Your HMDA Data is Submitted! What to Expect in the Next 12 Months
If you're a HMDA reporter, congratulations on submitting your 2014 HMDA data! It's an important deadline, and can set the stage for the year to come. Let's take a few minutes to cover what we can expect in the next twelve months.
The deadline to submit 2014 HMDA data was Monday, March 2. Congratulations, HMDA reporters! You made it. And while this is definitely not the finish line - actually, it's more like the starting line - it's a great time to take a deep breath and reasses the compliance landscape.
With that in mind, let's take a brief step back to consider what we can expect for HMDA and Fair Lending in the next twelve months.
1. HMDA Plus On the Way
For the past few years, HMDA Plus has cast a big shadow over the compliance landscape. HMDA Plus is the name for the expanded data field requirements that will be reported as part of the HMDA in the future. The CFPB released the proposed HMDA rule changes last year, and requested comments from the industry. Since the comments period closed, the Bureau has been quiet about HMDA. This is normal; that said, it does lead us to believe that changes will be formalized and released soon.
Some of the fields we're expecting to see? Age, credit score, property value, loan term and interest rate are just a few. The idea of a unique identifier for each loan has also been proposed. We know that the regulators are getting more sophisticated and data-centric; these HMDA Plus developments just further prove that point.
By working with so many institutions nationwide, we have the ability to see the variances in regulatory approaches. We've noticed that some regulators are already using expected HMDA Plus data fields in their analysis. Even if it's not standardized yet, we are expecting the number of regulators using this data to increase in 2015.
2. Disparate Impact in Question
Disparate impact plays a central role in anti-discrimination legislation and fair lending compliance analysis. Currently though, it is being questioned in the Supreme Court. Disparate impact is one of the three types of discrimination recognized by regulators. The theory says that a program or policy can be considered discriminatory if it disproportionately affects a prohibited basis group, even if there's no intent.
The case, Texas Department of Housing and Urban Development v. Inclusive Community Project, is questioning whether disparate impact claims should be allowed under the Fair Housing Act (FHA).
The FHA is one of the primary laws governing fair lending; the Equal Credit Opportunity Act, or ECOA, is the other. The FHA says that a person may not be discriminated against based on any prohibited basis factors.
The case is being closely watched by regulators, community activist groups and financial institutions. Justice Scalia in particular appears to have volleyed some tough questions to both sides in the open oral arguements on Jan. 21, 2015.
So what does this mean for financial institutions?
If disparate impact is upheld, then any changes would be minimal. However, if it's rejected, regulators may have to change their analysis methods and approaches. That said, fair lending compliance isn't going anywhere, even if the regulators change the way they perform that analysis and evaluation.
Although SCOTUS hasn't yet announced the dates, a decision is expected in late June or early July 2015.
3. Focus on Credit Cards, Servicing
Regulatory rumblings indicate that they will focus even more on credit cards, loan servicing and indirect auto in 2015. All three of these areas have been addressed by the regulators in the past, but they seem to be in the spotlight this year.
The CFPB is leading the charge on credit card regulations. In Feb., the CFPB announced a proposal that would change the way that credit card companies submit their agreements to the CFPB, as required by the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. They also ordered a finance company to pay $2.7 million back to consumers for charging illegal fees. The day before, on Feb. 3, they asked a federal court to permanently shut down a credit card company that was apparently offering a sham credit card.
Loan servicing, particularly by nonbank organizations, is also a priority. The regulators do not currently govern the prudential standards of nonbanks in the way that they govern banks; however, both Federal and state regulators are looking at servicing companies more closely.
TRUPOINT Viewpoint: The regulatory landscape is constantly changing - legislations shift and priorities are reassessed. That said, the core spirit of these regulations remain intact. While it can seem overwhelming to deal with these near-constant changes, we find that taking a longer view does help.
We're also glad to be part of the dialogue. Thank you for reading, and know that we're here to help.