mary-ann boaz, crcm december 8, 2015...approved this loan, even though a commitment letter may have...
TRANSCRIPT
MEMBER OF PKF NORTH AMERICA, AN ASSOCIATION OF LEGALLY INDEPENDENT FIRMS © 2010 Wolf & Company, P.C.
A Guide to HMDA Reporting
Mary-Ann Boaz, CRCM
December 8, 2015
• Today’s presentation slides can be downloaded at
www.wolfandco.com/webinars/2015.
• The session will last about an hour.
• Our audience will be muted during the session so if you
have questions throughout the session, please send
them by using the “question box” located on the
webinar’s control panel.
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Before we get started…
About Wolf & Company, P.C.
• Established in 1911
• Offers Audit, Tax, and Risk Management services to
nearly 250 financial institutions
• Offices located in:
– Boston, Massachusetts
– Springfield, Massachusetts
– Albany, New York
– Livingston, New Jersey
• Nearly 200 professionals
As a leading regional firm, we provide our clients with
specialized industry expertise and responsive service.
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Financial Institution Expertise
• Provide services to nearly 250 financial institutions:
– Approximately 50 FIs with assets > $1B
– Approximately 30 publicly traded FIs
– Constant regulatory review of our deliverables
• Over 60 Risk Management Professionals:
– IT Assurance Services Group Professionals
– Internal Audit Services Group Professionals
– Regulatory Compliance Services Group
Professionals
– WolfPAC® Solutions Group Professionals
• Provide RMS in 27 states and 2 U.S. territories
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Mary-Ann Boaz, CRCM
Senior Regulatory Compliance Consultant
Phone: 617-261-8175
Email: [email protected]
Meet Today’s Presenters
Today’s Agenda
• Overview of Home Mortgage Disclosure Act (HMDA) – Regulation C
• HMDA LAR Data Entry Information
• Collection of Government Monitoring Information
• Consistency Issues
• Common Violations
• Proposed Changes
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Purpose
The Consumer Financial Protection Bureau (CFPB) is
responsible for HMDA regulations since 2011
HMDA is intended to provide the public with loan data that
can be used:
– To help determine whether financial institutions are
serving the housing needs of their communities
– To assist public officials in distributing public-sector
investment so as to attract private investment to areas
where it is needed
– To assist in identifying possible discriminatory lending
patterns and enforcing anti-discrimination statutes.
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Who must report?
HMDA applies to all banks, savings associations, Credit
Unions, and other mortgage lending institutions.
For 2015, HMDA requires an institution with an asset size
of $44 million or greater as of December 31, 2014 to
report data to its regulating agency certain loan
transactions and to disclose the same data to the public.
Institutions are to report certain information on loan
applications secured by a dwelling that it originates,
declines or purchases for which it receives applications for
credit.
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Filing Deadlines
Transactions must be reported on the institution’s
HMDA LAR within 30 days after the end of the quarter
of when action is taken.
The institution must prepare its final year end HMDA
Report by March 1st of the following year.
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Notice Requirements
• Main Office must post notice of availability of its
HMDA data.
• Each branch must contain notice that such
information is available from the home office
• The HMDA LAR must be made available to the public
after modifying it or within 30 days of a request.
• The institution’s Home Office must contain the FFIEC
mortgage loan disclosure statement no later than 3
days after it is received
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Reporting Requirements
Home Purchase transactions
• Any loan secured by and for the purpose of
purchasing a dwelling (includes construction/permanent loans)
Refinance transactions
• Any dwelling-secured loan that replaces and satisfies another dwelling-secured loan to the same borrower.
Home Improvement transactions
• Loan secured by a lien on a dwelling for the purpose of repairing, remodeling, or improving a dwelling (in whole or in part) OR any non-dwelling secured loans if any of the proceeds are used for home improvement and the institution classifies it as a “home improvement” loan
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Reporting Requirements
HMDA excludes the following types of loans from the
reporting requirements:
• Loans originated or purchased as a fiduciary
• Loans on unimproved land
• Construction loans and other forms of temporary
financing (construction perm loans must be reported)
• The purchasing of an interest in a loan pool
• The purchasing of only servicing rights
• Loans acquired as part of a merger or acquisition
• Prequalification requests
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Optional Reporting Requirements
HMDA gives institutions the option to report the following:
• Home Equity Lines Of Credit (HELOC) and business purpose lines of credit
– Home improvement and home purchase
• Denial reason(s)
– Unless OCC regulated
– State of Connecticut
• For an employee loan, the income utilized by the institution in the credit decision.
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Who Reports?
The institution that makes the credit decision reports the
loan or application on its LAR.
• If a mortgage broker makes the credit decision, the
mortgage broker is responsible to report the loan or
application, including when the broker underwrites to the
investor’s guidelines and denies the application.
• If an investor reviews the loan application and makes a
credit decision, the investor reports the application.
• For participation loans, the institution that makes the
credit decision and initially originates the loan as the lead
lender reports the application
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LAR Data Entry
1. An identifying number for the loan or loan application
2. Date the application was received
3. Loan type
4. Property type
5. Purpose of loan or application
6. Owner-occupancy status of the property
7. Loan amount or the amount requested
8. Pre-approval status code
9. Type of action taken
10. Date of action taken
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LAR Data Entry
11.Property location (MSA)
12.Ethnicity, race and sex of the applicant(s) or
borrower(s)
13.Gross annual income relied upon in the processing of
the application
14.Type of purchaser of the loan
15.Reasons for denial
16.Rate spread between the loans APR and the yield on
Treasury securities
17.HOEPA Status (High Cost Home Loan)
18.Lien Status
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Collection of GMI
Ethnicity, Race and Sex of the applicant(s) are required to be collected and recorded for:
• Residential Mortgages
• Commercial Mortgages
• Home Equity Loans
• Home Improvement Loans
• Home Equity Lines of Credit
HMDA (Reg. C) requires institutions to collect and report GMI for home purchases, refinances and home improvement loans.
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Collection of GMI
In person applications:
• Inform applicant(s) of the federal requirement.
• If the applicant(s) chooses not to furnish the information, institution must record based on visual observation.
• Must report exactly how the applicant(s) responds
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Collection of GMI
Telephone applications
• Inform applicant(s) of the federal requirement.
• If the applicant(s) chooses not to furnish the information, indicate such and stop.
• Must report exactly how the applicant(s) responds
Mail or internet applications
• If the applicant(s) did not complete each section,
report that the application was taken by
mail/tele/int and not completed.
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Pre-Approval Programs
Regulation C § 1003.2 (b)(2)
• (2) Preapproval programs. A request for preapproval for a
home purchase loan is an application under paragraph
(b)(1) of this section if the request is reviewed under a
program in which the financial institution, after a
comprehensive analysis of the creditworthiness of the
applicant, issues a written commitment to the applicant valid
for a designated period of time to extend a home purchase
loan up to a specified amount.
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Pre-Approval Programs
Regulation C § 1003.2 (b)(2) Preapproval programs.
The written commitment may not be subject to conditions other
than:
– (i) Conditions that require the identification of a suitable
property;
– (ii) Conditions that require that no material change has
occurred in the applicant's financial condition or
creditworthiness prior to closing; and
– (iii) Limited conditions that are not related to the financial
condition or creditworthiness of the applicant that the
lender ordinarily attaches to a traditional home mortgage
application (such as certification of a clear termite
inspection).21
Pre-Approval Programs
• If the institution has a HMDA-defined Pre-Approval
Program, the institution must report for each qualified loan
request:
– Pre-Approval Requested
– Pre- Approval Not Requested
– Not Applicable
• Refinances and Home Improvement Loans
– Action Taken
• Pre-Approval Denied
• Pre-Approval Approved Not Accepted (optional)
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Conditional Approvals
• What does it mean to “approve” an application?
– When a credit decision is made to originate a loan AND that decision IS NOT subject to underwriting conditions, other than customary loan commitment or loan closing conditions.
• Customary loan commitment or loan closing conditions include:
– Clear Title requirements
– Acceptable Property Surveys
– Acceptable Title Insurance Binder
– Clear Termite Inspection
– Settlement statement showing adequate proceeds from sale when the proceeds from the sale of one home will be used to purchase another
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Conditional Approvals
• Underwriting conditions that are NOT customary loan
commitment or loan closing conditions include:
– Conditions that constitute a counter-offer, such as a
demand for higher down payment
– Underwriting conditions concerning the borrower’s
creditworthiness, including DTI and LTV ratios
– Verification/confirmation that the borrower meets the
underwriting conditions concerning the borrowers
creditworthiness
If your institution issues a commitment letter subject to
any of these categories, your institution has NOT
approved this loan, even though a commitment letter may
have been issued. 24
Trusts & Non-Natural Persons
When reporting loans to Trusts and Non-Natural Persons
(corporation, partnerships etc…) the following are
coded as “NA”:
– Government Monitoring Information
– Income
If the property type is Multi-family (5+units), the following
are coded as “NA”:
– Occupancy
– Income
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Mixed Loan Purposes
Reporting Order
• Home purchase loan supersedes a refinance or home improvement loan.
• Home improvement loan supersedes a refinance.
Examples:
• If the loan request is for a home purchase and home improvement, the loan purpose recorded on the LAR is home purchase.
• If the loan request if for a home purchase and a refinance, the loan purpose recorded on the LAR is home purchase
• If the loan request is for a refinance and home improvement, the loan purpose reported on the LAR is home improvement.
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Mixed Use Properties
• Purchase Loan – Commercial/Residential Property– Loan is home purchase if the property used primarily for
residential purpose (square footage/income)
• Home Improvement Loan – Commercial/Residential Property– Loan is a home improvement loan if the funds will be primarily
applied to the improvement of the residential area.
– If loan proceeds are used to improve the entire property, the loan is home improvement if the property itself is residential (square footage, utilization, income)
• Example– A book store with a residential apartment on the 2nd floor.
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Multiple Properties
Home Purchase Loan
• If the institution is taking more than one property for security:
– Report the location of the one property being purchased, if there is just one; OR
– Report the location of the other properties on separate entry lines
• Indicate a unique identifying number
• Allocate the loan amount between the multiple properties
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Multiple Properties
Home Improvement Loan
• If more than one property is being improved:
– Report the location of one of the properties being
improved;
OR
– Report both properties being improved by using a
separate entry line
• Indicate a unique identifying number
• Allocate the loan amount between the multiple
properties
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Income Reporting
Record the gross annual income relied upon for the credit decision:
• Multiple income
• Multiple borrowers / Co-signors
Do not record income if:
• Did not rely upon the income for the credit decision
• The individual is acting solely as a guarantor
• The security is a multi-family dwelling
• The loan is a purchased loan and the institution chose not to collect the income
• The loan is to a non-natural person
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Are You Consistent?
• Application Dates
– Between date on application and date recorded on LAR (definition of “application”)
• Occupancy Codes
– When to report “NA”
• Multi-family (5+)
• Property location is outside MSA
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Are You Consistent?
• Action Taken Codes
• Counteroffers
• Withdrawn
• File closed for incompleteness
• Action Taken Dates
• Originated
• Approved, not accepted
• Incomplete
• Withdrawn
• Declined
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Common Violations
• Inconsistent application dates
• Inaccurate reporting of action taken
• Improper reporting of commercial loans
• Improper reporting of income
• Over reporting
• Failure to report qualified applications
Civil money penalties can be imposed for failure to report
accurate data, failure to report the LAR in a timely
manner, and repetitive violations under Regulation C
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Changes as of 1/1/18
Beginning in 2018, Depository and Non-Depository
Financial institutions are subject to Regulation C if:
• Originated at least 25 covered closed-end mortgage
loans in each of the two preceding years OR
• Originated at least 100 covered open-end lines of
credit in each of the two preceding calendar years,
• Meet other applicable Depository institution and Non-
Depository coverage requirements
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Changes as of 1/1/18
New collection, recording and reporting requirements:
• Home Equity Lines of Credit
• Certain Home purchase approved not accepted
for pre-approvals
• Unsecured Home Improvement loans not
reportable
HMDA data fields increase from 26 to 48 fields
• Loan specific
• Collateral Property specific
• Applicant specific
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How To Prepare
• Action plan to implement the changes
• Review guidance
• Pay attention to error rate thresholds
• Seek input from business lines
• Train staff
• Revise Policies and Procedures
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References
• http://www.ffiec.gov/hmda/default.htm
– 2013 A Guided to HMDA Reporting Guide to Getting it
Right!
– HMDA FAQs
• January 2015 CRAHMDA Reporter -
http://www.ffiec.gov/hmda/pdf/15news.pdf
• HMDA Rule compliance guide
consumerfinance.gov/regulatory-implementation/hmda
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Questions?
Mary-Ann Boaz, CRCM
Sr. Regulatory Compliance Consultant
Phone: 617-261-8175
Email: [email protected]
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