Required changes may be closer than you think.
Most are aware that the majority of the new HMDA rules are going into effect January 1, 2018; however, some might not realize the impact of the new rules on 2017 covered applications. Specifically, covered applications received in 2017 for which final action is not taken until 2018. So, what does the transition provision allow and what does it not permit? Well, there is some good news and some bad news…
Good news: If on an application received in 2017 you collect the ethnicity, race and sex (demographic information) of the applicant(s) at the time of application (or at least before January 1, 2018), the transition provision allows you to report under the current rules—even if you action the loan/application in 2018.
The HMDA Rule provides a transition provision that allows a financial institution to report the applicant’s ethnicity, race, and sex 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.
Bad news: As in prior years, you report an application in the calendar year in which you take final action on the application. That means for an application received in 2017 for which final action is taken in 2018, you must collect, record, and report the new and modified data points related to the application under the new HMDA rules for everything except the ethnicity, race and sex, assuming you collected the ethnicity, race and sex of the applicant(s) before January 1, 2018. If for whatever reason you take action in 2018 and collect the demographic information at closing or at the point of non-origination (e.g., denial), you would be required to report the ethnicity, race and sex data points under the 2018 rules (i.e., the aggregated and disaggregated categories).
What to do during the transition period: Start practicing the collection of the expanded demographic information now. The Consumer Financial Protection Bureau (CFPB) has specifically deemed it acceptable. While you won’t yet report the expanded demographic information on your 2017 HMDA loan/application register (LAR), begin collecting it through use of the new Uniform Residential Loan Application (URLA / Fannie Mae 1003). If your institution has chosen to defer the use of the new URLA, or does not have a supplemental demographic collection form to collect the applicant’s aggregated and disaggregated ethnicity, race and sex information, then Fannie Mae and Freddie Mac have you covered. The GSEs have published the Demographic Information Addendum to facilitate collecting the new and expanded race and ethnicity subcategories while still using the current URLA.
WE CAN HELP
The 2018 HMDA Rules bring about massive changes—the addition of 25 new data points and the modification of 12 existing ones. These changes will of course not just impact the compliance department, but will have a ripple effect throughout the entire organization. With more information available via the HMDA LAR, the examiners will have more insight on your institution’s lending practices than ever before.
Select HMDA Services
-Policy and Procedure Update/Review
-Training
-LAR Data Integrity Testing