Compliance Blog

On Thursday, the CFPB published a final rule amending the 2015 Home Mortgage Disclosure Act rule. This finalizes technical changes and amendments that the Bureau proposed back in April 2017 while also finalizing a July 2017 proposal to increase the reporting threshold for open-end home equity loans from 100 loans to 500 loans. The regulatory references to HMDA below are not to the current version of the rule, but the rule as amended in 2015 (and further amended by last week's rule).

Technical Amendments. First, here is a summary of a few of the key amendments to the HMDA rule.

• Counteroffers. Section 1003.4(a)(8)(i) requires credit unions to report the action taken on covered loans and applications. Comment 4(a)(8)(i)– 9 explains how to report the action taken for a counteroffer where the applicant does not accept the counteroffer or fails to respond. The final rule amends comment 4(a)(8)(i)–9 to broaden the possible actions taken that could be reported in these situations, adding the following:

"…If the applicant agrees to proceed with consideration of the [credit union's] counteroffer, the [credit union] reports the action taken as the disposition of the application based on the terms of the counteroffer. For example, assume a [credit union] makes a counteroffer, the applicant agrees to proceed with the terms of the counteroffer, and the [credit union] then makes a credit decision approving the application conditional on satisfying underwriting or creditworthiness conditions, and the applicant expressly withdraws before satisfying all underwriting or creditworthiness conditions and before the institution denies the application or closes the file for incompleteness. The [credit union] reports that the action taken as application withdrawn in accordance with comment 4(a)(8)(i)–13.i. Similarly, assume a [credit union] makes a counteroffer, the applicant agrees to proceed with consideration of the counteroffer, and the [credit union] provides a conditional approval stating the conditions to be met to originate the counteroffer. The [credit union] reports the action taken on the application in accordance with comment 4(a)(8)(i)–13 regarding conditional approvals."

• Temporary and Construction-only loans. Section 1003.3 specifies which transactions are excluded from HMDA reporting. The Bureau finalized clarifying changes to comment 3(c)(3)–1 and to add new comment 3(c)(3)–2 to specify that a construction-only loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. Here's the new comment:

"…Loan or line of credit to construct a dwelling for sale. A construction-only loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. See comment 3(c)(3)–1.ii through .iv for examples of the reporting requirement for construction loans that are not extended to a person exclusively to construct a dwelling for sale."

• Loan purpose for purchased loans originated before January 1, 2018. Section 1003.4(a)(3) requires credit unions to report the purpose of a covered loan or application. Categories include home purchase, home improvement, or refinancing, an “other” category, and a cashout refinancing category. The Bureau is adding new comment 4(a)(3)–6 to clarify that, for purchased covered loans where the origination took place before January 1, 2018, a credit union complies with § 1003.4(a)(3) by reporting that the requirement is not applicable.

There are many more technical amendments and NAFCU is still reviewing the final rule. In the coming weeks, we will publish a Final Regulation for members providing a summary of the changes as well as a consolidated regulatory text so stay tuned.

Amended Open-end Line of Credit Threshold.

Section 1003.2(g) contains an institutional coverage test as one of five criteria for determining if a credit union is a "financial institution" subject to HMDA reporting. This is detailed in a past NAFCU Compliance Blog post, here's some of the commentary explaining the test as originally adopted:

"Originations. Whether an institution is a financial institution depends in part on whether the institution originated at least 25 closed-end mortgage loans in each of the two preceding calendar years [January 1, 2017] or at least 100 open-end lines of credit [January 1, 2018] in each of the two preceding calendar years. Comments 4(a)-2 through -4 discuss whether activities with respect to a particular closed-end mortgage loan or open-end line of credit constitute an origination for purposes of § 1003.2(g)."

The Bureau is amending HMDA effective January 1, 2018, to increase the open-end threshold from 100 to 500. However, this increase is only temporary – effective January 1, 2020, the threshold will revert to 100 open-end lines of credit.

Reporting 2017 HMDA Data (and Beyond). We've had some credit unions ask us about reporting methods for 2017 HMDA data. Currently, and in the past, the FFIEC has collected and processed HMDA data for the CFPB, OCC, FDIC and NCUA. Currently, for 2017 reporting of 2016 data, Appendix A still points credit unions to the FFIEC for reporting.

As we've noted before, the CFPB is developing a web-based submission tool which will be intaking and processing HMDA data on behalf of the agencies. See, 80 Fed. Reg. 66246. That tool will be used for the submission of 2017 data in 2018. Beginning in 2018, Appendix A will direct reporting credit unions to use the CFPB website and it's submission tool/HMDA platform, which should be ready in the 4^th quarter of this year for testing.

Some credit unions have asked if submissions by mail will still be an option. Currently, subsection II.A. in Appendix A states "If…you elect to submit your data by regular mail, then use the following address: […]" and provides the FRB address for mailing data. As of January 1, 2018, the submission instructions in Appendix A will no longer contain any instructions for submission via regular mail, only instructions for submission through the CFPB's portal.

Beginning in 2019, Appendix A will be entirely removed and new section 1003.5(a)(5) will direct reporting institutions to the instructions on submitting data which will live in a separate document on the Bureau's website. The reporting in 2019 will be done under the new rule, meaning the inclusion of instructions for submitting the new data collected in 2018. However, the actual method of submission – the CFPB's HMDA Platform – will have already been used in 2018 while submitting 2017 data.