Compliance Blog

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

Consumer Compliance Outlook. The Fourth Quarter 2013 issue of the Federal Reserve’s Consumer Compliance Outlook is now available. Articles in this issue include:

• Government Monitoring Information Requirements under the HMDA and the ECOA

• Overview of E-Banking Compliance Considerations

• Dodd-Frank Act Mortgage Regulations

One of the topics we receive a lot of compliance questions on is the collection of government monitoring information (GMI) under HMDA/Regulation C and ECOA/Regulation B.  This area is particularly tricky because the types of mortgage loans subject to each rule, and the information that must be collected under each rule, differ.  Regulation B, section 1002.5, generally prohibits inquiring about the “race, color, religion, national origin, or sex of an applicant or any other person in connection with a credit transaction,” except as specifically permitted by Regulation B, or except as specifically required – e.g., Regulation B, section 1002.13(a), Regulation C, section 1003.4(a)(10), etc.

All this complexity leads to a couple of common compliance violations in this area –not collecting information when you should, or collecting information when you shouldn’t.  The article in this issue of the Consumer Compliance Outlook on Government Monitoring Information Requirements under the HMDA and the ECOA provides an excellent summary of the requirements under HMDA and ECOA, and includes a handy comparison chart of the two.  It’s a great refresher for anyone who wants to brush up on these requirements and a great tool to pass on to your mortgage folks.

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CFPB to Look at HMDA Information Reporting Requirements. Speaking of HMDA, the CFPB announced that it is beginning to look at potential changes to HMDA reporting requirements and is convening a panel as required under the Small Business Regulatory Enforcement Fairness Act (SBREFA). Some of the additional reporting requirements under consideration are mandated by Dodd-Frank; however, the CFPB is considering additional changes as well – such as requiring institutions to include an explanation of rejected loan applications. From the press release:

“Potential changes under consideration by the Bureau include:

• Improvements required by Dodd-Frank: In the Dodd-Frank Act, Congress directed the Bureau to update HMDA regulations by having lenders report specific new information that could alert regulators to potential problems in the marketplace. This includes: the length of the loan; total points and fees; the length of any teaser or introductory interest rates; and the applicant or borrower’s age and credit score.

 

• New developments in the market: The Bureau is considering additional information that would give regulators a better view of developments in all segments of the housing market. The Bureau is considering asking financial institutions to include more underwriting and pricing information, such as the interest rate, the total origination charges, and the total discount points of the loan. This will help regulators investigate the true trouble spots in the mortgage market.

 

• Monitoring access to credit: The Bureau is considering new requirements that would more accurately capture access to credit in the mortgage market. The Bureau is considering requiring institutions to include an explanation of rejected loan applications. The Bureau is also considering including whether the lender considered the loan to be a “Qualified Mortgage.” Qualified Mortgages are loans that meet certain criteria under the CFPB’s Ability-to-Repay rule and offer extra protections for consumers. Including QM status in HMDA data will help regulators and the public determine how the CFPB’s rules are impacting the mortgage market. Additional information, such as the borrower's debt-to-income ratio, will help regulators see whether financial institutions are making loans that are expensive or unsuitable for borrowers.”

This CFPB factsheet lays out the changes being considered.  The CFPB has made available this outline of proposals and list of questions on which it will seek input from the SBREFA panel.

Finally, the CFPB also announced a new HMDA tool available to the public for tracking public mortgage data.

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Shameless Plug! Our 2014 Regulatory Compliance School is just one month away, but there’s still time to register! It’s like a comprehensive “boot camp” for compliance staff, with the chance to earn the respected title of NAFCU Certified Compliance Officer (NCCO). The program also includes a “Regulatory Update Day” – a roundup of current compliance topics and issues. If you’ve already registered, make sure to take advantage of the NAFCU discounted hotel room rate by February 14.