HMDA Regulatory Update – What Lenders need to know!
By Rob Sommerfeld, Senior Associate Consultant
RLR Management Consulting, Inc.
If you’re in the lending business, are you ready for some of the changes of 2018? Beginning January 1, 2018 most business purpose loans will be subject to fines by the Consumer Financial Protection Bureau (CFPB) unless they file reports under the Home Mortgage Disclosure Act, known as “HMDA.” Congress asserts that this information is necessary as:
- It helps show whether a lender is serving the housing needs of their communities
- It assists public officials in distributing public-sector investment to attract private investment to areas where it is needed; and
- It assists with the identification of potentially discriminatory lending patterns and enforcement of antidiscrimination laws
Generally, the new HMDA data categories fall into four primary areas:
- 1. Information about the applicants/borrowers, and the underwriting process
- Applicant’s/borrower’s age
- Credit score/name and version of the credit scoring model
- Debt-to-income ratio
- Automated underwriting system name
- 2. Information about the property securing the loan
- Value of the property to secure the loan
- Combined loan-to-value ratio
- Manufactured home property type – land or without land
- Manufactured home land interest – ownership or leasehold
- Total dwelling units securing the loan
- Multifamily affordable units – number of units that are income-restricted under affordable housing programs
- 3. The features of the loan transaction or requested loan transaction
- Total loan costs/total points and fees charged
- Origination charges paid by borrower
- Points paid to reduce interest rate
- Amount of lender credits
- Interest rate of the approved loan
- Prepayment penalty term in months
- Loan term in months
- Introductory rate period in months
- Non-amortizing features
- Application channel – submitted directly to FI, directly payable to FI
- Reverse mortgage indicator
- Open-end line of credit indicator
- Business/commercial purpose indicator
- 4. Unique Identifiers
- Address of property to secure the loan
- Mortgage loan originator NMLSR identifier
- ULI – Unique Loan Identifier (this is not the loan number and requires algorithm logic to create based on the CFPB requirements).
How Do You Get Ready?
Your first HMDA report (called a Loan Application Register or “LAR”) must be submitted electronically to the CFPB by March 1, 2019. Don’t wait until the week before to begin collecting data for 2018. Let RLR help with your testing of data collection and reporting requirements so you’re ready to report.