Pub. 6 2017 Issue 2

The CommunityBanker 14 F E A T U R E New HMDA 2018 Loan Volume Thresholds By Patti Blenden, Financial Solutions, Inc. It’s really hard to believe that we are only seven months away from the newHome Mortgage Disclosure Act. (HMDA) reporting rules. The CFPB’s implementation tools refer to the new rules as the “2015 HMDA Rule,” and for ease of familiarity, we will use that or “new HMDA rules” to distinguish from existing regula- tions. Not only do we have the many new data fields to report, we also have a new set of thresholds to determine HMDA-reportable status and whether to report closed- end dwelling loans, open-end dwelling loans, or both. With expanded HMDA data about nondepository lend- ing, the CFPB claims the public and public officials will be better able to protect consumers because historically, some riskier lending practices, such as those that led to the financial crisis, have emerged from the nondepository market sector. The industry is still grappling over very important privacy issues that are yet to be resolved. By considering both an institution’s closed-end and open-end origination volumes, the CFPB’s goal is to increase visibility into open-end dwelling-secured lending. Before you start counting loans, you must be certain which loans to count to compare to the threshold! The precise criteria for whether an institution is covered by HMDA’s implementing regulation, Regulation C, are codified in §1003.2(g). There are different thresholds for depository financial institutions versus nondepository-for-profit financial institutions. Here we will discuss the types of transactions that comprise the closed-end or open-end dwelling-secured transactions you must carefully count to find out exactly what you must report for the next calendar year. HMDA Loan Volume Threshold Effective January 1, 2018, the HMDA Rule adopts a uniform loan-volume threshold for all financial institutions. For depository financial institution coverage, the newHMDA Rule maintains current Regulation C’s asset-size threshold, location test, feder- ally related test, and loan activity test. Beginning on that date, an institution will be subject to Regulation C and required to collect, record and report data for covered closed-end mortgage loans if the institution originated at least 25 covered closed-end mortgage loans in each of the two preceding calendar years, and satisfies other applicable coverage requirements (i.e., asset size, location, loan activity and federally related tests). Additionally, an institu- tion will need to collect, record and report data for covered open- end lines of credit if the institution originated at least 100 covered open-end lines of credit in each of the two preceding calendar years, provided that other applicable coverage requirements are met. The loan volume tests are independent of each other, meaning that the institution may need to report only closed-end covered loans, only open-end covered loans, or both closed-end and open-end dwelling-secured mortgages. Covered Loans Beginning on January 1, 2018, Regulation C generally applies to consumer-purpose, closed-end loans and open-end lines of credit that are secured by a dwelling (§1003.2(d), (e), and (o)), regardless of purpose. As a result, a home improvement loan is not HMDA- report-able unless it is secured by a dwelling. As of the new effec- tive date, Reg C also applies to business-purpose, closed-end loans and open-end lines of credit that are dwelling-secured and are home purchase loans, home improvement loans, or refinancings. 12 CFR 1003.3(c)(10). For business-purpose transactions, the 2015 HMDA Rule creates a dwelling-secured standard and maintains current Regulation C’s purpose test. Dwelling To fully understand the reportable transactions, you must be clear on what is and what is not considered a dwelling. In the context of HMDA, a dwelling (§1003.2(f)) includes a residential structure, with or without real property, and includes a detached home, an individual condominium or cooperative unit, a manufactured home or other factory-built home, or a multifamily residential structure or community. Multifamily communities are counted as a “dwelling,” including those with manufactured homes, to reflect the evolution of the housing market to include many multifamily communities that are comprised of individual lots with manufactured homes rather than the traditional apartment complexes without parceled real estate.