Many changes will involve adding new
data elements to banks’ yearly HMDA
submissions to, in the bureau’s words,
“improve information reported about the
residential mortgage market to help better
understand borrowers’ access to credit.”
It’s important to note this is merely
the first step in the CFPB’s rulemaking
process; this was not a rulemaking of any
kind (proposed or otherwise). The even-
tual final rule could look much different
than the current regulation. But if his-
tory is any guide, much of this (in some
form) will make it into the final rule.
The Dodd-Frank Act requires the
CFPB to add 13 new data elements
(which will be in the final regulation regardless of what else happens). However,
the law also permits the bureau to add
“such other information as the bureau
may require.” The CFPB took this seriously— 13 additional data elements were
put forth for consideration.
The CFPB is off to a broad and ambitious start, but it may narrow its focus
based on what it hears. It will take the cost
and utility of the information will be taken. Much will depend on feedback from
the small business panel, as well as the
industry at large, once a formal proposal
has been issued for public comment.
Below are the new data elements discussed by the CFPB, grouped by application and loan, property, and applicant
and borrower data, and whether they’re
sure to be implemented (mandated by
Dodd-Frank), or are merely being considered by the bureau.
Application and Loan Data
Required to be added:
1. Application channel: Whether the
application was taken through a retail,
wholesale, or correspondent channel.
2. Loan term: Reported in months.
3. Adjustable rate mortgage (ARM) introductory term: The initial fixed-rate
period in months.
4. Rate spread for all loans: The numerical difference between the loan’s annual
percentage rate (APR) and the reference
“Average Prime Offer Rate” is currently
required only when the spread exceeds
a threshold. The thresholds will be
eliminated.
5. Total points and fees: Calculated under
Regulation Z (Truth in Lending) rules
that became effective in January 2014.
6. Prepayment penalty term: Reported in
months.
7. Non-amortizing features: Indicators
for balloon or interest-only payments, or
negative amortization.
8. Loan originator identifier: Likely to
be the Nationwide Mortgage Licensing
System and Registry (NMLS) identifier,
required by the Secure and Fair Enforcement for Mortgage Licensing (SAFE)
Act, for the employee who took the application or originated the loan.
9. Universal loan identifier: What this
will look like has yet to be determined,
but the idea is to create an ID that could
“facilitate tracking a loan through its
lifecycle across multiple platforms (e.g.,
servicing, foreclosure database).”
Also being considered:
10. Interest rate: The borrower’s rate after points are applied.
11. Risk-adjusted, pre-discounted interest
rate: The rate without any discounts or
premiums.
12. Total origination charges: As defined
by Regulation Z.
13. Total discount points: Paid to reduce
the interest rate.
14. Combined loan to value (CLTV) ratio: Includes multiple loans on the same
property.
15. Denial reasons: Currently, only banks
supervised by the Office of the Comptroller of the Currency (OCC) and The
Federal Deposit Insurance Corporation
(FDIC) must report these, but everyone
may get to join the party.
16. Automated underwriting system
(AUS) results: This would require
both the name of the AUS (if one was
relied upon), such as Fannie Mae’s
Desktop Underwriter (DU), and its
recommendation.
17. Loan type: Current designations may
be increased to include:
■ ■ ■ Cash-out refinancing;
■ ■ ■ Reverse mortgage;
■ ■ ■ Home Ownership and Equity Protection Act (HOEPA) status, which is already required, but may be expanded
to indicate why the loan qualifies
(points and fees, rate, or both);
■ ■ ■ Qualified Mortgage (QM) status,
which would allow the CFPB and
everyone else to see how the QM rules
impact credit availability; and
■ ■ ■ Home equity lines of credit (HELOCs).
Does this last point mean HELOCs
will become required reporting (they’re
optional now)? It’s uncertain, but one
sentence in the CFPB’s Outline of
Proposals is ominous: “The ability to
distinguish loan types may be even
more necessary if the bureau requires
FIs [Financial Institutions] to report all
Compliance Management
Preparing Now for HMDA Changes
SINCE The Dodd–Frank Wall Street Reform and Consumer Protection Act came out we’ve known Home Mortgage Disclosure Act (HMDA) requirements were going to expand. But we’re now starting to get an idea by how much they may be changing. In February, the Consumer
Financial Protection Bureau (CFPB) announced it is convening a small business
panel to provide feedback about amending the regulation.
