On Oct. 15, 2015, the Consumer Financial Protection Bureau (CFPB) issued its long-awaited final rule amending and expanding the mortgage loan application data reporting requirements under Regulation C and the Home Mortgage Disclosure Act (HMDA). It is critical for lenders who are subject to the final rule to begin compliance preparations now, before it goes into effect on Jan. 1, 2018.
The most notable amendments are those that add new data points and modify the already-existing data points that must be collected and reported by covered lenders. The rule more than doubles the number of required data points and modifies over half of the already-required data fields. The new data points include (1) information about applicants, such as their age, credit score, and debt-to-income ratio, (2) information about the property securing the loan, such as its value and its construction method, (3) information about the features of the loan, such as the loan term, interest rate, and type of loan, and (4) certain unique identifiers, such as the universal loan identifier and the property address. Additionally, for applications not taken in person, the final rule requires financial institutions to report whether ethnicity, race, and sex information was collected on the basis of visual observation or surname. It also expands the required reporting of rate spreads to most originated loans and lines of credit, not just higher-cost closed-end loans.
The new reporting requirements do not become effective until January 2018, but lenders should start preparing for the final rule now to ensure that they have a system in place to record the newly required data points for transactions that were previously covered by HMDA, as well as newly covered transactions. Mortgage lenders should begin collecting the new data points as if the final rule were already in effect. Quality control measures should be implemented, including routine scrubs, to test and adjust operational models, identify the source of any data errors, and address the causes of these errors going forward.
Take some time to consider your HMDA process and how to make it better before the new rules take effect. If you need help understanding the new HMDA rules, developing and employing best practices to improve your HMDA data collection, or testing your expanded HMDA data now, in anticipation of the new rule’s implementation, look for our upcoming series of Knowledge Center items that will address the new requirements noted above, and help you navigate the road to the new HMDA rule.