HOW MUCH DO YOU AGONIZE

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H OW M UCH D O YOU A GONIZE

OVER HMDA?

Speaker: Leah M. Hamilton, Director TriComply

Compliance is …

Everyone’s responsibility every day!

About the Speaker

 Leah M. Hamilton, JD

 Director of TriComply Services with TriNovus, A Temenos Company

 Serves over 900 financial institutions; approximately 6,000 users

 Almost 20 years of experience in the financial services industry

 A licensed attorney for more than 10 years, received Juris Doctorate from Northern Illinois University College of Law, and her Bachelor of Arts in General Studies degree from the University of Texas at Dallas with major in law and minor in business

management

 Known for engaging approach to teaching regulatory compliance as a nationally recognized speaker on Compliance and BSA/AML matters offering candor and an in-touch approach to the information presented while also providing attendees with tools and valuable insight into areas which could be considered high risk

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What you will learn



Proposed HMDA Rule



_H

ow



M

uch



D

o you



A

gonize over HMDA?

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HMDA Purpose



Originally adopted in 1975

Serving the community needs

Aid public officials and private investors to identify areas needing investments



Today …

Leading facilitator to identify possible discriminatory lending patterns

Assist regulatory agencies in enforcing anti-discrimination statutes



Future …

Enhance and improve understanding of mortgage markets

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Overview of Proposed Changes

 Change reporting threshold for all financial institutions

 Make 25 or more loans in calendar year required to report

 Change transactions subject to reporting

 Include all home-secured loans

 Include HELOCs, reverse mortgages and business LOCs

 Exempt home improvement loans not secured by a dwelling

 Require certain large institutions to file reports quarterly

 Report at least 75,000 loans annually

 Align HMDA data points with other industry data points

 Mortgage Industry Standards Maintenance Organization (MISMO)

 Change providing copies of HMDA-LAR info

 Refer to FFIEC website

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Overview of Proposed Changes

 Add new data points

 Include applicant/borrower information

 Age, credit score, debt-to-income ratio, reasons for denial,

application channel and automated underwriting system information

 Include property information

 Property value, lien priority, number of units in a multi-family dwelling and information about manufactured housing

 Include loan features

 Pricing information, loan term, interest rate, introductory rate period, non-amortizing features and type of loan

 Include unique identifiers

 Such as loan identifier, property address, loan originator identifier and legal entity identifier

 Data scrubbing/masking

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Definitions

 Application

 Under consideration for possible changes

 Not necessarily RESPA/Regulation Z

 Preapproval

 Still required to report if formal program

 Loan purpose

 ALL dwelling secured

 Open end, closed end, consumer, commercial

 Dwelling

 Clarify when dwelling no longer used as a residence

 No RVs or houseboats, even if located in US region that considers them homes

 Mobile homes will only be referred to as manufactured homes (consistent with HUD)

 5 or more residential units in a mixed use property = residential regardless of allocations for commercial/residential

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Definitions



Financial institution

Non-depository

Home or branch office in MSA

Originated at least (25) closed-end, covered loans

Depository institution

$43 million in assets (adjusted annually)

Home or branch in MSA

Originated at least (1) home purchase or refinance secured by a first lien on a 1-4 dwelling

Federally insured or regulated

Originated at least (25) closed-end, covered loans

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Definitions



Home improvement loan

Must be secured by a dwelling

No more unsecured home improvement loans



Home purchase loans

Assumptions with written agreement that lender accepts as new borrower obligated on the loan



Manufactured home

References to mobile home will go away

Consistent with HUD definition

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Definitions

 Multifamily dwellings

 New definition of 5 or more dwelling units

 Additional info will also be required

 Open-end credit

 New definition based on Regulation Z

 Applies regardless of consumer or commercial borrower or loan purpose

 All HELOCs and dwelling secured commercial LOCs

 Refinancing

 Not limited to prior purchase refinance

 One dwelling secured loan satisfying and replacing another dwelling secured loan

 Modifications without satisfaction would not be HMDA reportable

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Definitions



Reverse mortgage

Not currently reportable

Mandatory inclusion

Use definition under Regulation Z



Temporary financing

Designed to be replaced by permanent financing

Except construction loan > 2 years is not temporary



Unimproved land

Vacant land under RESPA is deemed a lien secured by unimproved land under HMDA

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New data points



Universal Loan Identifier

Unique identification number to be created



Date Application Received

Concerns for commercial loans



Loan or Application Type

Revised to track statutory requirements

Conventional loan, FHA, VA, USDA



Purpose of Loan or Application

Home purchase, home improvement, refinancing, other

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New data points



Construction Method

Factory-built modular homes that do not meet HUD

standards for manufactured housing are not manufactured housing for HMDA

Site-built or manufactured housing



Occupancy type

Principal, secondary, investment with/without rental income



Loan Amount

Closed end (not a reverse mortgage) = note amount

Purchased = balance at time of purchase

Reverse mortgage = amount of initial principal limit

Open end = full amount of credit available under the plan

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New data points

 Action Taken

 Rescinded loans = approved not accepted

 Conditional approval definition expanded

 Postal Address and Location of Subject Property

 Location of property securing / to secure the loan

 No PO Box

 Ethnicity, Race and Sex

 Looking for comments on visual observation

 Trusts

 Not applicable

 _Age

 Calculate based on date of birth provide on application

 Natural persons only

 _Income

 No clarification of what Gross Income is

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New data points



Type of Purchaser

Same codes but added commentary

Definition of ‘affiliate’ added



Rate Spread

All loans with proposal to limit to Regulation Z loans but exclude reverse mortgages, purchased loans, assumptions, not originated (except approved not accepted)

Actual spread (plus or minus)



HOEPA Status

What makes it a HOEPA loan

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New data points



Lien Status

Actual lien position up to 4^th position, then, other



Credit Score

Score used in making credit decision

Code if none used



Reasons for Denial

Currently required for OCC and some FDIC (former OTS institutions)

Mandatory for all

Up to (3) reasons

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New data points



Total Points and Fees

Definition consistent with Regulation Z and MISMO



Total Origination Charges

Borrower paid before or at closing



Total Discount Points

Paid to the creditor to reduce rate



Risk-Adjusted, Pre-Discounted Interest Rate

What would the rate have been without the discount



Interest Rate

Rate applicable at closing

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New data points

 Prepayment Penalty

 Term in months for any applicable prepayment penalty provided for in the loan

 DTI Ratio

 Debt to income ratio relied in making credit decision

 CLTV Ratio

 Combined loan to value ratio applicable to the property

 Loan Term

 Number of months until maturity

 Introductory Rate Period

 Number of months from origination until the first rate adjustment may occur

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New data points



Balloon Payment

Indicate if a balloon payment is required (T/F)



Interest Only

If one or more payments may be interest only (T/F)



Negative Amortization

If permit negative am (T/F)



Other Non-Amortizing

Features

If other non-amortizing features other than balloon, interest only or negative

amortization (T/F)

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New data points



Property Value

Value of property securing/proposing to secure the loan



Manufactured Home

Legal Classification

Based on state law



Personal property

Real property



Manufactured Home

Land Property Interest

Ownership or leasehold



Total Units

Number of individual units securing the loan



Multifamily Affordable

Units

Number of individual units securing the loan that are income-

restricted (Federal, State or local)

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New data points



Application Channel

Direct submission to institution (T/F/NA)



Mortgage Loan

Originator Identifier

NMLSR ID # of loan originator, if applicable



Automated Underwriting

System (AUS) and

Recommendation

Name AUS

AUS Recommendation



Reverse Mortgage Flag

Type of reverse

mortgage (open/closed)



HELOC Flag

Indicate if HELOC or other open end LOC



Qualified Mortgage

Type of QM



HELOC and Open End

Reverse Mortgage

Amount of any draw at account opening

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HMDA Scrub

 Create a HMDA Data Source Worksheet

 What are your actual source documents for each data element that must be captured for HMDA reporting

 Nothing fancy, nothing frilly

 Can be just a spreadsheet listing out the HMDA data fields

 Add a column next to indicate what source documents have the correct (and consistent) information.

 Do this for each type of application

 Examples

 Residential mortgage loan, you use the1003; GMI information is located on page 4 of 5

 Commercial loans, you use a separate GMI form

 Promotes consistency

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What it means to you?

 Controlling errors

 Considering error tolerance levels

 Create a HMDA Data Source Worksheet

 What are your actual source documents for each data element that must be captured for HMDA reporting

 Nothing fancy, nothing frilly

 Can be just a spreadsheet listing out the HMDA data fields

 Add a column next to indicate what source documents have the correct (and consistent) information.

 Do this for each type of application

 Examples

 Residential mortgage loan, you use the1003; GMI information is located on page 4 of 5

 Commercial loans, you use a separate GMI form

 Promote consistency

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HMDA Data

Source

Worksheet

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Questions?

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Contact: Bob Roberts Phone: 205.482.7559

Email: RRoberts@temenos.com

Contact: Starr Largin Phone: 205.541.2127 Email: SLargin@temenos.com