HMDA and Auto Denied Loans – Reporting NMLSR Numbers; New Website, New Search Functions
Written by Brandy Bruyere, Vice President of Regulatory Compliance
Happy Wednesday! Today I have a HMDA FAQ to tackle with some informal guidance from the CFPB to share. And for writing about HMDA, I'll also offer a couple of tips for finding things on our new website which has some helpful search functions.
But first, HMDA. Some credit unions utilize systems that can automatically deny loan applications that are submitted online because certain key baseline underwriting criteria are not met on the face of the application. If a credit union is subject to HMDA reporting, section 1003.4(a)(34) requires the credit union to report the Nationwide Mortgage Licensing System and Registry (NMLSR) number for "the mortgage loan originator." Here is an excerpt from the rule and some relevant staff commentary:
(34) For a covered loan or application, the unique identifier assigned by the Nationwide Mortgage Licensing System and Registry for the mortgage loan originator [MLO], as defined in Regulation G, 12 CFR 1007.102, or Regulation H, 12 CFR 1008.23, as applicable.
[…]
Paragraph 4(a)(34)
1. NMLSR ID. Section 1003.4(a)(34) requires a financial institution to report the Nationwide Mortgage Licensing System and Registry unique identifier (NMLSR ID) for the [MLO], as defined in Regulation G, 12 CFR 1007.102, or Regulation H, 12 CFR 1008.23, as applicable. The NMLSR ID is a unique number or other identifier generally assigned to individuals registered or licensed through NMLSR to provide loan originating services…
2. [MLO] without NMLSR ID. An NMLSR ID for the [MLO] is not required by §1003.4(a)(34) to be reported by a financial institution if the [MLO] is not required to obtain and has not been assigned an NMLSR ID. For example, certain individual [MLOs] may not be required to obtain an NMLSR ID for the particular transaction being reported by the financial institution, such as a commercial loan…If a [MLO] has been assigned an NMLSR ID, a financial institution complies with §1003.4(a)(34) by reporting the [MLO]'s NMLSR ID regardless of whether the [MLO] is required to obtain an NMLSR ID for the particular transaction being reported by the financial institution. In the event that the [MLO] is not required to obtain and has not been assigned an NMLSR ID, a financial institution complies with §1003.4(a)(34) by reporting that the requirement is not applicable.
3. Multiple mortgage loan originators. If more than one individual associated with a covered loan or application meets the definition of a mortgage loan originator, as defined in Regulation G, 12 CFR 1007.102, or Regulation H, 12 CFR 1008.23, a financial institution complies with §1003.4(a)(34) by reporting the NMLSR ID of the individual mortgage loan originator with primary responsibility for the transaction as of the date of action taken pursuant to §1003.4(a)(8)(ii). A financial institution that establishes and follows a reasonable, written policy for determining which individual mortgage loan originator has primary responsibility for the reported transaction as of the date of action taken complies with §1003.4(a)(34)… (Emphasis added.)
A few things to note from the commentary. First, comment 2 clarifies that where the loan originator is not required to have an NMLSR number, the credit union can report that data point as "N/A." Also, where multiple loan originators may be assigned to the loan, the credit union reports the person with "primary responsibility" for the loan as of the "date of action taken." While this language is similar to commentary to section 1026.36(g) Regulation Z for providing this information on documents such as the Loan Estimate and Closing Disclosure, HMDA allows credit unions to establish a "reasonable, written policy" for making determinations as to which loan originator has "primary responsibility." However, the rule does not contemplate situations where the credit union never assigns an individual loan originator to an application because an underwriting system automatically denies the loan.
Because the rule did not contemplate this situation, NAFCU reached out to the CFPB through its regulation inquiries system and received a response. Keep in mind, this is not an "official interpretation" from the CFPB, but may be helpful to credit unions. Generally, the CFPB agreed that the rule does not clearly allow for reporting the NMLSR number as "N/A" in these kinds of situations, and noted that the rule does contemplate using individual NMLSR numbers as opposed to the credit union's organizational NMLSR number. Instead, the comment about following a "reasonable, written policy" for when there are multiple loan originators might provide some flexibility to assign a specific loan originator's NMLSR number to these kinds of loans. Credit unions using systems that automatically deny loans may consider adopting a written policy for which NMLSR number to report for these loans.
NAFCU's New Website. Many of you may have noticed that NAFCU launched a new website a couple of weeks ago, which included migrating our blog to this new website. The changes also include an improved search function where site users search compliance content by keywords, filter content by topic (accounts, advertising, or home-secured lending), as well as by content type (blog, article, Q&A). Multiple topics or content types can be selected, or the entire library can simply be searched by keyword.
A few folks have asked where they can find some key resources on the new site, links can be found here:
- Key Updates on ADA litigation including amicus briefs
- NAFCU Compliance Calendar
- Current and past issues of NAFCU's Compliance Monitor (member only)
- Current and past issues of NAFCU's BSA Blast (member only)
- NAFCU Final Regulation summarizing finalized rules (member only)
- NAFCU Regulatory Alerts summarizing proposed rules (member only)
- Search just NAFCU Compliance Blogs
About the Author
Brandy Bruyere, NCCO, Vice President of Regulatory Compliance/Senior Counsel, NAFCU
Brandy Bruyere, NCCO was named vice president of regulatory compliance in February 2017. In her role, Bruyere oversees NAFCU's regulatory compliance team who help credit unions with a variety of compliance issues.