MBA Offers Recommendations on HMDA Rule Changes

The Mortgage Bankers Association, in a letter to the Consumer Financial Protection Bureau, expressed concerns with the Bureau’s proposed amendments to the Home Mortgage Disclosure Act, saying that many MBA member companies have not had sufficient time to prepare for the numerous changes required.

The letter also offered a number of recommendations to improve the proposal, which is scheduled to go into effect Jan. 1, 2018.

“Despite laudable efforts by the Bureau, effective implementation by lenders is not feasible under the current schedule, as many outstanding issues remain unresolved,” wrote MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills. “It is evident that several important steps have not yet been completed, making effective, timely implementation on the current schedule extremely difficult, if not impossible, for most institutions.”

The proposed changes to the CFPB’s Home Mortgage Disclosure (Regulation C) Final Rule, outlined this past October, include transition rules for two data points–loan purpose and the unique identifier for loan originator, clarifications of key terms, such as “temporary financing” and “automated underwriting system” and creation of a new reporting exception for certain New York Consolidation, Extension and Modification Agreement transactions. The proposal also affirms that the Bureau will make available on its website a geocoding tool that institutions may use to identify the census tract where a property is located. The proposal also would establish that an institution would not violate Regulation C by reporting an incorrect census tract for a property if the institution entered the address properly.

“The Final Rule brings extraordinarily ambitious additions to what is already an extensive database on mortgage lending,” the MBA letter said. “Specifically, it more than doubles the data points to be collected and reported, modifies most of the current definitions, expands reporting to Home Equity Lines of Credit and pre-approval transactions and also extends reporting requirements to virtually all significant mortgage or HELOC lenders. Regarding the data points, the Final Rule requires reporting on 48 data fields, adding 25 new data fields to the current 23, and also modifies 20 of the existing fields. The current data fields include the rate spread (for higher-priced loans), Home Ownership and Equity Protection Act status, race, ethnicity and income of the borrower, action taken on the loan or application, location of the property and loan amount.”

MBA asked for a delay on the Jan. 1, 2018 implementation date, noting collection of data must begin in 2017 for loan applications that may become reportable in 2018.

“Considering the fact that much remains to be done by the CFPB, including rules and deliverables, MBA respectfully urges the Bureau to delay these amendments and the Final Rule for at least one year in order to provide the Bureau and Home Mortgage Disclosure Act reporters with sufficient time to complete, implement and test their data collection and reporting processes.”

MBA rationalized that additional time “will allow several necessary actions and relevant materials to be delivered by the Bureau in time for them to be reviewed, tested and integrated into both vendors’ and lenders’ processes to ensure effective implementation primarily at loan origination, the point at which most reportable information is being collected.”

MBA told the CFPB lenders, and the vendors that support the industry, are still waiting on the CFPB to release the reporting portal, the geocoding tool, data validation and other edits, to name a few. “Without the availability of these and other necessary rules and tools, lenders cannot finalize revised business processes or provide final technology requirements for their information technology teams and/or vendors, or provide training to their originations and operations staff,” MBA said.

MBA also noted “significant training” of lenders’ employees is also required to ensure proper and accurate collection and reporting under the Final Rule, and training cannot begin until the systems and processes are complete. “We also suggest that, considering the possibility that privacy concerns might dictate that certain data not be disclosed publicly, a one year delay also should be used to reconsider whether the many data points required under Dodd-Frank within the Bureau’s authority should be required.”

Simply delaying enforcement of the requirements under the circumstances would be insufficient. “Moreover, we believe that continuing to apply Regulation C in its current form would adequately serve the public policy purposes underlying HMDA during the additional year of implementation,” MBA said. “In sum, the balance of burdens against public policy benefits favors a delay.”

The letter also reiterates MBA’s long-held contention that multifamily loans should not be subject to HMDA reporting.

“Multifamily mortgages are commercial in nature and are not consumer-facing,” MBA said. “Credit determinations are based on assessments of the business of managing an income-producing property, the value of the underlying property and the certainty of operating cash flow from the property as an income-producing asset. We believe that, as a result, the public policy benefit of collecting HMDA data on commercial multifamily mortgages does not outweigh the considerable regulatory burden of collecting and reporting it. We, therefore, continue to urge the CFPB to exclude multifamily commercial lending entirely from HMDA reporting.”