Compliance never sleeps,and this year is no exception.
Since the Home Mortgage Disclosure Act (HMDA) rule became eﬀective in January, CUNA has received a near constant stream of HMDA-related compliance inquiries.
Credit unions face implementation challenges with this long and complex regulation—and with good reason. Capturing the additional data points, relying on vendors for timely system changes, and getting staﬀ up to speed on the new changes are just a few of the many challenges institutions have grappled with in the wake of the new rule.
While the questions about HMDA are all over the board, credit unions seem to face common issues. This article will focus on the most frequently asked HMDA questions we have received at CUNA in hopes that they can help clear up any lingering concerns as your credit union moves forward with implementation.
Q: Are business loans now reportable under HMDA?
Business-purpose loans and lines of credit are reportable only if they are secured by a dwelling, and only if they are home purchase loans, home improvement loans, or reﬁnancings.
The new rule adopts a dwelling-secured standard regardless of loan purpose, so if the business loan is secured by a dwelling and it’s a purchase, home improvement, or reﬁnancing, it is reportable under HMDA.
Under the new rule, a “dwelling” is a residential structure, whether or not attached to real property. If you are making a business purpose loan that’s secured by one of these “dwellings” you need to capture and report HMDA data.
This is a big change for many commercial lenders who have never had to collect and report HMDA data until now.
Q: How do I report government monitoring information on race and ethnicity when the new Uniform Residential Loan Application (URLA) form is not effective until 2019?
For all loans with a date of ﬁnal action on or after Jan. 1, 2018, HMDA requires that you use the new disaggregated categories to report a borrower’s race and ethnicity. While the old categories were limited to broader categories such as “Asian,” an applicant can now select from more speciﬁc subcategories such as Asian-Indian, Filipino, Japanese, Korean, Chinese, Vietnamese,or “Other.”
These categories will be incorporated into the new URLA form that becomes eﬀective in 2019. But the current version of the URLA contains the old aggregated categories that are not suﬃcient for compliance. Many credit unions ask how they should capture this information on their loan applications.
The best way to do this is to use the form the Consumer Financial Protection Bureau (CFPB) provides in Appendix B of the HMDA rule to collect the updated demographic information. That form is available on CFPB’s website.
Another frequent question related to government monitoring information is how to report race and ethnicity for dwelling-secured business loans when the borrower is a corporation or LLC,and not a natural person.
In this situation you would report “NA” for not applicable since a business entity does not have a race or ethnicity, even if the guarantor of the loan or owner of the business is known. You do not report the race or ethnicity of that person; instead you report NA for the business.