Compliance Blog

In recent weeks the NAFCU Compliance Team has heard from a handful of credit unions about a notice they’ve received from the Consumer Financial Protection Bureau (CFPB or Bureau) relating to the data they reported under the Home Mortgage Disclosure Act (HMDA). The notice announces that the CFPB’s “HMDA Operations team” reviewed the credit union’s HMDA Loan/Application Register (LAR) for 2020, 2021 and 2022 and concluded that the data “may contain invalid entries” in the “Street Address” field.

The notice states that the CFPB is contacting institutions whose HMDA LARs contained errors such as reporting “multiple addresses, multiple property numbers, missing street names, placeholder addresses (e.g., TBD Condo or 000 Street), information that should be listed in other fields (e.g. zip codes) or listing street intersections.” It appears that the issue here may be that some credit unions reporting the address in a manner that did not technically conform to the specific guidance provided by the CFPB for reporting this data field. Let’s review that guidance:

Section 1003.4(a)(9) requires a credit union to report the property address in the HMDA data. Notably, the FFIEC’s guide HMDA: Getting it Right! states that a credit union can report the property address as “NA” if the address is unknown, indicating that entries which were initially reported as “TBD” or with a street number of “000” most likely should have been reported as “NA.”

For properties in which the address was known, the staff commentary to section 1003.4(a)(9) provides guidance on how the address should be formatted in the LAR. Some credit unions theorized that they may have received this notice because they reported a multi-unit property (such as a duplex) as an address range (for example, “1200 – 1400 Main Street”). The staff commentary states that when the loan is secured by multiple properties or is made on a multifamily dwelling with more than one postal address, then the credit union should report “the covered loan or application in a single entry on its loan/application register and provides the information required by § 1003.4(a)(9) for one of the properties taken as security that contains a dwelling” (emphasis added). The staff commentary provides this example:

“For example, Financial Institution A originated a covered loan that is secured by both property A and property B, each of which contains a dwelling. Financial Institution A reports the loan as one entry on its loan/application register, reporting the information required by § 1003.4(a)(9) for either property A or property B. If Financial Institution A elects to report the information required by § 1003.4(a)(9) about property A, Financial Institution A also reports the information required by § 1003.4(a)(5), (6), (14), (29), and (30) related to property.” (emphasis added).

In other words, the staff commentary states that, when multiple street numbers or addresses are involved, a credit union should pick just one and report that in all relevant fields of the LAR. In the example I provided above, the staff commentary indicates it would be appropriate to report only “1200 Main Street” rather than the “1200 – 1400” range.

The CFPB notice also refers credit unions to page 61 of the 2022 Filing Instructions Guide, which discusses how to format the street address field. The guide states that a properly formatted street address should include the following components (as applicable):

• Primary Address Number
• Predirectional
• Street Name
• Prefix
• Suffix
• Postdirectional
• Secondary Address Identifier, such as apartment
• Secondary Address, such as apartment number

The notice also provides the example of “456 W Somewhere Ave Apt 201” – in that example, “456” is the primary address number, “W” is the predirectional, “Somewhere Ave” is the street name, “Apt” is the secondary address identifier, and “201” is the secondary address.

So, what should a credit union do if it has received this notice? Interestingly, the notice itself does not actually require the recipient to make changes, however it does “encourage” the credit union to review its HMDA filings “for adherence to Regulation C requirements and Filing Instructions Guide guidance.” Notably, the CFPB has previously issued guidance regarding resubmission of HMDA data, which requires resubmission if there are errors found in a percentage of loan files sampled from the LAR – the number of files reviewed in the sample, as well as the exact error threshold that will require resubmission, depends on how many entries are in the LAR. Credit unions may want to review this guidance when determining if they need to resubmit their HMDA data. For CUs that choose to resubmit their HMDA data, the notice also notes that credit unions may update their HMDA data through the HMDA Filing Platform.

The notice also states that the HMDA Operations team will “conduct another analysis on data (including resubmissions on May 15, 2023…” Thus, while the notice does not say that resubmission is required, the reference to a second review on May 15^th certainly seems designed to spur credit unions to action, as it is unclear what action the CFPB may take if it discovers that the initial errors have not been corrected by that time.

Unfortunately, this notice means that some credit unions were provided with less than 30 days to conduct a review of 3 years’ worth of HMDA LAR data and to make corrections and resubmit. Credit unions that have received this notice may want to confer with their legal counsel regarding their potential legal liability for these errors and may want to consider making the corrections and resubmitting the data to mitigate possible future compliance risk that might arise if the errors remain uncorrected. NAFCU has heard that third-party vendors may be available to help with this process, though a credit union would want to do its due diligence before hiring such a third-party, as is required for vendor management purposes.  

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