Be Prepared: A Lender’s Guide to the Home Mortgage Disclosure Act Rule

home mortgage disclosure act rule (HMDA)

Are you ready? The CFPB’s 2015 updates to the Home Mortgage Disclosure Act rule will soon be in effect, and lenders need to be well-informed and prepared for the transition. Your business depends upon it. This guide will give you the basic details of the HMDA rule, how it affects your business, and what you can expect from the HMDA portal.


What are the Changes to the Home Mortgage Disclosure Act Rule?

The CFPB made the updates to “improve the quality and type” of data that lenders report information about home loans. The original documentation that laid out the changes to the HMDA rule encompassed whopping 800-plus pages, but this is much of the data the changes focus on:

  • New information includes loan terms, duration of any teaser or introductory interest rates, and property value
  • In addition, lenders will be required to report more info about mortgage loan pricing and underwriting — including interest rate, any discount points charged to the loan, as well your applicants’ debt-to-income ratio

In addition, the alterations have removed the asset test for lenders. Previously, some lenders may not have had to file because of smaller assets, but that will change. The threshold will now be this: if a financial institution has originated a minimum of 25 covered closed-end mortgage loans in each of the two preceding calendar years, or at least 100 covered open-end lines of credit in each of the two preceding calendar years, (and other applicable coverage requirements) they will have to file a report. This is a major difference of the current requirement of 100 closed loans.

It is important to note that there are different thresholds for closed-end and open-end loans dependent on the type of financial institution:

  • Banks, Savings Associations, or Credit Unions — will require adherence to Regulation C’s asset size, location, federally related, and loan activity tests
  • Other For-Profit Lending Institutions — will require adherence to Regulation C’s location test



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When Does the HMDA Rule Take Effect?

Soon. As 2017 speeds toward the end of the year, make sure your preparations are on track for compliance. Most of the provisions of the 2015 updates will take effect on January 1, 2018. Work throughout 2018 to collect, organize, report, and safely store the information. Lenders/financial institutions will need to report all the data gathered in 2018 by March 1, 2019.


What Can I Expect From the HMDA Portal?

The HMDA portal is the online tool and database for lenders to report all of the required information to the CFPB. It will also serve as a central access point that reporting institutions can direct the public to for their HMDA report and modified Loan Application Register (LAR).

Here are some more details about the portal:

  • Once it’s live, those responsible for reporting will need to create an account
  • For quality control, there will be a series of steps to validate data accuracy and format in a LAR
  • A File Format Verification Tool from the CFPB will be available to financial institutions
  • CFPB will be issuing a new version of the LAR Formatting Tool for lenders with smaller volume

The Takeaway

Preparation is key to keeping stress levels down and processes in place for best business practices in the coming year, and beyond. The changes to the Home Mortgage Disclosure Act rule will evolve your regular mode of operations, but if you and your company keep on top of compliance efforts and all the tools at your disposal, it will be much easier.

Our team at Bay National Title Company keeps you updated on the latest news affecting your business success.