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12 Apr

Impact of HMDA Changes to CRA Exams

Impact of HMDA Changes to CRA Exams

On November 24, 2017 the agencies issued revisions to Regulation BB – Community Reinvestment Act – to bring consistency between HMDA and CRA definitions.

The past CRA definition for a Mortgage Loan was a home improvement, home purchase, or a refinancing as described in Regulation C (HMDA).  The revised definition effective January 1, 2018 is “a closed-end mortgage loan or an open-end line of credit as these terms are described in 1003.2 (HMDA) and that is not an excluded transaction under 1003.3(c)(1)-(10) and (13).”  Now think about that for a moment – what will this innocuous change mean in terms of your CRA examination?

  • More residentially secured loan volumes to consider.
  • HELOCs (regardless of purpose) will now routinely be included rather than in what may have been optional reporting. When TRID rules became effective, some institutions migrated away from Home Equity Installment Loans in favor of HELOCs.  If that’s your story, that may also increase HMDA reportable loans.
  • Purpose will no longer be a factor so even more HELOCS than could previously be reported will be HMDA reportable.
  • Perhaps separate evaluations for closed-end and HELOC lending.
  • Elimination of unsecured and other-secured home improvement loans. Do you have sufficient coding to be able to track those separately for optional reporting?
  • More small business loans may be included in “Mortgage Loans” (home improvement, home purchase, and refinance definitions still apply).
  • You may still need to track closed-end, residentially secured, small business loans for other purposes (ex: working capital, startup costs, inventory, etc.) separately for optional reporting because they will be neither HMDA nor CRA reportable.

Another change is the definition of Consumer Loan which was revised to remove HELOCs because they will now be considered Mortgage Loans.  If you included “consumer loans” as optional reporting, you will likely have decreased volumes due to this change.

Ultimately, the Bank’s CRA Performance Evaluation is going to be dependent on the nature of your lending philosophies and portfolio composition.  You may want to begin performing some analysis of your HMDA reporting sometime mid-year to see the direction of your volumes (# and $) and how the context of your next performance evaluation might change.  This may lead you to develop optional reporting strategies for certain products. Gain some traction with your reporting process and then sometime mid-year, start evaluating to be sure to get the most credit possible during your next CRA Exam!

For additional information contact Evelyn Dehmey at