When It Comes to Regulatory Changes, There is No Rest for the Weary
By: RKL Risk Management Compliance Team
If we’ve learned anything over the past decade of regulatory changes impacting mortgage lending, we’ve learned that no amount of time for implementation ever seems to be enough time.
As we recoup from the TRID changes, we face the next round: HMDA.
The majority of the HMDA reporting changes do not go into effect until 2018. That seems like a long way off but don’t take false comfort. In actuality, we only have a little more than a year and a half to prepare because, with the exception of Government Monitoring Information (“GMI”), we are required to report the new and revised data based on action date, not application date.
The following chart is a high level review of the timeline:
|January 1, 2017||Small depository institutions may be excluded from reporting requirements for any mortgage application or loan with an action date on or after January 1, 2017, based on the current tests for size, location, and federal relationship AND a new test for volume for closed-end mortgage loans|
|March 1, 2018||Submit 2017 activity electronically through the FFIEC– no more paper submissions|
|January 1, 2018||Any application or loan with an action date on or after January 1, 2018, must comply with the new rules for reportable transactions and data collection
Small depository institutions may be excluded from reporting requirements for any application or loan with an action date on or after January 1, 2018, based on the current tests for size, location, and federal relationship AND two (2) new mutually exclusive tests for volume of closed-end mortgage loans and lines of credit secured by residential property
|March 1, 2019||Submit 2018 activity using the new process through the website|
|April 1, 2020 –
May 30, 2020
|Quarterly reporters (you’re originating more than 60,000 loans per year) must submit quarterly reports using the new process|
The CFPB Compliance Guide for the HMDA changes provides some useful guidance on the transition rules for applications taken prior to January 1, 2018, with actions dates after December 31, 2017:
For Applications received prior to January 1, 2018, the Financial Institution does not use the revised collection form, but collects applicant information using a collection form that complies with the Regulation C requirements in effect prior to January 1, 2018. The 2015 HMDA Rule provides a transition provision that allows a Financial Institution to report the applicant’s ethnicity, race, and sex required under the Regulation C requirements in effect at the time that the Financial Institution collects the information, not when the Financial Institution takes final action on the Application.
For the remaining new and revised fields, we are required to report using the 2018 standards regardless of the application date. So, now is the time to start working on process and system changes to ensure that we are able to accurately collect the information for the 2018 LAR.
- If you collect your HMDA data using a Loan Origination System (“LOS”), this means working with your vendor to ensure that those fields are in place and ready to use by late 2017 – for many of us, the end of the 3rd quarter 2017 will be best. Allow time for testing to validate field mapping and translations and to test any impact on interfaces with other systems such as automated underwriting, secondary market, and reporting systems.
- If you are not using an LOS, this means updating your data collection tools in time for accurate reporting. Again, if you use this data collection with any systems – internal or external – allow time for testing and fixes.
It’s important to note that we will be reporting transactions we did not (or were not required to) report in the past:
- Closed-end residential mortgage loans for cash-out, debt consolidation, and other purposes
It may be necessary to establish additional procedures to ensure that these applications are accurately reported.
You should also take this time to:
- Develop your HMDA training program with a strategy for roll-out in time to collect information for 2018 reporting (remember the applications from 2017 that won’t have an action until 2018)
- Revise your disclosures, checklists, and forms to ensure you are collecting the correct data
- Update your policies and procedures
To get a start, check out the implementation materials provided by the CFPB at: http://www.consumerfinance.gov/regulatory-implementation/hmda/
Also, think about getting your HMDA person a really wide computer monitor and magnifying glasses! And lots and lots of tape for checking the LAR on paper.