[Chris]

So the CFPB put out a final rule on Friday raising the threshold for closed-end originated covered (HMDA-reportable) loans to 100 for previous two calendar years, effective 7/1/2020. I understand this to mean that we have to collect data through the first two quarters – but as of “action taken date” 7/1/2020 and beyond, we now become HMDA exempt, if we want to be. I emphasize that last point, because I will be taking information to my Executive Committee to let them make a decision. (We are already exempt for open-end loans – that threshold was raised to 500 for 2018, 2019, 2020, & 2021 – and now on 1/1/2022, it will drop to 200… we are below 200, so we do not report open-end loans.)

My question is this – if we opt not to do HMDA any longer (as I anticipate that will happen) – what would auditors / examiners use and / or need to see in order to do a Fair Lending review of our Bank going forward? I’m trying to think ahead of the change and wondering what (if any) kinds of information / data I will need to add to my loan review log or my adverse action log to help those kinds of Fair Lending reviews.

I would appreciate your thoughts & feedback!!

Topic

[jholzknecht]

Chris,

The current threshold for reporting closed-end loans for purposes of HMDA is 25 loans. On July 1, 2020 the threshold increases to 100 closed-end loans. As a result of the revision institutions that originate:
• Fewer than 25 closed-end loans continue to be exempt from reporting closed-end loans for HMDA;
• 25 or more, but fewer than 100, closed-end loans become exempt from reporting closed-end loans for HMDA effective July 1, 2020 (More detail below.); and
• 100 or more closed-end loans continue to be required to report closed-end loans.

Impact During 2020
If as of December 31, 2019 your institution, in each of the two preceding calendar years (2018 and 2019), originated at least 25 closed-end mortgage loans that are not excluded from this part pursuant to § 1003.3(c)(1) through (10), then HMDA data collection for closed-end loans would be required for 2020 until July 1, 2020.
• Newly excluded institutions, those subject to HMDA’s closed-end requirements as of January 1, 2020 because it originated at least 25 closed-end mortgage loans in 2018 and 2019 and meets all of the other requirements under § 1003.2(g), but no longer subject to HMDA’s closed-end requirements as of July 1, 2020 because it originated fewer than 100 closed-end mortgage loans during 2018 or 2019, are relieved of the obligation to collect, record, and report data for their 2020 closed-end mortgage loans effective July 1, 2020.
o Newly excluded institutions may cease collecting 2020 data for closed-end mortgage loans as of July 1, 2020.
o Pursuant to § 1003.4(f), newly excluded institutions must still record data on a loan/application register for the first quarter of 2020 by 30 calendar days after the end of the first quarter. They will not, however, be required to record closed-end data for the second quarter of 2020 because the deadline under § 1003.4(f) for recording such data falls after July 1, 2020.
o Because newly excluded institutions collecting HMDA data in 2020 would not otherwise report those data until early 2021, the final rule also relieves newly excluded institutions of the obligation to report by March 1, 2021 data collected in 2020 on closed-end mortgage loans (including closed-end data collected in 2020 before July 1, 2020).

Impact During 2021
If as of December 31, 2020 your institution, in each of the two preceding calendar years (2019 and 2020), originated at least 100 closed-end mortgage loans that are not excluded from this part pursuant to § 1003.3(c)(1) through (10), then HMDA data collection for closed-end loans would be required for 2021.

Future Regulatory Expectations
Examiners will likely encourage you to continue to collect HMDA data; that makes their job much easier. If you don’t collect, examiners will need to collect HMDA-like data for a sample of the fewer than 100 loans per year originated by your institutions. Since your institution will no longer collect such data you will not be in a position to refute the findings from the examiner’s sample.

[Chris]

Thanks for the information, Jack. I understand that, but what about the Fair Lending component in my original question? That is the part I’m digging harder to understand – if we become a non-HMDA reporter (which will happen most likely – I do not see my institution choosing to voluntarily remain a HMDA reporter), what other information would I / the compliance department need to track to assist with future examinations for Fair Lending, since they will no longer have a HMDA LAR to rely upon? I’m thinking outside of the box – wondering if I need to begin tracking additional fields on my loan / adverse action logs to assist with future exams. (For example – geocoding? GMI collected for Reg B purposes? Etc. I do not track these things currently, outside of the HMDA LAR. Should I add any of thee items or other such items to monitoring spreadsheets for auditors / examiners, or would they not expect that information to be tracked? I ask, because I’ve never worked for a non-HMDA reporting bank, so I do not know what they look for when a bank doesn’t report HMDA.)

[jholzknecht]

Please review the late edit I added to the end of the previous post.

You will still be required to collect GMI for each application as required by Regulation B or by the OCC’s Part 27, but will not be required to compile it in a list. Compiling the data puts you in position to refute examiner’s findings. If you are going to compile the data you should just continue to use the HMDA LAR; you are already familiar with the requirements.

[Author]

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