Agency clarifies S. 2155 HMDA changes

The passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) in May created widespread confusion regarding how various provisions of the act might affect credit union operations.

The changes that specifically pertain to the Home Mortgage Disclosure Act (HMDA) have been a primary pain point for compliance professionals. That’s because the act’s HMDA provision created more uncertainty at a time when credit unions are still catching up with the Jan. 1, 2018, amendments to Regulation C.

On Aug. 31, 2018, after months of waiting, the Bureau of Consumer Financial Protection (BCFP) finally published a final rule clarifying the S. 2155 HMDA changes.

Overall, these provisions are a win for credit unions because the act provides an exemption from the collection of certain data points for small-volume mortgage lenders. But credit unions need to ensure they understand exactly what the new rule does and does not do now that we finally have more guidance.

What it doesn’t do

The new HMDA rule does not exempt any previously covered institution from the mortgage loan data reporting requirements of HMDA that were in effect prior to Jan. 1, 2018. If your credit union originated at least 25 closed-end mortgage loans or 500 openend home equity lines of credit (HELOC) in each of the preceding two calendar years, it is still subject to HMDA reporting.

S. 2155 just rolls back the rule to the state it was in on Dec. 31, 2017, before the new Dodd-Frank-enacted data collection requirements were implemented on Jan. 1, 2018.

Therefore, if you originated 25 to 500 closed-end loans in each of the preceding two calendar years, you will report only the old HMDA data points that were in effect last year. And if you originated less than 500 HELOCs in each of the preceding two years, you will not report any open-end HMDA data (at least for now).

What it does do

The new provision exempts small-volume mortgage lenders from the expanded HMDA data reporting requirements that became effective on Jan. 1, 2018, if certain conditions are met.

For closed-end mortgage reporting, the conditions require that the credit union has originated fewer than 500 of such loans in each of the preceding two calendars years.

For HELOCs, the credit union must have originated less than 500 of those loans in each of the preceding two calendars years.

The bureau has now clarified which loans count toward meeting the 500-loan threshold to qualify for the partial exemption: Only those loans that would otherwise be HMDA-reportable count.

It’s important to note that a BCFP-amended rule that became final in August 2017 already temporarily   raised the HELOC threshold from 100 to 500 loan originations, so S. 2155 will not have any impact on the HELOC threshold in the short term.

The BCFP-revised rule only temporarily raises the threshold to 500 for 2018 and 2019 for any HELOC reporting to allow the bureau more time to assess the potential impact.

So absent another rulemaking from BCFP, S. 2155 will not potentially come into play to keep the threshold at 500 for HELOC  reporting until 2020.

Effective date

While the act provided no effective date for the HMDA provision, the bureau states in the rule that it believes the best interpretation is that this provision took effect on the date of the act’s enactment, or May 24, 2018.

This is great news for credit unions that qualify for the partial exemption because they won’t have to collect and report the expanded data points for 2018 after May 24.

NEXT: Data collection and voluntary reporting

Data collection

When S. 2155 passed in May and promised a partial exemption from the collection of certain data, everyone was left to wonder which data points would be covered by the partial exemption and which would still be required to be reported.

The bureau addressed this in the Aug. 30, 2018, rule and provided a list of the 26 data points eligible for the exemption and the remaining 22 data points that are still required for all HMDA reporters.

Credit unions that do not meet the 500-loan threshold and qualify for the partial exemption will report fewer data points than those that do not qualify for the exemption.

Voluntary reporting

The rule also states that optional voluntary reporting of the expanded data points covered by the partial exemption is permissible, provided that the credit union will submit data for an entire data point when data are reported for any data field within that data point.

This will ease the compliance burden for institutions whose loan volume thresholds may fluctuate from year to year.

While it may be easier from a compliance standpoint to continue to report data in a given year even if your credit union qualifies for the exemption, keep in mind that you can still be held accountable for any discrepancies in the data that you report.

Universal Loan Identifier

The last big change in this rule pertains to the Universal Loan Identifier (ULI). Insured credit unions are not required to report a ULI for loans that are partially exempt (although the rule states that credit unions may still voluntarily report the ULI if they prefer).

But credit unions that qualify for the partial exemption must still provide information so each loan and application they report is identifiable for HMDA purposes. This allows the credit union to report the loan identifier without requiring it to obtain the Legal Entity Identifier (LEI) as part of the ULI if the credit union qualifies for the partial exemption.

As a result, the August 2018 final rule has amended the ULI requirement to only require a “non-universal loan identifier” that doesn’t have to be unique within the industry. That means it doesn’t have to contain an LEI.

However, the non-universal loan identifier does have its own requirements. For any partially exempt loan or application for which the credit union does not report a ULI, the non-universal loan identifier:

• *May be composed of up to 22 characters.
• *May be composed of  letters, numerals, or a combination thereof.
• *Must be unique within the credit union.
• *Must not include information that could be used to correctly identify the applicant or borrower.

“The year of HMDA”—as 2018 is known—has been big for credit union compliance. As the year comes to a close, hopefully credit unions can rest a bit easier knowing we finally have some clarity with respect to the new HMDA changes.

HMDA appears to be the ever-evolving rule, and this doesn’t appear to be changing any time soon.

BCFP has stated it intends to re-open the rule for further examination again in 2019. We hope this will lead to more positive changes for credit unions in the form of less regulatory burden.

WHITNEY NICHOLAS is senior federal compliance counsel for CUNA. Contact her at 202-508-6702.