Q: Do we have to report all preapproval or prequalification requests now?
The collection, recording, and reporting of preapproval requests that are approved but not accepted used to be optional under Regulation C. As of Jan. 1, 2018, covered institutions are now required to collect, record, and report information for approved but not accepted preapproval requests for home purchase loans.
Preapproval requests for open-end lines of credit, reverse mortgages,and home purchase loans to be secured by multifamily dwellings are not covered transactions under the new rule. Te appendix to the rule states that incomplete preapprovals should not be reported.
However, prequaliﬁcation requests are treated diﬀerently under the rule.Reg C does not require an institution to report prequaliﬁcation requests on the HMDA loan application register (LAR), even though these requests may constitute applications under Regulation B for purposes of adverse action notices.
Make sure your credit union issuing the terminology correctly and the prequaliﬁcation is not actually a preapproval under the rule. The important factors are whether a full credit underwriting with a commitment to lend takes place, or if the approval is an informal estimate of an amount for which an applicant “might” qualify. What the credit unions calls the approval is not the controlling factor.
Q: Does my credit union have to post the new signage if we are not currently a HMDA reporter? What about the legal entity identifier (LEI) number?
We have received many questions about the new lobby signage requirements. Hopefully if you are a HMDA reporter, you already have the proper notice posted in your home oﬃce and the lobby of each branch containing the notice directing members to the CFPB website to review HMDA data.
Many credit unions have asked if they are required to post the new sign even if they are not currently reporting HMDA data. The answer is no.
You do not have to post the sign if you are exempt from HMDA or until you are covered by the rule.The same goes for the LEI number: you do not need to obtain one until you are covered by the rule.
Q: Which rate spread calculator am I supposed to use?
The date of ﬁnal action will determine which calculator you use. Use CFPB’s new calculator on the bureau’s website for HMDA reportable loans with a ﬁnal action date on or after Jan. 1, 2018.
Use the prior rate spread calculator on the Federal Financial Institutions Examination Council site for loans with a ﬁnal action date before Jan. 1,2018.
In CFPB’s new calculator, the lien status (or higher-priced mortgage loan status) has no bearing on the rate spread being reported on the 2018 HMDA-LAR. You simply enter the date the rate was set, the annual percentage rate, and the term of the loan, and then report the rate spread that’s given (whether it’s positive,negative, or zero).
Q: Is there a safe harbor for HMDA compliance as credit unions get up to speed?
Technically there is only a safe harbor in place for bona ﬁde errors resulting from use of a new CFPB geocoding tool that credit unions may use to identify census tracts for a single address or batches of addresses. But this tool is still not available on the bureau’s website.
However, Director Mick Mulvaney issued a statement right before the eﬀective date indicating that the bureau would not be assessing penalties on data collected in 2018 and reported in 2019, eﬀectively putting enforcement under the new rule on hold.
Additionally, it said the CFPB does not intend to require ﬁnancial institutions to resubmit data unless data errors are material, or to pay penalties with respect to data errors.While it is technically not a safe harbor, it is a huge beneﬁt for credit unions clambering to get into compliance.
This doesn’t mean we can throw HMDA out the window. But knowing that regulators will not be looking for every technical error or mistake will certainly ease the implementation burden for many credit unions.
WHITNEY NICHOLAS is CUNA’s senior federal compliance counsel. You can reach CUNA’s Compliance Team at firstname.lastname@example.org.