While it may seem far off, if your organization hasn’t already started to think about HMDA implementation, you are likely behind. Effective January 1, 2018, the final amended rule of the Home Mortgage Disclosure Act (HMDA) issued by the Consumer Financial Protection Bureau (CFPB) in 2015 impacts reporting requirements for financial institutions.
Not only does the amended rule increase the requirements over the organizations that must file, the amount of data has substantially doubled. The CFPB predicts an increase of 40% of non-depository institutions will now be covered under the rule. The data points required to report include new and modified fields. Along with the increased data points, the file format is changing and paper submissions will no longer be accepted. These two changes go into effect as of January 1, 2017.
It is important to report accurate data given the CFPB’s history in pursuing companies who do not comply. There were two cases in late 2013 requiring the organizations to pay civil money penalties for errors identified in their data. While there is a safe harbor for organizations that resubmit their data if they identify an issue, an organization should understand what this data says about their lending environment.
Origination costs will be analyzed more closely to try and identify fair lending violations. Companies will be compared to their peers, but the big question from the industry is, who is considered my peer? The answer appears to be this, expect a broad interpretation. While an organization may be quick to dismiss another company as a peer because of size or product offerings, the data is easily analyzed. From the types of products offered and used to locations, census tracts, metropolitan statistical areas (MSA), it will be reviewed.
The new information will help regulators to focus their examinations and the start of any examination begins with the looking at a company’s HMDA data.
There are steps your organization can take now to help you prepare:
With this increased need for accurate and complete data, the changes to organization’s systems, process, and policies may be substantial. Financial organizations that now fall under the HMDA rule should begin evaluation of the impact to their internal operations.
For more information on HDMA implementation, or to learn how Baker Tilly’s financial services specialists can help, contact our team.