On April 13, 2017, the CFPB proposed amendments to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The proposed amendments are aimed at correcting and clarifying certain requirements under final HMDA rule adopted by the CFPB on October 28, 2015 (HMDA Final Rule) and proposes a new reporting exclusion. Comments to the proposed amendments will be due within 30 days of its publication in the federal register.
The HMDA Final Rule, promulgated pursuant to the Dodd-Frank Act amendment to HDMA, modified the types of institutions and loans transaction subject to HMDA reporting and significantly expanded the data points that financial institutions must report to federal regulators under HMDA. Expanded data collection is set to begin on January 1, 2018 and reporting under the HDMA Final Rule will begin in 2019.
Summary of Proposed Amendments
In the proposed amendments, the CFPB proposes to establish transition rules for reporting two data points related to purchased loans to account for regulatory effective dates. More specifically, for purchased loans that were originated prior January 1, 2018, the transition rules would allow financial institutions to report “not applicable” with respect to the “loan purpose” data point; and, for purchased loans originated prior to January 10, 2014, financial institutions would be permitted to report “not applicable” with respect to “loan originator unique identifier” data point.
The proposal would also clarify certain key terms, including “temporary financing”, “automated underwriting system”, “multifamily dwelling”, “extension of credit”, “income” and “mixed-use property”.
The proposal would also provide assurances to financial institutions that obtain the census tract number from the forthcoming geocoding tool that will be provided by the CFPB on its website. According to the proposal, the CFPB plans to make available on its website a geocoding tool (CFPB’s geocoding tool) that financial institutions may use to identify the census tract in which a property is located. The proposed amendment would establish that a financial institution would not violate Regulation C by reporting an incorrect census tract for a particular property if the financial institution obtained the incorrect census tract number from the CFPB’s geocoding tool, provided that the tool returned a census tract number for the address entered and that the financial institution entered an accurate property address into the tool.
The proposal also would create a new reporting exception for certain transactions associated with New York State consolidation, extension and modification agreements to avoid double reporting.
The proposal would also clarify that financial institutions may voluntarily report open-end lines of credit or closed-end mortgage loans even if the institution may exclude those loans pursuant to the transactional thresholds included in subsection 1003.3(c)(11) or (12) under the HMDA Final Rule.
The proposed rule also includes a variety of minor changes and technical corrections. More specifically, the proposal would correct a drafting error and align the transactional thresholds included in § 1003.3(c)(11) and (12) under the Final Rule with the institutional coverage thresholds included in § 1003.2(g). The proposal addresses certain technical aspects of reporting, such as how the reporting requirements for certain data points relate to disclosures required by the Bureau’s Regulation Z and how to collect and report certain information about an applicant’s race and ethnicity.
The CFPB proposes the amendment effective date would be synchronized with the related effective date of the amended provisions under the HMDA Final Rule. The HMDA Final Rule takes effect in stages, beginning in January 1, 2017 through January 1, 2020, with the bulk of the new data collection requirements becoming effective on January 1, 2018 with reporting beginning in 2019.
According to the CFPB, the proposed amendments are largely clarification and technical corrections. To the extent that the proposal makes substantive changes the CFPB is of the opinion that these changes would reduce burden on the industry. We encourage HMDA reporting financial institutions to review the proposed amendments and to consider the need to submit written comments. Comments to the proposed amendments will be due within 30 days of its publication in the federal register.
If you have any questions or would like more information on the matters discussed in this update, please contact Solomon Maman.