The CFPB recently posted on its website updated versions of guidance in connection with the revisions to the Home Mortgage Disclosure Act (HMDA) rules that become effective on January 1, 2018, and also posted a new guidance item.

The CFPB updated the chart entitled Collection and Reporting of HMDA Information about Ethnicity and Race, and updated the Filing instructions guide for information collected in and after 2018.

In August 2017, the CFPB issued various technical changes to the revised HMDA rule.  The revised materials incorporate changes made in the August amendments.

The CFPB also added a new chart entitled Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart.  The new chart is a reference tool for data points required to be collected and reported under the revised HMDA rule, as amended by the August 2017 amendments

 

 

The federal banking agencies have issued guidance to financial institutions on the key data fields under the revised Home Mortgage Disclosure Act (HMDA) rules that will be used to test and validate the accuracy and reliability of the HMDA data.

In October 2015, the CFPB adopted significant changes to the HMDA rules that significantly expanded the amount of information that must be collected and reported.  The changes are effective January 1, 2018.

The guidance issued by the federal banking agencies lists 110 data fields under the revised HMDA rules, and identifies 37 of such fields as Designated Key HMDA Data Fields.  Among the new reporting data fields that the agencies identify as key fields are the applicant’s age and credit score, the origination charges, discount points, lender credits, interest rate, debt-to-income ratio, combined loan-to-value ratio, and the automated underwriting system result.

Despite the identification of certain data fields as key fields for examination purposes, examiners nevertheless may determine that additional HMDA data fields need to be examined.

 

The Consumer Financial Protection Bureau has issued a second version of the Home Mortgage Disclosure Act (Regulation C) Small Entity Compliance Guide.  The updated version incorporates various changes to the HMDA rule that were issued in August 2017 and published in the September 13, 2017 Federal Register, which we reported on previously.  One of the main changes incorporated in the revised Guide is the temporary increase in the threshold to report home equity lines of credit (HELOCs) from 100 to 500 transactions in each of the two proceeding calendar years.  Based on the temporary increase, 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.  However, the CFPB may take further action to amend the threshold.

The CFPB recently released a revised version of the TILA-RESPA Integrated Disclosure Rule Small Entity Compliance Guide.

The revised version incorporates the recent amendments to the rule that became effective on October 10, 2017.  Compliance with the amendments will be required for applications received on or after October 1, 2018.

The amendments also clarified that the separate escrow cancellation notice and partial payment disclosure requirements under Regulation Z will apply to all covered loans on October 1, 2018, regardless of when the application is received.

Among the more than 20 bills that the House Financial Services Committee is scheduled to mark-up this Wednesday, October 11, is a bill to provide a “Madden fix” as well as several others relevant to consumer financial services providers.

These bills are the following:

  • H.R. 3299, “Protecting Consumers’ Access to Credit Act of 2017.  In Madden, the Second Circuit ruled that a nonbank that purchases loans from a national bank could not charge the same rate of interest on the loan that Section 85 of the National Bank Act allows the national bank to charge.  The bill would add the following language to Section 85 of the National Bank Act: “A loan that is valid when made as to its maximum rate of interest in accordance with this section shall remain valid with respect to such rate regardless of whether the loan is subsequently sold, assigned, or otherwise transferred to a third party, and may be enforced by such third party notwithstanding any State law to the contrary.”
    This language is identical to language in a bill introduced in July 2017 by Democratic Senator Mark Warner as well as language in the Financial CHOICE Act and the Appropriations Bill that is also intended to override Madden.  Like those bills, H.R. 3299 would add the same language (with the word “section” changed to “subsection” when appropriate) to the provisions in the Home Owners’ Loan Act, the Federal Credit Union Act, and the Federal Deposit Insurance Act that provide rate exportation authority to, respectively, federal savings associations, federal credit unions, and state-chartered banks.  In the view of Isaac Boltansky of Compass Point, the bill is likely to be enacted in this Congress.
  • H.R. 2706, “Financial Institution Consumer Protection Act of 2017.”  This bill is intended to prevent a recurrence of “Operation Chokepoint,” the federal enforcement initiative involving various agencies, including the DOJ, the FDIC, and the Fed. Initiated in 2012, Operation Chokepoint targeted banks serving online payday lenders and other companies that have raised regulatory or “reputational” concerns.  The bill includes provisions that (1) prohibit a federal banking agency from (i) requesting or ordering a depository institution to terminate a specific customer account or group of customer accounts, or (ii) attempting to otherwise restrict or discourage a depository institution from entering into or maintaining a banking relationship with a specific customer or group of customers. unless the agency has a material reason for doing so and such reason is not based solely on reputation risk, and (2) require a federal banking agency that requests or orders termination of specific customer account or group of customer accounts to provide written notice to the institution and customer(s) that includes the agency’s justification for the termination.  (In August 2017, the DOJ sent a letter to the chairman of the House Judiciary Committee in which it confirmed the termination of Operation Chokepoint.  Acting Comptroller Noreika in remarks last month, in which he also voiced support for “Madden fix” legislation, indicated that the OCC had denounced Operation Choke Point.)
  • H.R. 3072, “Bureau of Consumer Financial Protection Examination and Reporting Threshold Act of 2017.”  The bill would raise the asset threshold for banks subject to CFPB supervision from total assets of more than $10 billion to total assets of more than $50 billion.
  • H.R. 1116, “Taking Account of Institutions with Low Operation Risk Act of 2017.”  The bill includes a requirement that for any “regulatory action,” the CFPB, and federal banking agencies must consider the risk profile and business models of each type of institution or class of institutions that would be subject to the regulatory action and tailor the action in a manner that limits the regulatory compliance and other burdens based on the risk profile and business model of the institution or class of institutions involved.  The bill also includes a look-back provision that would require the agencies to apply the bill’s requirements to all regulations adopted within the last seven years and revise any regulations accordingly within 3 years.  A “regulatory action” would be defined as “any proposed, interim, or final rule or regulation, guidance, or published interpretation.”
  • H.R. 2954, “Home Mortgage Disclosure Adjustment Act.”  The bill would amend the Home Mortgage Disclosure Act to create exemptions from HMDA’s data collection and disclosure requirements for depository institutions (1) with respect to closed-end mortgage loans, if the institution originated fewer than 1,000 such loans in each of the two preceding years, and (2) with respect to open-end lines of credit, if the institution originated fewer than 2,000 such lines of credit in each of the two preceding years.  (An amendment in the nature of a substitute would lower these thresholds to fewer than 500 closed-end mortgage loans and fewer than 500 open-end lines of credit.)
  • H.R. 1699, “Preserving Access to Manufactured Housing Act of 2017.”  The bill would amend the Truth in Lending Act and the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) to generally exempt a retailer of manufactured housing from TILA’s “mortgage originator” definition and the SAFE Act’s “loan originator” definition.  It would also increase TILA’s “high-cost mortgage” triggers for manufactured housing financing.
  • H.R. 2396, “Privacy Notification Technical Clarification Act.”  This bill would amend the Gramm-Leach-Bliley Act’s requirements for providing an annual privacy notice.  (An amendment in the nature of a substitute is expected to be offered.)

The Consumer Financial Protection Bureau (CFPB) recently posted on its website updated versions of guidance in connection with the revisions to the Home Mortgage Disclosure Act (HMDA) rules that become effective on January 1, 2018.

The CFPB updated the key dates timeline, 2018 HMDA institutional coverage chart and 2018 HMDA transactional coverage chart to reflect the temporary increase in the threshold to report home equity lines of credit (HELOCs). In the original version of the revised HMDA rules, an institution that made at least 100 HELOCs in each of the prior two years would need to report HELOCs for the current reporting year.  For example, an institution that made at least 100 HELOCs in each of 2016 and 2017 would have to collect and report data on HELOCs for 2018.  As previously reported, the CFPB temporarily increased the threshold from 100 to 500 HELOCs for 2018 and 2019, and will assess the appropriate reporting threshold to be implemented in 2020.

In October 2015, the CFPB adopted significant changes to the rules under the Home Mortgage Disclosure Act (HMDA).  Among the changes, the items of information to be collected and reported under HMDA are greatly expanded, with some items being specified by Congress in the Dodd-Frank Act and others being added by the CFPB.  The CFPB is now proposing policy guidance regarding what items of application-level information will be disclosed to the public.  The comment deadline is November 24, 2017.

Currently, institutions that report HMDA data must publicly disclose their HMDA data on an application-level basis. HMDA requires the modification of data released to the public “for the purpose of protecting the privacy interests of mortgage applicants.”  Currently, before disclosing application-level data, institutions remove the application or loan number, the date the application was received, and the date the institution took final action on the application.  However, there are concerns that by combining the current publicly available HMDA data with other data sources, the identity of each applicant can be determined.  As the applicant’s income is one data item that is publicly disclosed, there is a concern that the income of individual applicants can be determined.

Going forward, institutions will report HMDA data to the CFPB, and the CFPB will disclose HMDA data publicly, including application-level data for each institution.  The significant expansion of HMDA data information made by the October 2015 revisions raised consumer privacy and related concerns associated with the public disclosure of the information.  New data items include, among other items, the applicant’s age, income (which is currently reported), credit score, and debt-to-income ratio; the automated underwriting results; the property address; loan cost information; and, for denied applications, the principal denial reasons.

When the CFPB adopted the October 2015 revisions, it deferred making a decision on which elements of the expanded HMDA data would be reported on an application-level basis.  However, the CFPB indicated that it would use a balancing test to decide what information to disclose publicly, and would allow public input on the information that it proposed to disclose.  The CFPB advised that “[c]onsidering the public disclosure of HMDA data as a whole, applicant and borrower privacy interests arise under the balancing test only where the disclosure of HMDA data may both substantially facilitate the identification of an applicant or borrower in the data and disclose information about the applicant or borrower that is not otherwise public and may be harmful or sensitive.”

The CFPB proposes to make all of the HMDA data available to the public on an application-level basis, except as follows:

  • The following information would not be disclosed to the public (the non-disclosure of the first three items is consistent with current disclosure practices):
    • The universal loan identifier.
    • The date the application was received or the date shown on the application form (whichever was reported).
    • The date of the action taken on the application.
    • The property address.
    • The credit score(s).
    • The NMLS identifier for the mortgage loan originator.
    • The automated underwriting system result.
  • The free form text fields for the following (the standard fields reported would be disclosed):
    • The applicant’s race and ethnicity.
    • The name and version of the credit scoring model.
    • The principal reason(s) for denial.
    • The automated underwriting system name.
  • The CFPB proposes to disclose in a modified format the loan amount, age of the applicant, the applicant’s debt-to-income ratio, and the property value.
    • For the loan amount, the CFPB proposes to disclose:
      • The midpoint for the $10,000 interval into which the reported value falls, such as $115,000 for amounts of $110,000 to less than $120,000. (Currently, the loan amount is reported to the nearest $1,000.)
      • Whether the reported loan amount exceeds the Fannie Mae and Freddie Mac conforming loan limit.
    • For the age of the applicant, the CFPB proposes to disclose:
      • Ages of applicants in the following ranges: Under 25, 25 to 34, 35 to 44, 45 to 54, 55 to 64, 65 to 74, and over 74.
      • Whether the reported age is 62 or over. For purposes of the Equal Credit Opportunity Act, a person is considered elderly if they are age 62 or over.
    • For the debt-to-income ratio, the CFPB proposes to disclose:
      • The reported debt-to-income ratio for reported values of 40% to less than 50%, and other debt-to-income ratios in the following ranges: under 20%, 20% to less than 30%, 30% to less than 40%, 50% to less than 60% and 60% or higher.
    • For the property value, the CFPB proposes to disclose the midpoint for the $10,000 interval into which the reported value falls, such as $115,000 for amounts of $110,000 to less than $120,000.

Although the loan amount will now be reported in the applicable $10,000 interval and not to the nearest $1,000, the concern is that the totality of the information that is publicly available will make it easier than it is today to determine the identity of the applicant.  Thus, as proposed by the CFPB, there is a risk that a significant amount of information that consumers view as confidential will become publicly available.  As a result, the CFPB will likely face intense criticism of its balancing of the privacy needs of consumers with the disclosure of HMDA data.

Additionally, because the increase in the amount of HMDA data elements means that the CFPB will now store very confidential consumer information in its records, data security concerns must be considered.  The CFPB rebuffed data security concerns raised by parties commenting on the proposed HMDA data expansion, stating that it “has analyzed these industry comments carefully and has determined that any risks to applicant and borrower privacy created by the compilation and reporting of the data required under the final rule are justified by the benefits of the data in light of HMDA’s purposes even though its data security has been cited as being deficient.”  While the CFPB was referring to a Government Accountability Office report finding issues with CFPB data security, as we have reported previously on several occasions the CFPB’s own Office of Inspector General has found deficiencies in CFPB data security. (See here, here and here.)

One must wonder why the CFPB views the collection and disclosure of expansive HMDA information as being more important than addressing privacy and data security risks to consumers.

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