The wait is over! On Friday, August 31st, the CFPB released a HMDA small filer exemption! At least that’s what we’re calling it. Speaking of plain English, we’re going to take all of this information, digest it, and deliver it to you in a one-hour webinar on September 18th. We’ll do the heavy lifting and you’ll get all the details, a complete manual, a video recording, questions and answers – so you can keep doing what you do best – serving your customers. Sign up today!
Let’s talk – July 5th the CFPB made a preliminary announcement that this was coming and I produced a video blog and a coverage chart (included in the monthly newsletter and the upcoming webinar).
If you originate less than 500 closed in loans or 500 lines of credit in each of the two proceeding calendar years, then you are a HMDA small filer! If you qualify for the exemption, then you don’t have to report a bunch of data. Lucky you!
Let’s dive into this just a little bit. Now, it could be that you qualify for the loans but not the lines, or the lines but not the loans. Apply this exemption to loans or just to lines. You’re not eligible if you messed up CRA. In other words, if you got a needs to improve in each of your last two CRA exams or a substantial noncompliance in your last CRA exam, you’re not eligible for the exemption. Even though you originate less than 500 loans or lines, you don’t get to take advantage of the exemption. Sorry! Just don’t go there.
If we qualify, when can we start reporting less data? Well, basically May 24th, but the CFPB passed it back retroactively to January 1st. All of your 2018 loan application registered entries are subject to this exemption. There are 26 items that you don’t have to report! I recommend viewing my July 5th video blog – the laundry list is there! If you get our monthly newsletter, we spelled them out there too. Or, go to page 18 of the final rule and you’ll see the list in two columns of those things that are exempt and those things that you still have to report. Things like rate spread, origination charges, discount points, interest rate, debt-to-income – they’ve knocked them all out! You can voluntary report all this, but why? Maybe it’s a system issue. The Filing Instruction Guide (FIG) was updated in August and now you use the word “exempt” or there’s a code “1111” that you’ll use depending on if it’s an alphanumeric or numeric value that you’ll enter that says we don’t have to report this. I recommend that you don’t report anything you don’t have to because if you’re wrong then it’s a citation. You might have some civil money penalties. You might have to rescrub and refile. If you want to still collect data great, but don’t report it.
I recommend that you still collect debt-to-income, loan-to-value, and credit score. That is defensive information that you can use in case you’re being questioned from a fair lending standpoint. You can use this information to justify why you denied or charged somebody more, etc. But again, I would not report that information. Simply collect it and have it readily available in your defense.
Again, you can voluntarily report data, but if you decide you want to, there are 7 items that if you report one you’ve got to report them all. Let me explain. For example, property address, credit score, reasons for denial, total loan costs or total points and fees (5 data points), non-advertising features (4 data points), application channel, and automated underwriting…there’s not just one data point per each category. There’s two or three or up to five data points. So, if you decide to report any of the loan costs, you have to report all five data points in the loan costs category. If you report any of the non-advertising features, you have to report all four of them. If you go there, you must complete them all. It doesn’t mean that if you do credit score you have to do reasons for denial. Within reasons for denial, there’s more than one data point. You can’t just do half of it.
Here’s another couple of quirky things to keep in mind:
- Reasons for denial is no longer something that the CFPB is requiring under HMDA, but the OCC does require it. Also, if you were regulated by the OTS, and you switched over to a FDIC charter, then you still have to report the reasons for denial. This is the way it was prior back in 2015. So, in other words, let me say it this way: banks regulated by the FDIC and the Federal Reserve that were not previously OTS do not have to do reasons for denial. But, all OCC and those FDIC that were OTS will have to do reasons for denial. Sorry, I just give you the plain English version, but I didn’t write the rule!
- The Universal Loan Identifier is one of the exempt data pieces, but you still have to have some way to uniquely identify every application. The CFPB is calling it a non-universal loan identifier. Boy isn’t that creative? You don’t have to use your legal entity identifier. You don’t have to use a check digit. It can be up to 22 digits long. It can’t contain any information that would allow someone to be able to identify the applicant. So, it’s got to be confidential. If you’re a small filer and you sell a loan to a purchaser that is not a small filer, then they’re going to have to assign a ULI to it. So, they might make you use a ULI because they have to use a ULI.
I recommend that you do not report any of this optional data. Instead, report it as “exempt” or code “1111″, but again still collect debt-to-income, loan-to-value, and credit score, and information to defend your practices. There are 22 data points that are still required. Again, go to my July 5th video blog or page 18 of the final rule for the laundry list. The CFPB says they will be modifying Regulation C. Right now it’s just a narration, they haven’t codified it yet, but they will. Go to the CFPB’s website and download the August 2018 version of the Filing Instruction Guide (FIG). Register for our one-hour webinar on Tuesday, September 18th for all the details, written questions and answers, and a recorded webinar to share with your team and view as many times as you’d like. We’ll see you there.