“Don’t stumble over something behind you.” – Seneca, Roman Stoic philosopher
Wait! Not the kind of look back as would be required by a regulator for noncompliance or a documented deficiency to a compliance program. Often, we hear that looking back doesn’t help us to move forward. While this may be true, sometimes looking back gives us the opportunity to remember what we’ve accomplished and to celebrate those successful benchmarks along the way. While it’s not uncommon for us to experience the occasional update to one regulation or another throughout the year, 2017 has been a bit different and a whole lot of challenge. Not every regulatory change has been difficult, but one comes to mind – HMDA. We’ll briefly explore the changing landscape of the past year before we switch to looking forward and what 2018 will bring.
HMDA – Ready or Not
Wow – where is one to begin? The sweeping significant changes are mind boggling if not broken down into its parts. But, even then, it can seem overwhelming. This past year represents time at developing an implementation plan: a lot of planning, learning, reworking, asking questions, preparing, training, updating systems, testing, and more reworking. Wrapping our heads around the final rule and its new requirements has expended time and resources, let alone mental focus and energy.
The way we’ve done HMDA today and in the past, will certainly not be the way starting January 1, 2018. The entire HMDA landscape is changing: coverage changes, reportable loans and lines, preapprovals, what is and isn’t reportable, collection of demographic information, reportable data points, reporting accuracy, resubmission, and notifications.
This article is not meant to serve as restating the myriad of changes, but practically speaking, have you considered or addressed the following questions to ensure a less bumpy start in 2018?
- What processes need to be modified and enhanced to ensure adequate staffing and training? Have you included quality control measures regarding internal audit, compliance, and risk?
- What assessments and plans are in place to address the system changes that need to occur to support the added data points, accuracy of reporting, and submission changes? If any deficiencies have been identified through testing, have corrective action steps been identified, implemented, and tested?
- Based on certain applicable privileges from the final rule, have you conducted self-analysis or testing of the data before January 1st?
- For those entities involved with the secondary market, have you identified any risks as to potential new loan program purchase requirements from investors?
- Have you performed careful due diligence and oversight with service providers to ensure that what they are providing will handle the new changes?
ECOA – The Overlap with HMDA
The CFPB recently published a final rule to amend Regulation B to provide further flexibility with creditors in how they comply with both Regulation B and HMDA and the use of the revised Uniform Residential Loan Application (URLA). New collection requirements that support this flexibility will permit the following:
- Collection of ethnicity, race, and sex for HMDA-reportable loans if the applicable reporting threshold in the prior year was exceeded
- If HMDA data was submitted for any of the last five years by non-HMDA reporters, these entities are allowed to collect ethnicity, race, and sex for HMDA-reportable loans
- Compliance with Regulation B by collecting ethnicity and race using the same categories that have been used or the revised categories and subcategories that will be used with the final HMDA rule use of the revised URLA
- Non-HMDA reporters to collect ethnicity, race, and sex for HMDA-reportable loans if HMDA data was submitted during anytime from the past five years
- HMDA reporters that have submitted HMDA data in the last 5 years to collect ethnicity, race, and sex for loans of a business/commercial purpose, even if not for the purchase, home improvement, or refinance of a dwelling
Form changes regarding the collection of information involve the use of two alternative, but optional, forms in collecting ethnicity, race, and sex.
RESPA – Mortgage Servicing Rules
Effective October 19, 2017, the CFPB issued an interim final rule regarding the timing for mortgage servicers to provide modified written early intervention notices to borrowers who have invoked their cease communication rights under the Fair Debt Collection Practices Act.
Why an interim final rule? Based on feedback to the CFPB regarding the implementation of the 2016 Mortgage Servicing Final Rule, it determined that the outcome created too narrow of a window as to when and how servicers comply with the timing requirements under certain circumstances. The interim final rule gives mortgage servicers a 10-day window to provide the modified notice at the end of the 180-day period rather than providing the notice exactly on the 180th day after providing a prior notice. While not final, the interim final rule provides for flexibility regarding these timing requirements.
Around the Industry:
CFPB issues FCRA maximum charge effective January 1, 2018 for consumer reporting agency disclosures.
CFPB issues interim final rule for mortgage servicing rules.
CFPB issues amendments to ECOA data collection.
On the Horizon:
Keep this reference chart near your fingertips for the revised data points for HMDA.
Do you have a good connection for the new HMDA requirements? See this to find out.