One of the most problematic issues we’ve encountered with HMDA is how to count open-end lines of credit for exemption and then what to report. If you follow the CFPB’s Transactional Coverage Chart at https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201709_cfpb_2018-hmda-transactional-coverage.pdf to the end, you’ll find these 2 points:
- Only originated Covered Loans count toward the loan-volume thresholds. If a threshold is met*, the institution reports all Applications for Covered Loans that it receives, Covered Loans that it originates, and Covered Loans that it purchases for that type of transaction (either Closed-End Mortgage Loan or Open-End Line of Credit, or both, if both thresholds are met).
- Covered consumer and business or commercial purpose originations should be counted together when assessing the individual thresholds for Closed-End Mortgage Loans and Open-End Lines of Credit.
- A financial institution may voluntarily report Closed-End Mortgage Loans or Open-End Lines of Credit that are excluded because the financial institution does not meet the transactional threshold for that type of transaction. However, if it chooses to voluntarily report Closed-End Mortgage Loans or Open-End Lines of Credit, the financial institution must report all such transactions that would otherwise be covered loans for that calendar year.
We’ve encountered some situations where institutions are only counting HELOCs for the exemption threshold. The correct formula is to count HELOCs plus your business lines of credit that are secured by a dwelling and those business lines are for the purpose of purchase, home improvement, or refinance. This is based on the definition of open-end line of credit at 1003.2(o) (secured by a lien on a dwelling) and the exemption language for Comment 1 at 1003.3(c)(10) (for an open-end line of credit primarily for a business or commercial purpose is a covered loan only if it is a home improvement loan, a home purchase loan, or a refinancing).
The other issue is what to report or exclude from reporting for lines of credit. As with determining the number of open-end lines of credit, you report all or nothing. If you’ve determined that you fall within the exemption threshold, you don’t report HELOCs or business lines of credit. If you decide to voluntarily report lines of credit, then you report both HELOCs and business lines of credit. This is rooted in 1003.3(c)(12)-Comment 2 on optional reporting.
We recommend that you maintain documentation for how you’ve determined your reporting thresholds or exemption from reporting. So, get checking and make certain you’ve counted correctly!
*Threshold for 2018 and 2019 is 500 but drops to 100 beginning in 2020.