A New Year, A New Beginning – Implementing the HMDA Rule

By:  Michele Renz

January.  The month marking the start of new beginnings – a new year of good intentions and implementation of resolutions to better yourself personally.  While you undoubtedly started strong toward your goals and still have the best intentions, the reality, at least according to one study, is that 80% of resolutions fail by February.  If you are succeeding at your resolution – congratulations!  If you have failed, you are obviously not alone.  The good news is that you can always pick up where you left off and start fresh.  On the other hand, if you never got started, there is no better time to start than now.  Such is true with the implementation of the Consumer Financial Protection Bureau’s (CFPB) Home Mortgage Disclosure Act (HMDA) Rule. 

The HMDA Rule, published in 2015 and revised in 2017, redefined what is a covered, reportable loan and contains numerous new provisions that became effective on January 1, 2018.  Perhaps the most significant, enhanced of the HMDA Rule provisions that became effective on January 1st is that the number of data points on the loan application register (LAR) expanded from 29 to 48, and the number of data fields ballooned from 39 to 110. 

Some of the added data points – such as property address and credit score – are new fields required on the LAR that are undoubtedly collected as a part of your credit union’s loan application process.  However, there are multiple data points and fields that are entirely new, such as expanded ethnicity and race fields, for which you may not be collecting to the level of detail required by the newly enacted HMDA Rule provisions.  Furthermore, these additional data fields and/or points means that you will need to establish an efficient way to collect, record, and transfer the data collected to the LAR in a timely manner.  Depending on the volume of covered transactions that your credit union processes, you may want to track this information manually via an Excel spreadsheet, or it may be time and money well spent to invest in resources to include and auto-extract this information from your core systems. 

The good news is that the Consumer Financial Protection Board (CFPB) has some excellent resources on its website to get you on track with collecting the data necessary for 2018 HMDA reporting.  If you were not using it already, I highly recommend that you immediately begin using the Sample Data Collection Form – Demographic Information of Applicant and Co-Applicant to collect voluntary, self-identified ethnicity and race information from loan applicants and co-applicants.  Also, the Reportable HMDA Data:  A regulatory and reporting reference overview chart is an invaluable resource to guide and define required data point definitions and proper data field reporting.  In addition to these resources, the Home Mortgage Disclosure Act Rule Implementation web page contains a link to the 225-page published Rule as well numerous other invaluable resources including executive summaries, coverage charts, and free archived, educational webinars.  Regulators have also indicated that a guide similar to the Federal Financial Instiutions Examination Council’s (FFIEC) 2013 A Guide to HMDA Reporting – Getting It Right! for the CFPB’s HMDA Rule is coming soon; this is sure to be a welcome addition to your HMDA compliance resources. 

As you are likely aware, the NCUA has included HMDA compliance in its published Supervisory Priorities for 2018.  This letter indicates that examiner’s will “…evaluate federal credit unions’ good faith efforts to comply with (HMDA)” and that the “NCUA’s review of 2018 HMDA data will be diagnostic in nature…and will credit good faith compliance efforts”.  Familiarity with and use of the aforementioned resources, along with a documented HMDA compliance management system, will go a long way towards demonstrating your credit union’s good faith compliance efforts with the current HMDA Rule.

If you did not make changes to your information collection process for HMDA-related loan applications, the time to make the changes is NOW.  The time required now to become familiar with the resources and implement these changes is minor compared to the time – and huge amount of rework and headache – you will incur if you do not do this until later in the year.  Also, I’m sure avoiding making your examiner unhappy and not giving them reason for a comment in this area is pretty good motivation to get moving on this as well!

If you have any questions regarding the HMDA Rule and/or its implementation, we can help.  Please do not hesitate to contact us today.