Yesterday, TRUPOINT hosted a quick webinar to cover the 5 most frequently asked questions we're receiving about the final HMDA rule. We get these questions almost every day, and even though they're basic, we're sure that you'll find them helpful.
If you're like many compliance professionals who have to comply with HMDA, you're coming to terms with the "new normal" of compliance in 2018. That means changing data collection requirements, enhanced HMDA data analysis, new technologies, and updated processes that are designed to support the HMDA rule.
Get your guide to the 2018 HMDA changes:
This session is part of the ongoing TRUPOINT:30 webinar series, wherein we dive into an issue that impacts you and deliver real insights in 30 minutes (or less).
This post will summarize some of the most frequently asked questions about the Final HMDA Rule that were covered in the webinar, and also add a few additional insights!
Let's get started:
1. What is the difference between an LEI and a ULI, and how can I get them?
An LEI is a single identifying number for your institution. LEI stands for Legal Entity Identifier. Your LEI is 20 digits long, and you’ll need to include it in your 2018 HMDA submission. You can get an LEI from one of the three companies listed here:
- MERS®: https://www.mersinc.org/lei ($117 to register, and $97 per year to renew)
- GMEI Utility: https://www.gmeiutility.org/ ($200 for a registration request, and a $19 surcharge)
- Bloomberg: https://lei.bloomberg.com/ (fee not public)
ULI stands for Universal Loan Identifier. A ULI is assigned to a specific loan and incorporates the LEI. This is a number that will follow the application or loan throughout the lending process. Your institution will create your ULIs internally, using this formula:
[20-digit LEI] + [Loan or Application Identifier] + [2-digit Check Digit] = ULI
2. When to I need to start collecting GMI data?
For applications received before this year, you need to collect demographic data based on the Final Action Taken date. For applications received on or after Jan. 1, 2018, you collect demographic data based on the application date. This chart from the CFPB provides more detail:
The easiest rule to remember is that if the final application date was in 2017, you can only report aggregated data. If it was an application taken in 2017 but finalized in 2018, you can report either aggregated or disaggregated data - whichever you collected. For applications taken in 2018, you have to collect both aggregated and disaggregated data, and report all of the detail you have.
As you consider your data collection and reporting, here are some things to keep in mind:
- There are two words used to describe the GMI data that you should know: aggregated and disaggregated.
- “Aggregated” describes the five or so broad categories.
- "Disaggregated" describes the more specific subcategories.
In the image on the right, you can see a piece of the sample GMI data collection form provided by the CFPB. The aggregated race options are:
- American Indian or Alaskan Native
- Black or African American
- Native Hawaiian or Other Pacific Islander
Or, “I do not wish to provide this information”.
There are rules that govern what level (aggregated or disaggregated) data you can collect. No matter what method you use to take the application, you must provide the borrower the chance to provide their GMI data. If they choose not to provide, how you respond will depend on the application method.
If an applicant chooses not to provide their GMI data in an in-person application, you must guess for them and note that you made the estimate based on visual observation or surname. A sample of that question is below:
If an applicant marks that they choose not to provide their GMI data in an application taken via telephone, internet, or mail, you may not guess for them.
3. What happens if I make a mistake?
The CFPB has shared a “good faith” provision, because they understand that they know that comply with the HMDA changes are challenging. Here is what they said:
“The Bureau recognizes the significant systems and operational challenges needed to meet the impending requirements under the rule. Accordingly, for HMDA data collected in 2018 and reported in 2019, the Bureau does not intend to require financial institutions to resubmit data unless data errors are material, or to pay penalties with respect to data errors.
Accordingly, collection and submission of the 2018 HMDA data will provide financial institutions an opportunity to focus on identifying any gaps in their implementation of the additional requirements and making improvements in their HMDA compliance management systems for future years. The Bureau expects that any supervisory examinations of 2018 HMDA data will be diagnostic, to help institutions identify compliance weaknesses, and will credit good-faith compliance efforts.”
4. What is a "material" error?
In their good faith provision statement, the CFPB references "material errors." As we researched, we haven't yet found a clear, concise definition, so we reached out to the CFPB for clarification.
That said, the statement references HMDA resubmission, so they may be referencing those requirements...here they are.
5. How do I obtain an edit report for data collected in or after 2017?
According to the CFPB, we know that the HMDA Platform will generate an edit report for your HMDA LAR prior to submission. The HMDA Platform requires filers to address all edits before allowing the LAR to be filed.
In addition, the HMDA Platform will allow you to check your HMDA filing as many times as you want before filing the final HMDA LAR.
6. How does the new HMDA rule impact Community Reinvestment Act compliance?
In an effort to reduce the burden of compliance, the regulators have also released amendments to the Community Reinvestment Act. As we have written previously, these amendments are designed to align CRA requirements more closely with the HMDA requirements. The regulators also believe that these changes will make CRA Performance Evaluations less burdensome.
The most important CRA changes include:
- The term “Home Mortgage Loan” has been redefined.
- The term “Consumer Loan” has been redefined.
- Requirements regarding the content that needs to be in your Public File have changed.
The amendments also remove some now-obsolete cross—references and definitions from the Community Reinvestment Act.
7. I have HMDA data coming from two different loan operating systems (LOS). Am I able to submit these separately?
Unfortunately, you cannot submit multiple LAR files. The CFPB says: "This must be a single file that contains the entire LAR for the filer; the HMDA Platform will not allow users to combine multiple files."
TRUPOINT Viewpoint: We did recieve some great questions during the HMDA webinar yesterday, which we will be working to answer via an email to all registrants later this week. Keep your eyes on your inbox!
If you didn't get a chance to attend the webinar, you can still get a recording and copies of the slides. Click the button below to get those HMDA webinar resources: