HMDA—Institutional Coverage Test in 2017 and Beyond; BSA Blast Available
Written by Brandy Bruyere, Director of Regulatory Compliance
As Alicia mentioned on Friday, the CFPB finalized changes to HMDA on Thursday, October 15th. Most of the rule such as new data points will not become effective until January 2018. However, the definition of financial institution is changing effective January 1, 2017 to incorporate one prong of the institutional coverage test, so I thought I would highlight that today and keep the blog short for a Monday morning.
Section 1003.2 contains a definition of financial institution that determines which credit unions must report under HMDA as applicable. Part (1) of this definition will have a fifth subpart added to include a threshold test so if a credit union does not meet another exclusion under the rule, it may still be exempt from reporting by not originating a threshold number of loans. Here is how this section of the rule will appear as of January 1, 2017:
Financial institution means:
(1) A bank, savings association, or credit union that:
(v) In each of the two preceding calendar years, originated at least 25 home purchase loans, including refinancings of home purchase loans, that are not excluded from this part pursuant to 1003.4(d)
See p. 653 of the final rule.
Meanwhile, the definition that becomes effective on January 1, 2018 will incorporate second prong which would also include those credit unions that originated at least 100 open-end lines of credit in each of the two preceding calendar years. Of course, the rule is written in a rather convoluted way, so as I continue to dig through more, I feel a bit like this:
Keep in mind that the final rule makes amendments to the official staff commentary as well, although none of these changes are effective until January 1, 2018. However, here's the amended staff commentary to this particular test which does provide some clarification as to which loans count towards this threshold:
5. 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).
See p. 695 of the final rule.
(emphasis added)
NAFCU is working on a Final Regulation summarizing key parts of the rule that will be made available to members within a couple of weeks.
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BSA Blast. The October 2015 quarterly issue of the BSA Blast is now available for NAFCU members (member login needed). This quarter, we review how the Department of Treasury's Office of Foreign Assets Control's final rule amending the Cuban sanctions changes things for financial institutions. In addition, there is a new BSA quiz on Anti-Money Laundering compliance programs and Bank Secrecy Act reporting that can be used for staff training.