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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© 2014 TriComply Compliance Services
What you will learn
Proposed HMDA Rule
H
ow
M
uch
D
o you
A
gonize over HMDA?3
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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© 2014 TriComply Compliance Services
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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© 2014 TriComply Compliance Services
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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© 2014 TriComply Compliance Services
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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© 2014 TriComply Compliance Services
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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© 2014 TriComply Compliance Services
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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© 2014 TriComply Compliance Services
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 4th 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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© 2014 TriComply Compliance Services
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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© 2014 TriComply Compliance Services
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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© 2014 TriComply Compliance Services
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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© 2014 TriComply Compliance Services
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
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