HMDA and Exception from Partial Exemption

Issue/Inquiry

The Bank, which is a state-chartered commercial bank, wants to know whether it must report the reasons for loan declines on its HMDA LAR because it is insured by the FDIC.

Response Summary

National banks, federal savings banks and associations supervised by the OCC, and state-charted savings associations, thrifts, and mutual funds banks supervised by the FDIC are required to report the reason for a loan denial on their HMDA LAR, even though they may qualify for the partial exemption. A state-chartered commercial bank insured by the FDIC would not be required to report such information on its HMDA LAR.

Response Detail

On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“Economic Growth Act”) was signed into law. The Economic Growth Act amended the Home Mortgage Disclosure Act (“HMDA”) by adding partial exemptions from HMDA’s reporting requirements for closed and open-end transactions made by certain insured depository institutions and insured credit unions.

On September 7, 2018, the Consumer Financial Protection Bureau (“CFPB”) published rules amending Regulation C to implement the partial exemption, effective May 24, 2018. Under Regulation C, there are 48 data points that must be collected and reported. If the financial institution qualifies for a partial exemption, the following 26 data points do not need to be collected:

• Universal Loan Identifier (“ULI”) (non-universal loan identifier must still be used)
• Property Address
• Rate Spread
• Credit Score
• Reasons for Denial
• Total Loan Costs or Total Points and Fees
• Origination Charges
• Discount Points
• Lender Credits
• Interest Rate
• Prepayment Penalty Term
• Debt-to-Income Ratio
• Combined Loan-to-Value Ratio
• Loan Term
• Introductory Rate Period
• Non-Amortizing Features
• Property Value
• Manufactured Home Secured Property Type
• Manufactured Home Land Property Interest
• Multifamily Affordable Units
• Application Channel
• Mortgage Loan Originator Identifier
• Automated Underwriting System
• Reverse Mortgage Flag
• Open-End Line of Credit Flag
• Business or Commercial Purpose Flag

An insured depository institution or insured credit union must have originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years for its closed-end mortgage loans to qualify for the partial exemption. In addition, it must have originated fewer than 500 open-end lines of credit in each of the two preceding calendar years for its open-end lines of credit transactions to qualify for a partial exemption. However, these partial exemptions are not available to an insured depository institution if it received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent Community Reinvestment Act (“CRA”) examinations, or a rating of “substantial noncompliance in meeting community credit needs” on its most recent CRA examination.

When the partial exemption rules were published, the CFPB stated:

Pursuant to the Act, insured depository institutions and insured credit unions need not collect or report these 26 data points for transactions that qualify for a partial exemption under the Act, unless otherwise required by their regulator. 83 Federal Register 45325, 45329.

Footnote 37 to this statement is as follows:

Certain financial institutions supervised by the OCC and the FDIC are required by those agencies to report reasons for denial on their HMDA loan/application registers. 12 CFR 27.3(a)(1)(i), 128.6, 390.147.

With respect to the citations in the footnote:

• 12 CFR 27.3 provides that national banks required to collect home loan data under 12 CFR Part 203 shall do so using the FR HMDA LAR form, except that it shall include data for why it declined the loans using the codes in 12 CFR Part 203;
• 12 CFR 128.6 states that savings associations and other lenders required to file HMDA LARs with the OCC must include data for why it declined loans using the codes in 12 CFR Part 203;
• 12 CFR 390.147 provides that state savings associations and other lenders required to file HMDA LARs with the FDIC must enter the reason for denial using the codes in 12 CFR Part 203.

12 CFR Part 203 was the Federal Reserve designation for Regulation C, which was re-codified as 12 CFR Part 1003 when Regulation C was brought under the auspices of the CFPB.

The Fair Housing Home Loan Data requirements for national banks are found in 12 CFR Part 27, which is an OCC regulation. When the Office of Thrift Supervision (“OTS”) was merged into the OCC in 2011, federal savings associations and savings banks came under the supervision of the OCC, while the supervision of state savings banks, thrifts, and mutual fund banks was transferred to the FDIC. The OTS’s Nondiscrimination Requirements were transferred to the OCC regulations for savings associations now supervised by the OCC, as per 12 CFR Part 28, and to the FDIC regulations for state-chartered savings associations now supervised by the FDIC, as per 12 CFR Part 390.140.

Therefore, the requirement to report the reasons why a financial institution declined a loan application on the HMDA LAR pertains to national banks, savings associations supervised by the OCC, and state savings associations supervised by the FDIC, even though the institution qualifies for the partial exemption. However, a state-chartered commercial bank that qualifies for the partial exemption would not be required to report the reason for a loan denial in its HMDA LAR.

This entry was posted on Tuesday, January 22nd, 2019 at 6:00 am.