New GSE Application Can Help With HMDA Compliance
I had a great time the other night hanging out with the Association’s Young Professionals Commission. I even got to celebrate the birthday of one of their newest members. Regardless of age, one of the questions that always comes up at such gatherings is what issues are lurking out there to sneak up on the unsuspecting credit union. The one I keep coming back to is HMDA and yesterday Fannie and Freddie took a huge step to help those of you who have to comply with this data reporting regulation be ready when the expanded mandate becomes effective in January of 2018.
The uniform residential loan application which you may know as either Form 1003 or Freddie Mac Form 65 is a standardized document that has been around for 20 years. So many mortgages are connected in some way to Fannie and Freddie that the application is used by almost all lenders in the country. Yesterday, the GSEs announced that they have created a new, redesigned URLA form. Most importantly, for my purposes, the form includes the expanded data fields that impacted lenders will have to fill out to comply with the HMDA regulation. In addition, if the GSEs are correct, the new form will be easy to integrate into your existing lending systems and better suited for an online application process. For those of you dinosaurs who still rely on paper, the updated URLA will still be available in a hard copy.
Even though the form doesn’t become effective for over a year, you can use it as an easy way to cross reference the information you collect now against the information you will need to gather in the relatively near future. Don’t underestimate just how much more information you will have to collect. According to a summary provided by the CFPB, the new HMDA reporting requirements include data points for applicant or borrower age, credit score, automated underwriting system information, unique loan identifier, property value, application channel, points and fees, borrower-paid origination charges, discount points, lender credits, loan term, prepayment penalty, non-amortizing loan features, interest rate, and loan originator identifier as well as other data points. The HMDA Rule also modifies several existing data points.
The good news is that the CFPB narrows the scope of the institutions to which HMDA applies. Starting in 2018, if your institution didn’t originate 25 covered mortgage loans in each of the preceding two years, or at least 100 open-end lines of credit in each of the preceding two calendar years, HMDA doesn’t apply to you regardless of your asset size. Still, this is not the type of regulation you want to keep to the last second. The CFPB and Congress want this additional information for a reason and I doubt regulators are going to have much patience for those of you who aren’t prepared for this mandate. The new and approved application is a great way to get ready to comply.