Final HMDA Reporting Rule Issued

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Changes to reporting requirements for the Home Mortgage Disclosure Act are intended to improve insight into lending trends. But financial institutions are raising concerns.

HMDA data was reported by 7,062 financial institutions on 11.9 million home loan applications, pre-approvals and closed loans that occurred last year.

But the data being provided reportedly has not kept up with the evolution of the mortgage market and does not provide insight into loan features that helped contribute to the mortgage crisis.

That is according to the Consumer Financial Protection Bureau.

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required that the HMDA dataset be expanded to include additional information about applications and loans that would be helpful to better understand the mortgage market.

After convening
a panel early last year of small businesses to provide feedback on potential changes to the rule, the CFPB issued a proposed rule last July.

On Thursday, the bureau announced that
a final rule has been issued on HMDA reporting requirements.

The rule requires that lenders now report
the property value, term of the loan, and the duration of any teaser or introductory interest rates. This information is intended to improve the public’s understanding of market conditions. It’s also intended to help identify emerging risks and potential discriminatory lending practices in the marketplace.

Financial institutions will need to provide more information about
underwriting and pricing — including debt-to-income ratios, interest rates and discount points.
In addition to helping lenders and regulators screen for and identify possible fair lending problems, this data is expected to help the CFPB monitor developments in specific markets such as multifamily housing, affordable housing and manufactured housing.

Covered lenders are additionally required by the rule to deliver information about applications and loans like reverse mortgages and home-equity lines of credit.

“With today’s final rule we are shedding more light to foster better understanding of the market and also ensuring that lenders have sufficient time to come into compliance,” CFPB Director Richard Cordray stated in the announcement.

Small banks and credit unions
that are located outside a metropolitan statistical area remain excluded from coverage.

In addition, small financial institutions that originate fewer than 25 closed-end loans or 100 HELOCs in each of the two preceding calendar years will no longer be required to report HMDA data — a change that is expected to significantly ease compliance costs for firms with few staff members.

The new requirements are expected to reduce the number of depository institutions that report HMDA data by 22 percent while not impacting the value of the remaining dataset.

A statement from the American Bankers Association said the group is concerned about the privacy of their members’ customer data.

ABA is additionally concerned about “significantly expanded data reporting and collection requirements.”

Credit unions are also wary of cumbersome requirements.

“We are concerned that some of the additional reporting requirements will not achieve these goals and may only serve to impose significant additional compliance and reporting burdens on responsible lenders like credit unions,” National Association of Federal Credit Unions Director of Regulatory Affairs Alicia Nealon said in a written statement.

NAFCU additionally noted that mandating HELOC reporting will increase compliance costs and burdens on credit unions
since their systems will need to be modified in order to collect data.

The bureau noted that it is working with other members of the Federal Financial Institutions Examination Council and the Department of Housing and Urban Development to streamline the reporting process for financial institutions.

“In addition to collecting data under HMDA, many financial institutions are collecting the same or similar data for their own processing, underwriting and pricing of loans, or to facilitate the sale of loans on the secondary market,” today’s CFPB statement said. “Many of the amended requirements align with well-established industry data standards, including definitions that are already in use by a significant portion of the mortgage market.

“The bureau anticipates that this alignment will mitigate the burden on many lenders, and improve the quality and the value of the information reported.”

Mortgage Bankers Association President and Chief Executive Officer David H. Stevens issued a statement commending
the regulator for making MISMO technology standards a core part of the new reporting.

But Stevens said the trade group is still concerned about
data security and consumer privacy as a result of additional detailed consumer information the government will be collecting and disclosing under the new HMDA guidelines.

Most of the final rule’s provisions impact activity that occurs on or after Jan. 1, 2018, and reported by March 1, 2019.

Mortgage Expert

Mortgage Daily Staff