By, Elva Coffey-Sears
In addition to the institutional coverage changes previously reported, the CFPB’s final rule amending Regulation C to implement amendments to the Home Mortgage Disclosure Act (HMDA) changes the transactions required to be reported on the HMDA Loan Application Register (LAR). These changes work in concert with the loan volume threshold tests to determine which transactions you will include on your HMDA-LAR.
Currently, covered institutions are required to report applications, loans and loan purchases that are for the purpose of:
- Purchasing a dwelling, provided that the loan is secured by a dwelling
- Home improvement, if the loan is secured by a dwelling or the loan is classified by the institution as a home improvement loan regardless of the collateral
- Refinancing a dwelling-secured loan that replaces and satisfies an existing dwelling-secured loan to the same borrower
Institutions also have the option of reporting the portion of the proceeds of any home equity line of credit that will be used for home purchase or home improvement.
Beginning January 1, 2018, institutions meeting the asset size, location, federally-related and volume tests will be required to report:
- Open-end and closed-end applications and originations and purchases of consumer-purpose credits secured by a dwelling, regardless of purpose
- Dwelling-secured business or commercial purpose open-end and closed-end applications, originations and purchases, if the purpose of the credit is to
- Purchase a dwelling
- Repair, rehabilitate, remodel or improve a dwelling or the real property on which the dwelling is located
- Replace an existing, dwelling-secured debt obligation with a new, dwelling-secured obligation for the same borrower
- Approved but not accepted preapproval requests for home purchase loans relating to a single-family dwelling
However, as with all good regulations, certain transactions are excluded from the reporting requirement. The regulation excludes transactions in which the institution is acting in a fiduciary capacity and institutional purchases of an interest in a pool of credits, servicing rights, credits relating to a merger/acquisition, of the assets and liabilities of a branch office or a partial interest in a line or loan. Also excluded from reporting are obligations secured by unimproved land, temporary financing, applications or credits of less than $500 and credit used primarily for agricultural purposes.
The impact of these transactional coverage changes on your institution will depend upon the products you offer and your transaction volumes. For example, institutions offering closed-end reverse mortgages may experience an increase in reportable transactions because of the change from a purpose-driven to a dwelling-secured standard. And, institutions with high volumes of home equity lines of credit and/or open-end reverse mortgages will also be significantly impacted. Future posts will delve into the amendments to collecting and reporting applicant information and the expanded data fields, as well as changes impacting the submission process, reporting schedule and disclosure requirements.
