutions with fewer than 30 LAR entries, the resubmission threshold is still 3, so the effective resubmission threshold percentage is higher than 10%.  As is the case currently, even if the thresholds are not met an institution can be required to correct one or more data fields and resubmit one or more data fields in its HMDA LAR if examiners have a reasonable basis to believe that errors in the field or fields will likely make analysis of the HMDA data unreliable.

Under the revised guidelines, if an institution has a total of 1,000 entries on its LAR, the regulator would first review an initial sample of 35 loans.  If the regulator finds two or more errors in a data field, the regulator would then review the full 79 loan sample.  If four or more errors are found in any data field, the institution would be required to resubmit its LAR with the applicable data field corrected.

Unlike the current approach, under the new guidelines there are tolerances for certain data fields, and an error within the applicable tolerance will not be considered an error for either threshold.  The tolerances are as follows:

  • Date of Application: Three calendar days or less with regard to the date the application was received or date shown on application form and the date reported in the LAR.
  • Loan Amount: One thousand dollars or less in the amount of the covered loan or loan applied for and the amount reported in the LAR.
  • Date Action Taken: Three calendar days or less with regard to the date the action was taken and the date reported in the LAR, provided that the difference does not result in reporting data for the wrong calendar year.
  • Income: Errors in rounding the gross annual income relied upon to the nearest thousand.

Subject to an exception, for purposes of the guidelines a “data field” generally refers to an individual HMDA Filing Instructions Guide (FIG) field, and such fields are identified by a distinct Data Field Number and Data Field Name.  The July 2017 version of the FIG for data collected in 2018 is available here.    The exception is for information on the ethnicity or race of an applicant or borrower, for which a data field consists of a group of FIG fields as follows:

  • The Ethnicity of Applicant or Borrower data field group—comprised of six FIG fields with information on an applicant’s or borrower’s ethnicity (FIG Data Field Numbers 19-24);
  • The Ethnicity of Co-Applicant or Co-borrower data field group—comprised of six FIG fields with information on a co-applicant’s or co-borrower’s ethnicity (FIG Data Field Numbers 25-30);
  • The Race of Applicant or Borrower data field group—comprised of eight FIG fields with information on an applicant’s or borrower’s race (FIG Data Field Numbers 33-40); and
  • The Race of Co-Applicant or Co-borrower data field group—comprised of eight FIG fields with information on a co-applicant’s or co-borrower’s race (FIG Data Field Numbers 41-48)

If one or more of the six data fields for such a data field group has errors, this would count as one error.

 

The Federal Housing Finance Agency has announced that it has reopened and extended until September 1, 2017 the comment period on its Request for Input on improving language access in mortgage lending and servicing.  The FHFA previously extended the comment period until July 31, 2017.

According to the FHFA, it took this action “to allow interested parties more time to consider additional information on issues facing qualified mortgage borrowers with Limited English Proficiency (LEP) throughout the mortgage life cycle process, including mortgage lending and servicing.”

Issued this past May, the FHFA has stated that it intends to use the information it receives in response to the RFI to inform “additional steps that could potentially be taken to further support [LEP] borrowers and the mortgage industry’s ability to serve them throughout the mortgage life cycle.”

On August 3, 2017, the Consumer Financial Protection Bureau (CFPB) provided the mortgage industry with a first look at the portal to be used for the reporting of, and public access to, data under the Home Mortgage Disclosure Act (HMDA).  Reporting institutions will use the portal to submit data commencing with the submission of calendar year 2017 data by March 1, 2018.  Also, instead of making their HMDA report and modified Loan Application Register (LAR) available to the public, reporting institutions will direct members of the public to the HMDA portal for this information.  The presentation was conducted by Michael Byrne, a Project Director in the Technology Division with the CFPB.  The presentation addressed only the data submission aspects of the portal, and not the ability to access HMDA data that is publicly available.

The portal was created by the CFPB in conjunction with the significant revisions to the HMDA rule.  As we have reported previously, most of revisions are scheduled to be implemented on January 1, 2018.  Nevertheless, initially the portal will be available only for the submission of the current HMDA data fields, which must be collected for 2017 activity and reported in 2018.

The portal is not yet available for access.  Mr. Byrne advised that the CFPB plans to make a Beta version of the portal available around the end of the third quarter, and that the CFPB will use input from the Beta period to revise the portal during the fourth quarter prior to the final version being released.  The CFPB also plans to release a check digit tool for use in verifying the universal loan identifier, and a geocoder tool, during the fourth quarter.

Once the portal becomes live, persons responsible for HMDA reporting at their institution will need to create an account to be able to access the portal.  The portal includes a series of steps to validate the accuracy and correct formatting of the data in a LAR before it can actually be submitted.  The CFPB has a File Format Verification Tool that institutions can use to test whether their 2017 HMDA data is formatted correctly.   The CFPB plans to issue a File Format Verification Tool for the revised HMDA data categories.  Data for the revised categories will first be collected for the 2018 reporting year, and reported in 2019.

Mr. Byrne advised that for institutions with a smaller volume of loans who elect to use the Excel-based LAR Formatting Tool that is available on the CFPB website, the CFPB designed the tool to convert the data into the format necessary to submit the data through the HMDA  portal.  The CFPB plans to issue a version of the LAR Formatting Tool for the revised HMDA data categories later this year.

For institutions that collect HMDA data with multiple LARs, they will be able to use the multiple LARS to test the data on the portal before submission.  However, to submit the data institutions will need to combine the multiple LARS into a single LAR file.

The CFPB issued HMDA Loan Scenarios on July 19, 2017 to provide additional guidance to the industry on reporting transactions under the revised HMDA rule, which has a January 1, 2018 effective date for most provisions.

The guidance includes loan scenarios for a single-family mortgage loan, multifamily mortgage loan, and home equity line of credit.  For each scenario, the guidance reflects how the information about the transaction would be mapped to the required data fields, and then how the transaction would appear on the Loan Application Register in the pipe delimited format.

 

As we have previously reported, in October 2015 the CFPB adopted significant revisions to the Home Mortgage Disclosure Act (HMDA) rule, most of which become effective January 1, 2018.  Among the revisions, the reporting of home equity lines of credit under HMDA, which currently is voluntary, will become mandatory for both depository institutions and non-depository institutions that originated at least 100 home equity lines of credit in each of the two preceding calendar years.

The CFPB is now proposing to temporarily increase the threshold to the origination of 500 home equity lines of credit in each of the two preceding calendar years.  The temporary increase would apply for data collection years 2018 and 2019.  The CFPB notes that through outreach it “has heard increasing concerns from community banks and credit unions that the challenges and costs of reporting open-end lending may be greater than the Bureau had estimated when adopting the 100-loan threshold.  Additionally, the Bureau’s analysis of more recent data suggests changes in open-end origination trends that may result in more institutions reporting open-end lines of credit than was initially estimated.”  The temporary increase will allow the CFPB to assess the appropriate threshold for smaller-volume lenders.

Comments on the proposal are due by July 31, 2017.  The CFPB notes that at a later date it will issue a separate proposal with a longer notice and comment process to consider adjustments to the permanent threshold.