Proposed Rules Published on Dodd-Frank Changes to Home Mortgage Disclosure Regulations
On August 29, 2014, the Bureau of Consumer Financial Protection (the “Bureau”) issued a proposed rule and request for public comment on changes to its Regulation C (Home Mortgage Disclosure) to implement changes to the Home Mortgage Disclosure Act (“HMDA”) required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”).
HMDA requires financial institutions to report to Federal regulators on an annual basis, and to the public on request, information on the institutions’ housing-related credit transactions. The stated purpose of the statute is to promote access to fair credit in the housing market. Section 1094 of the Act modified HMDA in order to increase reporting requirements and to streamline and modernize the reporting and data-gathering process. The Bureau proposes to amend Regulation C to implement the changes to HMDA required by the Act.
The final rule would modify the Regulation C in four general ways:
1. Changes to Coverage Under HMDA. Currently, Regulation C contains different coverage criteria for depository institutions and non-depository institutions. A “depository financial institution” (such as a bank) that makes even one first-lien home purchase loan or refinancing secured by a 1-4 family dwelling must collect and report HMDA data, while some institutions that are not defined as “depository financial institutions” in Regulation C (such as some mortgage companies) may make as many as 99 such loans each year without collecting and reporting HMDA data. Under the proposal, any lender meeting the definition of “financial institution” under Regulation C will be required to report HMDA data if they originated more than 25 covered loans (excluding open-end lines of credit) in the previous calendar year.
In addition, the Board is proposing to expand the types of loans required to be reported. Currently, only home purchase loans, home improvement loans and refinancings are required to be reported. The reporting of other types of loans, such as home-equity loans, is optional. In addition, reverse mortgages are reported to the extent they fall within the above three basic categories, but are not identified as such in the reporting. The Board believes that such uneven reporting can distort the data. Under the proposal, financial institutions would report all closed-end loans, open-end lines of credit and reverse mortgages secured by dwellings. Unsecured home-improvement loans would no longer be required to be reported, and loans secured by raw land and temporary loans would continue to be exempt, along with certain other types of loans. Reverse mortgages and open-end loans would have to be separately identified as such.
2. Changes to Reportable Data. The Bureau is proposing to align many of the HMDA data reporting requirements with the Mortgage Industry Standards Maintenance Organization standards for residential mortgages. The Bureau is also proposing to add or modify the following categories of data points:
- Information on applicants, borrowers, and underwriting criteria, such as age, credit score, debt-to-income ratio, reasons for any adverse action, and automated underwriting system results.
- Information on the security property, such as value, construction method, lien position, type of structure, and information about manufactured and multifamily housing.
- Information about the loan terms, interest rate and other pricing, maturity, loan type, and non-amortizing and introductory rate features.
- Unique loan identifiers, such as property address, originator identifier, and loan identifiers.
The proposed revised regulation contains a longer, and more specific, list of data points than those summarized above.
3. Changes to Disclosure and Reporting Requirements. Currently, financial institutions must report their HMDA data annually, by March 1 of the following year. The Bureau is proposing to change this to quarterly reporting, for those financial institutions that report large volumes of HMDA data. In addition, the Bureau is proposing to allow financial institutions to make disclosure statements available to the public by referring those requesting the information to a publicly available website. Currently, financial institutions must make the disclosures available to the public in their home offices and in certain branch offices, and must publish notice that the disclosures are available and provide them upon request.
4. Clarifying Changes. The proposed rule tries to address many long-standing issues that financial institutions and other interested groups have brought to the attention of the Federal regulators, such as the definition of “dwelling,” the treatment of manufactured and modular homes, coverage of preapproval programs and temporary financing, reporting loans made by multiple lenders, and the reporting of action taken on applications.
The proposed rule contains a great deal of very technical and detailed instructions for collecting and reporting data. These instructions are generally found in proposed Section 1003.5(b) of the Regulation and in proposed Appendix A to the Regulation. Those involved in complying with these requirements should review these proposed provisions carefully.
Banks and others may comment, and should do so if they think that these changes, or the specifics of the implementation of these changes as published in the notice, will have an adverse effect on their businesses. Comments on the proposed rule must be submitted by October 29, 2014. Comments must be identified by Docket No. CFPB-2014-0019 or RIN 3170-AA10, and may be sent by any of the methods set forth in the notice, which is published in the Federal Register of August 29, 2014 (Volume 79, No. 168) at page 51732.