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FOS Blog

19 Oct
2020

How might HMDA Thresholds Affect Your Institution?

How might HMDA Thresholds Affect Your Institution?

On April 16, the CFPB announced its final rule on the thresholds for reporting closed-end and open-end loans for HMDA.  The threshold for closed-end mortgage loans increased from 25 to 100 loans effective July 1, 2020.  The current temporary limit for open-end credit is 500 and expires January 1, 2022.  Most community banks have been exempted from reporting open-end credit.  The regulatory threshold for open-end lines increased from 100 to 200 effective January 1, 2022.  Without the current ruling, open-end credit would have reverted to 100 loans.  Regardless, the new threshold will cause more institutions to report open-end credit.  Thresholds are determined by the number of loans originated as of December 31 of each of the prior two years.

So, how do you make this transition?

The Executive Summary provides the answers. The CFPB also updated its Transactional Coverage Charts for July 1, 2020 and January 1, 2022.

For closed-end loans, if you were reporting because you exceeded 25 mortgage loans per year and, under the new standard, you would still be subject because your mortgage loans have exceeded 100/year for the last two years, then nothing changes.  Keep on collecting and reporting.

But, if you were collecting HMDA data because you originated 25 closed-end loans but would not qualify under the 100 loans threshold, you can stop collecting data beginning on July 1, 2020.  You must retain first quarter records but would not be required to collect second quarter data because the deadline for recording (July 31, 2020) is after July 1, 2020.  Newly excluded institutions are not required to report by the March 1, 2021 deadline.  But depending on your systems and processes, it may not be possible to turn off data collection mid-year.  If an institution chooses to voluntarily report, it must report for the full 2020 year.  Also note, that even though you may not be required to report Demographic Information under HMDA, you are still required to collect it under ECOA {1002.13}: A creditor that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, is required to collect ethnicity, race, sex, marital  status, and age.

Now to those open-end lines of credit.  You can begin by examining how many of these loans you originated in 2018 and 2019.  If you are or look suspect to reporting 200 lines of credit annually, you’ll want to begin thinking about how you will begin that process.  What resources do your loan origination and HMDA reporting software provide?  Will you need a manual data collection form?  Will your HELOC application change to collect Demographic Information?  Other than Demographic Information, what will be your point for other data collection?  Some fields are excluded for open-end credit – you’ll want to be sure to factor those.  And what information will you need for denied applications?

There’s plenty of time to develop your program as data collection for open-end credit doesn’t begin until January 1, 2022.

For additional information contact the author edehmey@fosaudit.com.

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