A Guide to HMDA Reporting

Transcription

1 A Guide to HMDA Reporting Mary-Ann Boaz, CRCM December 8, 2015 MEMBER OF PKF NORTH AMERICA, AN ASSOCIATION OF LEGALLY INDEPENDENT FIRMS 2010 Wolf & Company, P.C.

2 Before we get started Today s presentation slides can be downloaded at The session will last about an hour. Our audience will be muted during the session so if you have questions throughout the session, please send them by using the question box located on the webinar s control panel. 2

3 About Wolf & Company, P.C. Established in 1911 Offers Audit, Tax, and Risk Management services to nearly 250 financial institutions Offices located in: Boston, Massachusetts Springfield, Massachusetts Albany, New York Livingston, New Jersey Nearly 200 professionals As a leading regional firm, we provide our clients with specialized industry expertise and responsive service. 3

4 Financial Institution Expertise Provide services to nearly 250 financial institutions: Approximately 50 FIs with assets > $1B Approximately 30 publicly traded FIs Constant regulatory review of our deliverables Over 60 Risk Management Professionals: IT Assurance Services Group Professionals Internal Audit Services Group Professionals Regulatory Compliance Services Group Professionals WolfPAC Solutions Group Professionals Provide RMS in 27 states and 2 U.S. territories 4

5 Meet Today s Presenters Mary-Ann Boaz, CRCM Senior Regulatory Compliance Consultant Phone: mboaz@wolfandco.com

6 Today s Agenda Overview of Home Mortgage Disclosure Act (HMDA) Regulation C HMDA LAR Data Entry Information Collection of Government Monitoring Information Consistency Issues Common Violations Proposed Changes 6

7 Purpose The Consumer Financial Protection Bureau (CFPB) is responsible for HMDA regulations since 2011 HMDA is intended to provide the public with loan data 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 to areas where it is needed To assist in identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. 7

8 Who must report? HMDA applies to all banks, savings associations, Credit Unions, and other mortgage lending institutions. For 2015, HMDA requires an institution with an asset size of $44 million or greater as of December 31, 2014 to report data to its regulating agency certain loan transactions and to disclose the same data to the public. Institutions are to report certain information on loan applications secured by a dwelling that it originates, declines or purchases for which it receives applications for credit. 8

9 Filing Deadlines Transactions must be reported on the institution s HMDA LAR within 30 days after the end of the quarter of when action is taken. The institution must prepare its final year end HMDA Report by March 1 st of the following year. 9

10 Notice Requirements Main Office must post notice of availability of its HMDA data. Each branch must contain notice that such information is available from the home office The HMDA LAR must be made available to the public after modifying it or within 30 days of a request. The institution s Home Office must contain the FFIEC mortgage loan disclosure statement no later than 3 days after it is received 10

11 Reporting Requirements Home Purchase transactions Any loan secured by and for the purpose of purchasing a dwelling (includes construction/permanent loans) Refinance transactions Any dwelling-secured loan that replaces and satisfies another dwelling-secured loan to the same borrower. Home Improvement transactions Loan secured by a lien on a dwelling for the purpose of repairing, remodeling, or improving a dwelling (in whole or in part) OR any non-dwelling secured loans if any of the proceeds are used for home improvement and the institution classifies it as a home improvement loan 11

12 Reporting Requirements HMDA excludes the following types of loans from the reporting requirements: Loans originated or purchased as a fiduciary Loans on unimproved land Construction loans and other forms of temporary financing (construction perm loans must be reported) The purchasing of an interest in a loan pool The purchasing of only servicing rights Loans acquired as part of a merger or acquisition Prequalification requests 12

13 Optional Reporting Requirements HMDA gives institutions the option to report the following: Home Equity Lines Of Credit (HELOC) and business purpose lines of credit Home improvement and home purchase Denial reason(s) Unless OCC regulated State of Connecticut For an employee loan, the income utilized by the institution in the credit decision. 13

14 Who Reports? The institution that makes the credit decision reports the loan or application on its LAR. If a mortgage broker makes the credit decision, the mortgage broker is responsible to report the loan or application, including when the broker underwrites to the investor s guidelines and denies the application. If an investor reviews the loan application and makes a credit decision, the investor reports the application. For participation loans, the institution that makes the credit decision and initially originates the loan as the lead lender reports the application 14

15 LAR Data Entry 1. An identifying number for the loan or loan application 2. Date the application was received 3. Loan type 4. Property type 5. Purpose of loan or application 6. Owner-occupancy status of the property 7. Loan amount or the amount requested 8. Pre-approval status code 9. Type of action taken 10. Date of action taken 15

16 LAR Data Entry 11. Property location (MSA) 12.Ethnicity, race and sex of the applicant(s) or borrower(s) 13.Gross annual income relied upon in the processing of the application 14.Type of purchaser of the loan 15. Reasons for denial 16.Rate spread between the loans APR and the yield on Treasury securities 17. HOEPA Status (High Cost Home Loan) 18. Lien Status 16

17 Collection of GMI Ethnicity, Race and Sex of the applicant(s) are required to be collected and recorded for: Residential Mortgages Commercial Mortgages Home Equity Loans Home Improvement Loans Home Equity Lines of Credit HMDA (Reg. C) requires institutions to collect and report GMI for home purchases, refinances and home improvement loans. 17

18 Collection of GMI In person applications: Inform applicant(s) of the federal requirement. If the applicant(s) chooses not to furnish the information, institution must record based on visual observation. Must report exactly how the applicant(s) responds 18

19 Collection of GMI Telephone applications Inform applicant(s) of the federal requirement. If the applicant(s) chooses not to furnish the information, indicate such and stop. Must report exactly how the applicant(s) responds Mail or internet applications If the applicant(s) did not complete each section, report that the application was taken by mail/tele/int and not completed. 19

20 Pre-Approval Programs Regulation C (b)(2) (2) Preapproval programs. A request for preapproval for a home purchase loan is an application under paragraph (b)(1) of 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. 20

21 Pre-Approval Programs Regulation C (b)(2) Preapproval programs. 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 lender ordinarily attaches to a traditional home mortgage application (such as certification of a clear termite inspection). 21

22 Pre-Approval Programs If the institution has a HMDA-defined Pre-Approval Program, the institution must report for each qualified loan request: Pre-Approval Requested Pre- Approval Not Requested Not Applicable Refinances and Home Improvement Loans Action Taken Pre-Approval Denied Pre-Approval Approved Not Accepted (optional) 22

23 Conditional Approvals What does it mean to approve an application? When a credit decision is made to originate a loan AND that decision IS NOT subject to underwriting conditions, other than customary loan commitment or loan closing conditions. Customary loan commitment or loan closing conditions include: Clear Title requirements Acceptable Property Surveys Acceptable Title Insurance Binder Clear Termite Inspection Settlement statement showing adequate proceeds from sale when the proceeds from the sale of one home will be used to purchase another 23

24 Conditional Approvals Underwriting conditions that are NOT customary loan commitment or loan closing conditions include: Conditions that constitute a counter-offer, such as a demand for higher down payment Underwriting conditions concerning the borrower s creditworthiness, including DTI and LTV ratios Verification/confirmation that the borrower meets the underwriting conditions concerning the borrowers creditworthiness If your institution issues a commitment letter subject to any of these categories, your institution has NOT approved this loan, even though a commitment letter may have been issued. 24

25 Trusts & Non-Natural Persons When reporting loans to Trusts and Non-Natural Persons (corporation, partnerships etc ) the following are coded as NA : Government Monitoring Information Income If the property type is Multi-family (5+units), the following are coded as NA : Occupancy Income 25

26 Mixed Loan Purposes Reporting Order Home purchase loan supersedes a refinance or home improvement loan. Home improvement loan supersedes a refinance. Examples: If the loan request is for a home purchase and home improvement, the loan purpose recorded on the LAR is home purchase. If the loan request if for a home purchase and a refinance, the loan purpose recorded on the LAR is home purchase If the loan request is for a refinance and home improvement, the loan purpose reported on the LAR is home improvement. 26

27 Mixed Use Properties Purchase Loan Commercial/Residential Property Loan is home purchase if the property used primarily for residential purpose (square footage/income) Home Improvement Loan Commercial/Residential Property Loan is a home improvement loan if the funds will be primarily applied to the improvement of the residential area. If loan proceeds are used to improve the entire property, the loan is home improvement if the property itself is residential (square footage, utilization, income) Example A book store with a residential apartment on the 2 nd floor. 27

28 Multiple Properties Home Purchase Loan If the institution is taking more than one property for security: Report the location of the one property being purchased, if there is just one; OR Report the location of the other properties on separate entry lines Indicate a unique identifying number Allocate the loan amount between the multiple properties 28

29 Multiple Properties Home Improvement Loan If more than one property is being improved: Report the location of one of the properties being improved; OR Report both properties being improved by using a separate entry line Indicate a unique identifying number Allocate the loan amount between the multiple properties 29

30 Income Reporting Record the gross annual income relied upon for the credit decision: Multiple income Multiple borrowers / Co-signors Do not record income if: Did not rely upon the income for the credit decision The individual is acting solely as a guarantor The security is a multi-family dwelling The loan is a purchased loan and the institution chose not to collect the income The loan is to a non-natural person 30

31 Are You Consistent? Application Dates Between date on application and date recorded on LAR (definition of application ) Occupancy Codes When to report NA Multi-family (5+) Property location is outside MSA 31

32 Are You Consistent? Action Taken Codes Counteroffers Withdrawn File closed for incompleteness Action Taken Dates Originated Approved, not accepted Incomplete Withdrawn Declined 32

33 Common Violations Inconsistent application dates Inaccurate reporting of action taken Improper reporting of commercial loans Improper reporting of income Over reporting Failure to report qualified applications Civil money penalties can be imposed for failure to report accurate data, failure to report the LAR in a timely manner, and repetitive violations under Regulation C 33

34 Changes as of 1/1/18 Beginning in 2018, Depository and Non-Depository Financial institutions are subject to Regulation C if: Originated at least 25 covered closed-end mortgage loans in each of the two preceding years OR Originated at least 100 covered open-end lines of credit in each of the two preceding calendar years, Meet other applicable Depository institution and Non- Depository coverage requirements 34

35 Changes as of 1/1/18 New collection, recording and reporting requirements: Home Equity Lines of Credit Certain Home purchase approved not accepted for pre-approvals Unsecured Home Improvement loans not reportable HMDA data fields increase from 26 to 48 fields Loan specific Collateral Property specific Applicant specific 35

36 How To Prepare Action plan to implement the changes Review guidance Pay attention to error rate thresholds Seek input from business lines Train staff Revise Policies and Procedures 36

37 References A Guided to HMDA Reporting Guide to Getting it Right! HMDA FAQs January 2015 CRAHMDA Reporter - HMDA Rule compliance guide consumerfinance.gov/regulatory-implementation/hmda 37

38 Questions? Mary-Ann Boaz, CRCM Sr. Regulatory Compliance Consultant Phone: