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Proposed HMDA Changes Open for Comment through October 22

The Home Mortgage Disclosure Act (HMDA) requires financial institutions to collect, report and disclose data about mortgage loans to help determine whether financial institutions are serving the housing needs of their communities, and to assist public officials in their determination of the distribution of public sector investments so as to improve private investment environment. HMDA also requires financial institutions to report racial characteristics, gender and income information on applicants and borrowers to identify possible discriminatory lending patterns and enforce antidiscrimination statutes. In a nutshell, it’s a lot of information to gather, verify, report, review, analyze and utilize.

The latest proposed changes to HMDA are a whopping 5oo-plus pages long. The crux of the proposed changes call for the collection of more information to facilitate further analysis of how well financial institutions are serving their communities’ home mortgage lending needs. If adopted, the result will be significantly more data for banks to collect and report, thereby increasing risks for non-compliance, increasing costs and increasing the potential for errors and data breaches.

Under the proposed rule, reporting would actually be eased for small banks with 25 or fewer applications for the preceding calendar year, while banks with very large volume (only about 28 banks nationwide that normally report 75,000 applications per calendar year) would have to report quarterly.

For most banks, the burden to collect and accurately report data would be required for all closed-end loans, open-end lines of credit, and reverse mortgages secured by dwellings. Unsecured home improvement loans would no longer be reported. Enhanced data collection would apply to three critical areas:

  • Applicant – age, credit score, debt to income ratio, reason for denial is application was denied, application channel and automated underwriting results
  • Property –method of construction, property value, lien priority, number of individual dwelling units on the property and additional details about manufactured and multi-family housing
  • Loan – pricing information, loan terms, interest rate, introductory rate period, non-amortizing features and type of loan

It’s critical that banks understand and evaluate the proposal, and weigh in with their comments because regulators have tightened their focus on accuracy in reporting, now more than ever. 

Click here to read the proposed changes. Click here to submit your bank’s comments.

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