HMDA Reporting and Multifamily Finance
The Home Mortgage Disclosure Act (HMDA) is a consumer-focused law enacted by Congress in 1975 and implemented as Regulation C that requires mortgage lenders to collect and report information on specific data points pertaining to their lending practices. Historically, the data collected under HMDA pertained primarily to single-family lending. The Dodd-Frank Act of 2010 transferred administration of HMDA to the Consumer Financial Protection Bureau (CFPB, significantly expanded mandated reporting and authorized the CFPB to require collection of additional mortgage lending information. In August 2014, the CFPB released proposed amendments to Regulation C with provisions that specifically extended HMDA reporting requirements to multifamily mortgages and expanded the range of data points collected. The CFPB finalized the new rule, including the express application to multifamily mortgage lending (including business to business loans), on October 15, 2015. This issue brief applies specifically to commercial loans secured by multifamily properties. While the CFPB has issued a final HMDA rule, we continue to believe that HMDA, as a consumer lending disclosure requirement, should not apply to commercial business lending.
HMDA FINAL RULE
The final HMDA rule effectuates several important changes to Regulation C with respect to covered institutions, covered transactions, and the breadth of data that must be reported. The CFPB declined to exclude commercial mortgage loans secured by multifamily properties as recommended by the MBA. Most new HMDA provisions take effect January 1, 2018. The final rule includes the following:
The rule continues minimum asset-level and loan volume thresholds for covered institutions for 2017. Beginning in 2018, financial institutions that originate at least 25 covered commercial mortgage loans secured by a multifamily property in each of the two preceding calendar years, and meet other specifications for either depository or nondepository financial institutions, will be required to collect and report HMDA data.
The final HMDA rule mandates that financial institutions report data for all applications, originations [including assumptions], and purchased loans relating to commercial mortgage loans secured by multifamily properties. Beginning in 2018, covered institutions must also collect and report data on loan applications that are approved but not accepted.
Addition and Modification of Data Points
The final rule requires covered institutions to report more data than is presently required. New and modified data include more detailed information on loan terms, interest rates, loan identification numbers, location and affordable housing units. The CFPB did exclude several borrower specific data points from multifamily reporting requirements, in line with MBA's view that the information is not applicable to commercial/multifamily lending given the fundamental nature of these transactions.
Reporting and Disclosure Process
Beginning with data reported in 2018, information must be submitted through a web based CFPB portal that has yet to be released. The CFPB will be the single agency for collection and distribution of HMDA data. While institutions will be required to maintain public disclosure notices, they will not be required to provide their data directly to requesting parties. Data that the CFPB determines meets a balancing test for public disclosure will be made available on the HMDA website.
The final rule was responsive to some of MBA's concerns regarding the inapplicability of certain data points to multifamily lending. During the two year period before the majority of HMDA amendments take effect, MBA will continue working with industry members, regulators and other appropriate parties to clarify the requirements and address areas of the final rule that introduce uncertainty or unintended consequences to the commercial/multifamily lending industry, including:
Publicly Available Data
The number of covered transactions that occur in the multifamily sector every year are far fewer than the number of single-family transactions made during the same period and multifamily properties are also more easily identifiable. We are concerned that some information that may be publicly disclosed may not ensure borrower privacy. MBA encourages dialogue with the industry as the CFPB considers which data elements in the new rule will be published.
Data Use and Enforcement
Given the consumer-centric focus of the HMDA reporting data, the divergent risk appetites of commercial lenders and the business models employed in commercial lending to source, originate and decision multifamily secured loans and applications, MBA is concerned that the business purpose nature of multifamily property finance may not serve the goals of HMDA. MBA recommends that the HMDA data reporting requirements for multifamily loans be withdrawn.
Use and Applicability of Industry Reporting Standard
While MBA appreciates that MISMO standards would provide a common language for exchanging data across the mortgage industry, MISMO provides separate and distinct standards in the commercial and multifamily lending categories that have not been widely adopted. Implementing the MISMO standards of review for commercial/multifamily properties will require further clarification.
Commercial Servicing Resources
Find relevant white papers on commercial/multifamily servicing issues, as well as tools for property inspection and insurance. Visit our CMF Servicing Resources page.