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1 I am a senior internal auditor for a holding company of four locally-owned banks with locations throughout small communities in eastern Iowa. Two of these banks have branch locations in MSAs and are consequently HMDA reporters. One reporter is approximately $320 million in assets with the other approximately $180 million. The larger bank annually averages approximately 300 reportable transactions, with the smaller reporting approximately 100. I have spent parts of my 17-year banking career entering HMDA data, confirming and scrubbing HMDA data, and training other bank personnel on HMDA. In its proposal, the Bureau states As part of this rulemaking, the Bureau is seeking ways to reduce burden without impairing the quality of HMDA data. HMDA represents one of the largest, if not the largest, regulatory burden for our community banks. Each month we have two staff members at each bank review and verify every HMDA loan application s reportable data points, currently approximately 25 items, but proposed to increase well beyond 25. These two employees spend an average of four work days monthly to ensure accurate HMDA data, or a total of 48 work days annually at each bank. In other words, annually we use the equivalent of over two working months at each bank simply confirming the accuracy of HMDA data; this does not count the time spent during the origination process obtaining and documenting this data. This is a huge amount of time spent by our staff that could be used to work with our customers to further meet their credit needs. Instead, this time is being spent to create application registers which have never been requested by a member of public, and as detailed below account for little of the overall industry loan volume. Small reporters such as mine have a very finite resource pool to dip into to create the LAR; the Bureau should consider the very limited resources of small reporters during its creation of the revised HMDA rules and the increased burdens it has proposed for these reporters with reporting of additional loans, additional loan fields, and the many other changes it has suggested. Setting the institution coverage threshold at 250 annual originations rather than 25 as proposed would help small creditors like mine to more effectively serve their communities by reducing the regulatory burden of HMDA as the Bureau has stated it is seeking to do. Further, the 250 origination would have an extremely limited impact on overall national reporting. According to the Federal Reserve most reporters are small as measured by assets, and most receive few applications and extend few loans. For 2012, 56 percent of the depository institutions (banking institutions and credit unions) covered by HMDA had assets under $250 million, and 71 percent of them reported information on fewer than 100 loans. Further, according to this Federal Reserve analysis, 2,239 reporters reported fewer than 50 applications, 1,087 reported 50-99, and 1,300 reported Assuming the reporters reported the highest number of loans in their respective categories, these 4,626 reporters submitted 541,024 out of the 9.8 million entries submitted in In other words, erring on the high side, 63% of the 7,345 reporters submitted a potential maximum 5.5% of the total 2012 HMDA data. Eliminating the HMDA requirements for those institutions receiving fewer than 250 reportable applications annually would drastically reduce their regulatory burden, while nominally reducing the aggregate nationwide reporting. Further, it can be expected that there would be no corresponding increase in fair lending concerns as the banks and credit unions in this category are subject to regular, ongoing fair lending reviews during compliance exams by their prudential regulators, and banks additionally undergo Community Reinvestment Act exams to evidence that they meet the credit needs of their communities; well over 90% of these banks receive satisfactory or outstanding CRA ratings.

2 In its proposal, the Bureau claims that With data from additional nondepository institutions, the public and public officials would be better able to evaluate whether those institutions are serving the housing needs of their communities and whether those institutions practices pose possible fair lending risks. In addition, the data would allow the public and public officials to identify emerging products and practices in the nondepository mortgage market that may pose risks to consumers. Realistically, those institutions, depository or not, that are originating fewer than 250 covered loans are not originating a sufficient number of loans to be a risk in their communities nor are they creating emerging products and practices that will pose a risk to the overall mortgage market, regionally or nationally, especially in light of Reg. Z s ability-to-repay requirements. The impact of their lending volume can be seen in the analysis above showing that these lenders are responsible for only approximately 5% of all HMDA volume. For these reasons, I recommend setting a reporting threshold of 250 applications or more for all HMDA reporters rather than the proposed 25. I do endorse the Bureau s proposal to create a consistent loan volume benchmark for all reporters, but this threshold should be set at 250 covered loans. Doing so will reduce burden without impairing the quality of HMDA data as the CFPB has requested feedback on. While I am generally not in favor of the added burden of additional reporting, requiring the reporting of all closed-end and open-end consumer-purpose loans secured by a dwelling as recommended by the Bureau will be beneficial for all parties. Lenders will find it easier to determine what loans are reportable, while more loans will be available for those parties using the aggregate HMDA data. However, little purpose is served by collecting data on dwelling-secured business-purpose loans. Business-purpose loans are not the focus of the stated intent of HMDA, which Congress has not changed. Lenders frequently request dwellings as additional collateral for business-purpose loans whose proceeds are not used for any purpose that users of HMDA reporting will find of value, such as farm operating money, a family restaurant renovation, or motorcycle shop purchase. Indeed, the SBA typically requires a lien on the borrower s dwelling when guaranteeing a bank loan. The inclusion of these loans amounts to creating noise with the unnecessary loans and their associated data obscuring the consumer-purpose loans. While there may be value from reporting all consumer-purpose loans, business-purpose loans should be excluded from reporting. The Bureau s proposal to set an annual reporting threshold using only closed-end loans, yet require reporting on both closed- and open-end loans, can be expected to be confusing and lead to unnecessary errors as institutions calculate whether they have sufficient activity levels to require reporting. Using a threshold based on all reportable loans will be far more intuitive for reporters and result in far fewer errors. Further, a multiyear look-back period would allow potential reporters sufficient lead time to determine if they would be required to report in a given year. Perhaps a two-year rolling average would be appropriate. For instance, if a potential reporter s average origination volume for 2017 and 2018 met the origination threshold level, that institution would report in Without the use of a rolling average, a potential reporter might find that an unforeseen origination volume increase at year end for a given year unexpectedly requires it to report all loans in that year, requiring it to go back and complete entries for all reportable loans near year end. The proposed comment to paragraph 3(c)(2) explaining that a loan is not secured by a lien on unimproved land if a financial institution knows or reasonably believes that within two years after the loan closes, a dwelling will be constructed or placed on the land using the loan proceeds is not appropriate and can be expected to lead to unnecessary confusion and errors. The existing exemption for all unimproved land is more appropriate and should continue to be used. Expecting lenders to be

3 able to identify and provide documentation on each loan secured by unimproved land to evidence if HMDA is applicable or not will only lead to additional regulatory burden, confusion, and errors if the lender is expected to discern with what may only be a guess if a dwelling will be placed on the land within two years from the loan date. It is more appropriate to continue to administer HMDA on properties only once a dwelling has been constructed. Regarding the proposal to identify rate-and-term refinances separately from cash-out refinances, my institution does not currently treat these two types of refinances differently. Each borrower goes through the same underwriting analysis including ability-to-repay and loan-to-value, regardless of the refinance purpose. Having to make a distinction between rate-and-term refinances and cash-out refinances will not result in any useful data being obtained on our originations. Further, the proposal lacks clear guidance on what is a cash-out refinance. Is it a loan where any amount of the proceeds is used for a purpose other than home improvement or refinance, even only $1? The Bureau s proposal to report the actual loan amount, rather than a rounded amount, is appropriate. As stated, if LTV is a reported item, it will allow for more accurate calculations. It will also eliminate the potential for errors associated with incorrect rounding. Releasing the parcel identifier or postal address of each reportable loan represents a significant privacy issue for borrowers. Information on loan amount, loan-to-value, borrower age or birthdate, and most concerning, income, would be available to any user of HMDA data. A borrower s identity could easily be found by cross-referencing publicly-available information on parcel numbers and postal addresses with HMDA data. If this information is collected, it should be redacted from the public release of HMDA data. With that being said, we would welcome reporting the postal address rather than geocoding information given the burden of obtaining this information and the frequency with which the FFIEC website fails to provide geocoding information on given addresses, forcing us to complete best guesses. If the Bureau is geocoding property information, the burden of accuracy should rest with the Bureau and not HMDA reporters, who may not have access to the geocoding process. The Bureau s proposal to report age, rather than date of birth, for applicants creates the possibility of reporters committing errors during the translation process between date of birth and age. The Bureau assumes in its proposal that since age is currently being collected on Uniform Residential Loan Applications (URLA) that this proposal will be simple to implement. However, only approximately 50% of our reportable loans use the URLA. The remainder are commercial-purpose loans or loans that otherwise use modified consumer loan applications. Reporting the date of birth rather than age will reduce the likelihood of reporters miscalculating applicants ages, and therefore introducing unnecessary errors into the reporting process. Additionally, the Bureau claims that reporting birthdates increases privacy concerns, yet these concerns are minimal when compared to the privacy concerns of reporting parcel identifiers or postal addresses. Proposed comment 4(a)(12)-4.iii explains that when a covered loan s term to maturity (or, for a variablerate transaction, the initial fixed-rate period) is not in whole years, the financial institution uses the number of whole years closest to the actual loan term or, if the actual loan term is exactly halfway between two whole years, by using the shorter loan term. This rounding method is not intuitive as it does not follow the typical method of rounding up when a number is exactly halfway between two other numbers, which is indeed used in 4(a)(10)(ii) for income rounding. Unnecessary errors can be expected if the proposed comment is finalized as-is. The comment should be adjusted to read that if an actual

4 loan term is exactly halfway between two whole years, the longer loan term should be used. The comment regarding the rounding of months should similarly be adjusted. The Bureau requested comment regarding whether the Bureau should maintain the current lien reporting requirement (secured by a first lien or subordinate lien), or whether financial institutions prefer to report the actual priority of the lien against the property (secured by a first lien, second lien, third lien, fourth lien, or other). Our institution recommends retaining the existing reporting requirement as the proposal to report the actual lien priority results in unnecessary additional burden without corresponding added benefit. Our institution often lends with liens on dwellings that are subordinate, but the contract terms and pricing on the loans is not dependent on the subordinate lien position. Second or third liens are priced the same. Additionally, we may not necessarily confirm the actual lien position with a lien search if we are already aware we are in a subordinate position. And, very, very few loans are secured by liens beyond a second lien. The Bureau can expect little useful data from this modification, yet lenders will face additional unnecessary burden. The Bureau has proposed to collect data on origination costs via four different methods: rate spread, points and fees, origination charges, and discount points. There is much overlap between these four measures, three of which are not presently on the LAR. Including four different measures of origination cost amounts to significant regulatory burden for HMDA reporters who will undoubtedly face criticism from their prudential regulators for even immaterial, inadvertent errors, such as an error of $1 in the points and fees calculation. This expected criticism will require lenders to increase their administrative staff devoted to HMDA reporting, which will be a cost that will ultimately be passed to borrowers as HMDA reporters do not have limitless resources on which to draw. The Bureau needs to reassess and strongly consider the need for four different measures of origination costs. Given that most lenders currently calculate the rate spread on each of their reportable loans subject to Reg. Z, relying on this measure would represent the least burden for the industry, and in turn result in fewer costs passed on to the borrowers the Bureau was founded to protect. Regarding the proposal to report a debt-to-income ratio for each reportable transaction, it would be far more burdensome for the Bureau to adopt a specific debt-to-income ratio calculation than to allow lenders to report the debt-to-income ratio relied on during the transaction. Proposed (a)(23) is silent as to how a debt service coverage ratio should be recorded if commercial loans continue to be reported. The DSCR is typically used for commercial loans in lieu of a DTI. Additional guidance is necessary. The proposed (a)(24)(ii) is problematic. As proposed it states that, for a covered loan that is not a home-equity line of credit, the CLTV ratio shall be determined by dividing the combined unpaid principal balance amounts of the first and all subordinate mortgages, excluding undrawn home-equity lines of credit amounts, by the value of the property. Presently, if we are aware of undrawn homeequity lines of credit and their total available line, we calculate the CLTV based on the total available line. Proposed (a)(24)(ii) therefore would require us to calculate two CLTVs in those instances where we know the total available line amount, one calculated accurately based on the total available line amount, and one based on the regulation s inaccurate calculation. To correct this issue, I would recommend (a)(24)(ii) state that lenders should calculate the CLTV based on the total available line of credit amounts, if known, and if the total available line amount is not known the CLTV may be based on the outstanding balance of all liens. Proposed (a)(24)(i) should similarly be changed to allow the CLTV to be based on the total available line of credit amounts, if known, and if the total

5 available line amount is not known the CLTV may be based on the outstanding balance of all liens to allow for consistent treatment of outstanding lines of credit, regardless of the loan type being originated. Proposed (a)(26) requires reporting of the number of months until the first date the interest rate may change after loan origination. As proposed this section uses a different measurement than that contained in Regulation Z (e)(2)(iv)(A) which measures for QM loans the interest rate change from the date the first regular periodic payment is due. The disconnection between these two measurements of rate change length has the potential to cause unnecessary confusion and errors for reporters. For instance, a lender might have a loan whose rate changes 72 months after the first payment date under the requirements of (e)(2)(iv)(A), but this loan would be reported with 73 or potentially 74 months under (a)(26) depending on the length of time between the loan consummation date and first payment date. I would therefore recommend (a)(26) be written with a measure consistent with (e)(2)(iv)(A). Proposed (a)(30) requiring the reporting of the ownership interest of the land where a manufactured home will be located is an unnecessary regulatory burden with no benefit to the users of HMDA data. Manufactured home loan details such as interest rate, fees, and maximum debt-to-income are not dependent on whether the land is owned or leased by the property owner. If a manufactured home is not classified as real property this is not information we confirm and document in the file. As it is an unnecessary regulatory burden with no benefit to end users of HMDA information, the ownership interest of the land where a manufactured home will be located should not be reported. The Bureau has solicited feedback on appropriate alternatives to reporting the total number of dwelling units, including whether financial institutions should report ranges of the number of units such as one, two to four, and five or more under proposed (a)(31). We do not always obtain the exact count of units when financing multi-family dwellings, and loan pricing, fees, and underwriting criteria are not based on the number of units. Therefore, the Bureau s suggested alternative to report ranges of the number of units is more appropriate. The Bureau correctly recognizes that collecting information on affordability restrictions as proposed under (a)(32) imposes new burden on lenders. Income-restricted units are not something we regularly collect information on. Lenders will face a requirement to determine if a program covers any units in a given piece of collateral, determine if that program meets the definition of a covered program under (a)(32), and also determine how many units are actually covered by the program if it meets the definition. HMDA reporters, and ultimately borrowers, will be the ones paying for the cost of submitting this data, which the Bureau has not shown will be of such use as to warrant the cost of its being paid for by those who will not be the end users of the data. Proposed (a)(39) would require reporting on the initial draw made at account opening on a home equity line of credit or reverse mortgage. The Bureau has not demonstrated how this information would be useful. Reporting this information would be difficult as the amount of the initial draw is not entered into our loan origination document software, but rather into our separate loan servicing software. Without a demonstrated explanation for how this data would be useful, and due to the added burden of capturing and submitting this information on the LAR, the initial draw amount should not be included as part of the LAR data.

6 The Bureau s proposal to allow HMDA reporters to make their disclosure statements available by referring members of the public that request a disclosure statement to a publicly-available website is appropriate. Our institution has not had a request for a public disclosure in the 13 years I have worked for it. Implementing this proposal will afford reporters a limited, but welcome, amount of regulatory relief while not inconveniencing the limited number of individuals who seek copies of this information. In fact, referring them to the publicly-available website will almost certainly be more convenient than requiring them to stop in a physical location of the reporter. If most, or all, of the Bureau s proposed additional loan data reporting is implemented, additional leniency needs to be granted toward HMDA reporters for inadvertent entry errors. National and state bank reporters face consequences, including possible civil money penalties, for errors in excess of five percent of reportable transactions per thresholds set by their prudential regulators. This five percent threshold is not codified in but appears to have been informally adopted by the prudential regulators. Currently approximately 25 data points are reported for each reportable transaction. Stated differently, these data points must be 99.80% accurate to avoid regulatory violations and possible civil money penalties under the five percent threshold. If the Bureau increases the reportable data points per transaction to a hypothetical 45 (though it has proposed many more data points), a 99.99% accuracy threshold would be required under the existing five percent measure. This level of precision is virtually impossible to attain. A more realistic measure must be considered, such as a one percent error level, or 99% accuracy rate, for all data points. Such a level still allows for extremely accurate data aggregating while permitting reporters some leniency for inadvertent errors. Not permitting such a reasonable accuracy level when coupled with the additional amount of data the Bureau has proposed be collected will ultimately result in lenders leaving the industry or passing on the costs of increased staffing to customers, with neither outcome being positive for borrowers. The Bureau needs to strongly consider implementing realistic error thresholds to that ensure accurate reporting data while not penalizing reporters for minor error rates as some currently face today. Further, by including error thresholds within all reporters will be subject to the same accuracy standards, regardless of who their regulators are. The proposed Appendix A instructions for Paragraph 4(a)(23) DTI Ratio requires that if the applicant s or borrower s debt-to-income ratio is a figure with more than two decimal places, the reporter should round up to the next hundredth. For example, for a debt-to-income ratio of , the reporter should enter This rounding method is not intuitive as it does not follow the typical method of rounding up when a number is exactly halfway between two other numbers or larger and otherwise rounding down, which is indeed used in 4(a)(10)(ii) for income rounding. Additionally, current underwriting systems such as Fannie Mae s Desktop Underwriter use the typical method of rounding up when a number is 5 or larger and otherwise rounding down. Unnecessary errors can be expected if the proposed instructions are finalized as-is. The instructions should be adjusted to read that a DTI ratio should be rounded up if the third digit behind the decimal is 5 or larger, and round down if the digit is 4 or smaller. Similarly, the Appendix A instructions for 4(a)(24) CLTV Ratio should be adjusted to read that a DTI ratio should be rounded up if the third digit behind the decimal is 5 or larger, and round down if the digit is 4 or smaller, rather than the proposed requirement to truncate any digits beyond the first two decimal places. Appendix A instructions for 4(a)(25) should include instructions for rounding when a loan term included fractions of months, and they should round the term up if the number of days is equal to or more than

7 half of a month, and down if less than half a month. Further, the commentary for 4(a)(25) should be revised to reflect this rounding method, rather than the proposal which reads that any remainder should be disregarded. Consistency in the rounding process of all HMDA data will lead to more accurate reporting. The Bureau has proposed a confusing and haphazard rounding process that differs depending on the data point being reported. I have attempted in my recommendations to promote consistency in rounding for reporters. As written, the proposed commentary to Paragraph 3(c)(3) will lead to much confusion for HMDA reporters. Specifically, two sections are apparently contradictory. The first sentence in question is simple and straightforward and should be retained. Temporary financing refers to loans that are designed to be replaced by permanent financing at a later time. However, the section on temporary financing loans that convert to permanent financing will lead to much confusion, especially the sentence that reads Likewise, if an institution issues a commitment for permanent financing, with or without conditions, the loan is not considered temporary financing. This sentence specifically describes a scenario encompassed by the preceding Temporary financing refers to loans that are designed to be replaced by permanent financing at a later time, yet reporters are being told to report these loans as they are not considered to be temporary financing. Apparently the only difference between these two sentences as written depends on whether or not a commitment for permanent financing exists, yet no guidance is provided for what constitutes a commitment for permanent financing. To alleviate confusion and unnecessary omission errors, the sentence Likewise, if an institution issues a commitment for permanent financing, with or without conditions, the loan is not considered temporary financing should be removed from the commentary. Striking this sentence will bring needed clarity and certainty to the question of what is, and is not, temporary financing. Additionally, the sentence For example, a loan made to finance construction of a dwelling is not considered temporary financing if the loan is designed to be converted to permanent financing by the same institution or if the loan is used to finance transfer of title to the first user needs to be modified by removing or if the loan is used to finance transfer of title to the first user. Again, this phrase unnecessarily complicates the proper identification of temporary financing by forcing HMDA reporters to go through a multi-step process to determine if a loan is temporary financing or not, despite having already determined that a given loan is designed to be replaced by permanent financing at a later time. Temporary financing refers to loans that are designed to be replaced by permanent financing at a later time is simple and straightforward, and no additional caveats should be added. With the modifications given above the Bureau can ensure useful and accurate HMDA data is obtained while limiting the impact to consumers and lenders, particularly smaller creditors who without these and similar refinements to the various Dodd-Frank proposals may exit the industry altogether, resulting in further consolidation, limited consumer options, and increased borrowing costs. Brian Holst Vice President, Senior Internal Auditor Ohnward Bancshares